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HomeMy WebLinkAboutResolution 2012-07 Election in Connection with Housing Assessts - FunctionsCITY OF PALM DESERT STAFF REPORT REQUEST: ADOPT RESOLUTION NO 2012-07ELECTING TO RETAIN THE HOUSING ASSETS AND FUNCTIONS PREVIOUSLY PERFORMED BY THE REDEVELOPMENT AGENCY AND ACCEPTING THE TRANSFER OF ALL RIGHTS, POWERS, DUTIES, AND OBLIGATIONS ASSOCIATED WITH THE HOUSING ACTIVITIES OF THE REDEVELOPMENT AGENCY SUBMITTED BY: Janet M. Moore, Director of Housing DATE: February 9, 2012 CONTENTS: Resolution No. 2012-07 Exhibit A — Housing Authority Projections Exhibit B — Housing Real Property List Recommendation By minute motion, that the City Council adopt Resolution No2012-0;lecting to retain the housing assets and functions previously performed by the Palm Desert Redevelopment Agency and accepting the transfer of all rights, powers, duties, and obligations associated with the housing activities of the Redevelopment Agency Executive Summary As of February 1, 2012, the Palm Desert Redevelopment Agency is dissolved. According to the new laws, as of this date, the housing assets, with the exception of the cash on hand in the low and moderate income housing fund ("LMIHF"), will be transferred to the successor entity. The City then needs to decide whether it wishes to retain the housing assets or potentially turn them over to the Riverside County Housing Authority. Discussion In the case of California Redevelopment Association, et al. v. Matosantos, et al. (Case No. S194861), the litigation challenging AB X1 26 ("AB 26) and AB X1 27("AB 27"), the Supreme Court largely upheld AB 26 (which provides for the windup and dissolution of redevelopment agencies), invalidated AB 27 (which provided for an alternative voluntary redevelopment program), and held that AB 26 may be severed from AB 27 and enforced independently. As a result of the Supreme Court's decision, on February 1, 2012, all redevelopment agencies were dissolved, and cities do not have the option of making remittance payments to enable the continued operation of redevelopment agencies. The City is the successor agency for the Palm Desert Redevelopment Agency. 81000-0163\1417030v1. doc G:\rda\Patty Leon\JMM\staff report\City Council Resolution Making an Election in connection with Housing Assets and Fun (4).doc Staff Report Adopt Resolution No.201.2-07 electing to retain the Housing Assets February 9, 2012 Page 2 of 4 Health and Safety Code Section 34176(a) authorizes a city that created a redevelopment agency to elect to retain the housing assets and functions previously performed by the redevelopment agency. If a city elects to retain the responsibility for performing housing functions previously performed by the redevelopment agency, Section 34176(a), as adopted, provides that all rights, powers, duties, and obligations, excluding any amounts on deposit in the LMIHF, shall be transferred to the City. Health and Safety Code Section 34176(b), as adopted, provides that if a city does not elect to retain the responsibility for performing housing functions previously performed by the redevelopment agency, all rights, powers, assets, liabilities, duties, and obligations associated with the housing activities of the redevelopment agency, excluding any amounts on deposit in the LMIHF, shall be transferred as follows: (1) where there is no local housing authority in the territorial jurisdiction. of the former redevelopment agency, to the Department of Housing and Community Development; (2) where there is one local housing authority in the territorial jurisdiction of the former redevelopment agency, to that local housing authority; and (3) where there is more than one local housing authority in the territorial jurisdiction of the former redevelopment agency, to the local housing authority selected by the city that authorized the creation of the redevelopment agency. The Palm Desert Housing Authority and the Riverside County Housing Authority are in the territorial jurisdiction of the former redevelopment agency. Health and Safety 34176(c) provides that the entity assuming the housing functions formerly performed by the redevelopment agency may enforce affordability covenants and perform related activities pursuant to applicable provisions of the Redevelopment Law, including, but not limited to, Health and Safety Code Section 33418. Current Housing Information for Palm Desert Palm Desert's affordable housing functions production and administration (including staff and developer project compliance, Home Neighborhood Stabilization Program, etc.) an (approximately 1,000 units). Housing Production and Administration: d consist of two basic components, 1) housing costs, housing development, acquisitions, for -sale Improvement Program, transitional housing, 2) operations of the housing authority properties Under Redevelopment law, the Agency was required to utilize twenty -percent (20%) of tax increment derived from the project areas to produce affordable housing. In the last several years, the Agency produced over 200 units of affordable housing, rehabilitated over 200, assisted in the resale of (12) twelve for -sale units, processed over (90) ninety-four applications under the Home Improvement Program, negotiated housing agreements with developers for over 200 additional units with income restrictions and purchased 2 homes under the Neighborhood Stabilization Program for re -sale to qualified lower income households. Agency staff has also monitored the affordability covenants on all assisted for -sale and developer provided units consisting of over 650 units. 81000-0163\1417030v1.doc G:\rda\Patty Leon\JMM\staff report\City Council Resolution Making an Election in connection with Housing Assets and Fun (4).doc Staff Report Adopt Resolution No. 2012-07electing to retain the Housing Assets February 9, 2012 Page 3 of 4 The Agency also acquired a total of (17) seventeen homes in Desert Rose and Falcon Crest and is authorized to acquire two (2) more. As these houses are sold, the proceeds from the sales can be used to acquire and/or provide subsidy to future resales. Housing Authority Operations: In 1998 the Agency acquired 725 units from the County of Riverside that they operated on Palm Desert's behalf. At the time we took the complexes over, many of them were in need of significant deferred maintenance. The Agency has grown its portfolio to over 1,000 units, which includes fourteen (14) multi -family and senior complexes, whose estimated value in a stable market is over $100 million dollars. The complexes are operated by the Palm Desert Housing Authority and a contracted management company. Currently the operation of the Housing Authority properties, not including capital costs, has a positive cash flow. Staff will also be looking at modifying the rent structure, through attrition, to match the law which is expected to result in approximately $200,000 additional rental income per year. Staff will also be looking at potential savings of current expenses, including landscape, advertising, and courtesy patrol. This could also increase the positive cash flow by an additional $200,000. A projected cash flow for the housing authority properties, including moving housing staff and administrative costs to the Housing Authority is attached to this report (Exhibit A) although it should be noted that several issues remain with the interpretation of AB 26 that could affect these projections in either direction. The proposed cash flow should be considered a fluid document as there are many variables that can affect it such as the expectation that tenant incomes will remain at or above current levels. Monies have been set aside for the properties deferred maintenance and although we believe it should continue to be an obligation under the Stipulated Judgment, it is subject to review by the State. That said, the current condition of the Housing Authority properties is very good and they will need minimal capital maintenance over the next several years. Approximately 35% of the portfolio is new or rehabilitated within the last five years, i.e. Palm Village, La Rocca Villas, Sagecrest Senior, California Villas, Laguna Palms, and Taos Palms. Staff will continue to seek other funding alternatives for rehabilitation and capital maintenance when it is needed. Planned Affordable Projects: The Agency has a number of new projects slated for affordable housing. Among them are the senior complex known as Carlos Ortega Villas, Sagecrest multi -family complex construction, a 14 unit for -sale self-help project, an expansion to the complex known as Las Serenas and a facade enhancement to Desert Pointe. These projects could be in jeopardy in the event the City cannot use bond funds issued for this purpose, however, staff is currently looking for alternatives to complete the noted projects. Conclusion If the City Council elects to become the successor housing agency, all the building and land assets paid for by the housing bonds or twenty -percent (20%) set -aside will be transferred to the Housing Authority and under the purview of the Housing Authority Board and not the Oversight Committee established under AB 26. A list of the housing assets (Exhibit B) that we expect to transfer is attached. The monies in the Housing Authority fund (871 fund), although they may be subject to 81000-0163\ 1417030v l .doc G:\rda\Patty Leon\JMM\staff report\City Council Resolution Making an Election in connection with Housing Assets and Fun (4).doc Staff Report Adopt Resolution No2012-07 electing to retain the Housing Assets February 9, 2012 Page 4 of 4 initial review by the State, are derived from rents and should not be affected by AB 26. The cash on hand in the LMIHF is slated to go to the taxing agencies although there is also pending legislation that would allow the successor housing agency to retain the balance in the fund. Fiscal Impact AB 26 does not appear to authorize a funding mechanism for performing housing functions previously performed by the redevelopment agency, however, it explains that outstanding loans to the LMIHF are to be repaid to the housing fund. Of course the interpretation is vague, but for Palm Desert this includes the loan from Hovley Gardens Apartments and the SERAF loan which total over $24 million dollars. The projected cash flow ("Exhibit A") for the housing authority properties is based on staff's assumptions for loan repayment, cost reductions and increased revenues. With these assumptions, the Housing Authority operations could be self-sustaining, however, there are many variables that cannot be confirmed at this point. In addition, SB 654 would allow the Authority to retain the balance in the LMIHF which is approximately $21.3 million dollars. The bill was passed by the Senate on January 31st, however, it still requires passage by the Assembly and signature of the Governor. If it is passed, it will most likely not be implemented before the beginning of January of next year. Because of the many variables, assumptions and interpretations, the long-term financial impact is unknown at this time. Environmental Impact There will be no new environmental impact associated with any of the decisions outlined above. Submitted by: Ja t M. Moore, Director of Housing JMM:pI Approval: P$ql S. Gibson, Director of Finance M. Wohlmuth, City Manager Department Head: I - McCarthy, Assistant" Manager 81000-0163\ 1417030v l .doc G:\rda\Patty Leon\JMM\staff report\City Council Resolution Making an Election in connection with Housing Assets and Fun (4).doc RESOLUTION NO. 2012 -07 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT MAKING AN ELECTION IN CONNECTION WITH HOUSING ASSETS AND FUNCTIONS UNDER PART 1.85 OF DIVISION 24 OF THE CALIFORNIA HEALTH AND SAFETY CODE AND TAKING CERTAIN ACTIONS IN CONNECTION THEREWITH RECITALS: A. AB X1 26 and AB X1 27 were signed by the Governor of California on June 29, 2011, making certain changes to the Community Redevelopment Law (Part 1 (commencing with Section 33000) of Division 24 of the California Health and Safety Code) (the "Redevelopment Law"), including adding Part 1.8 (commencing with Section 34161) ("Part 1.8") and Part 1.85 (commencing with Section 34170) ("Part 1.85"). B. The California Redevelopment Association and League of California Cities filed a lawsuit in the Supreme Court of California (California Redevelopment Association, et al. v. Matosantos, et al. (Case No. S194861)) alleging that AB X1 26 and AB X1 27 are unconstitutional. On December 29, 2011, the Supreme Court issued its opinion in the Matosantos case, largely upholding AB X1 26, invalidating AB X1 27, and holding that AB X1 26 may be severed from AB X1 27 and enforced independently. C. The Supreme Court generally revised the effective dates and deadlines for performance of obligations in Part 1.85 arising before May 1, 2012, to take effect four months later. D. As a result of the Supreme Court's decision, the Palm Desert Redevelopment Agency (the "Redevelopment Agency"), a redevelopment agency in the City of Palm Desert (the "City"), created pursuant to the Redevelopment Law, was dissolved pursuant to Part 1.85 on February 1, 2012. E. Health and Safety Code Section 34176(a) authorizes a city that created a redevelopment agency to elect to retain the housing assets and functions previously performed by the redevelopment agency. Pursuant to Section 34176(a), if a city elects to retain the responsibility for performing housing functions previously performed by the redevelopment agency, all rights, powers, duties, and obligations, excluding any amounts on deposit in the Low and Moderate Income Housing Fund, shall be transferred to the City. F. Health and Safety Code Section 34176(b) provides that if a city does not elect to retain the responsibility for performing housing functions previously performed by the redevelopment agency, all rights, powers, assets, liabilities, duties, and obligations associated with the housing activities of the redevelopment agency, excluding any amounts in the Low and Moderate Income Housing Fund, shall be 91000-0163\1417031 v1doc RESOLUTION NO. 2012- 07 transferred as follows: (1) where there is no local housing authority in the territorial jurisdiction of the former redevelopment agency, to the Department of Housing and Community Development; (2) where there is one local housing authoring in the territorial jurisdiction of the former redevelopment agency, to that local housing authority; and (3) where there is more than one local housing authority in the territorial jurisdiction of the former redevelopment agency, to the local housing authority selected by the city that authorized the creation of the redevelopment agency. G. The Palm Desert Housing Authority and the Riverside County Housing Authority are in the territorial jurisdiction of the former Redevelopment Agency. H. Health and Safety 34176(c) provides that the entity assuming the housing functions formerly performed by the redevelopment agency may enforce affordability covenants and perform related activities pursuant to applicable provisions of the Redevelopment Law, including, but not limited to, Health and Safety Code Section 33418. I. The City Council desires to adopt this resolution in connection with the housing assets and functions previously performed by the Redevelopment Agency. NOW, THEREFORE, THE CITY COUNCIL HEREBY FINDS, DETERMINES, RESOLVES, AND ORDERS AS FOLLOWS: Section 1. The above recitals are true and correct and are a substantive part of this Resolution. Section 2. This Resolution is adopted pursuant to Health and Safety Code Section 34176. Section 3. Pursuant to Health and Safety Code Section 34176(a), the City Council hereby elects for the City to retain the housing assets, as allowed by law, and functions previously performed by the Redevelopment Agency and hereby accepts the transfer of all rights, powers, duties, and obligations associated with the housing activities of the Redevelopment Agency. The City Council reserves its right to rescind this election and to subsequently determine that all of the rights, powers, assets, liabilities, duties, and obligations associated with the housing activities of the Redevelopment Agency shall be transferred to the housing authority selected by the City. Section 4. The officers and staff of the City are hereby authorized and directed, jointly and severally, to make all notifications of the Council's election, as set forth in Section 3 hereof, as deemed necessary or advisable and to execute all documents and take all actions which they may deem necessary or advisable to effectuate this Resolution, and any such actions previously taken by such officers and staff are hereby ratified and confirmed. -2- 81000-0163\1417031v3.doc r -ia\Patty T rnn\TMNk taffrr "1RFC(-lT T iTTOWq\Cit, (`--il Rye 1 inn MA i— an Flr Linn in rn—tinn with H-6— A-M, and F,—tinnc 1— RESOLUTION NO. 2012- 07 Section 5. The adoption of this Resolution is not intended to and shall not constitute a waiver by the City of any right the City may have to challenge the legality of all or any portion of AB X1 26 through administrative or judicial proceedings. Section 6. This Resolution has been reviewed with respect to applicability of the California Environmental Quality Act ("CEQA"), the State CEQA Guidelines (California Code of Regulations, Title 14, Sections 15000 et seq., hereafter the "Guidelines"), and the City's environmental guidelines. The City Council has determined that this Resolution is not a "project" for purposes of CEQA, as that term is defined by Guidelines Section 15378, because this Resolution is an organizational or administrative activity that will not result in a direct or indirect physical change in the environment. (Guidelines Section 15378(b) (5)). Section 7. This Resolution shall take effect immediately upon its adoption. PASSED, APROVED, AND ADOPTED this 9t" day of February, 2012 by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: Robert A. Spiegel, Mayor ATTEST: Rachelle D. Klassen, City Clerk -3- 81000-0163\1417031 vldoc f:-\rtia\Patty T rni� TMW—ffrrnnr,RFV,011 TTTONC\f it, (-nmril Rnmintinn Makin,, — F71—tin, in rnnn--inn with 14-6 ,, A-- —i Fnnrti— d— Rsolution No. 2012-07 HOUSING AUTHORITY PROJECTIONS Exhibit FYE 6/30/2010 6/30/2011 6/30/2012* 6/30/2013* 6/30/2014* REVENUES Rental Income 4,729,313 4,728,432 4,750,465 A 4,987,988 A 5,237,387 Other Income 117,915 131,035 114,559 116,850 119,187 Reimbursement from Bonds 654,731 381,388 98,101 100,063 102,065 Hovley Loan Repayment2 - 510,918 521,137 531,559 Housing Loan RepaymentS3 - 186,210 189,934 193,733 TOTAL REVENUE 5,501,959 5,240,854 5,660,253 5,915,972 6,183,931 EXPENDITURES GENERAL COSTS Staffing4 - - 335,756 E 821,931 838,370 Administrative Costs (budget) 87,188 E 213,435 217,704 Programs5 - - 1,000,000 D,E 1,020,000 ° 1,040,400 PDHA DIRECT COSTS Operation Costs 4,043,501 3,850,341 3,514,438 B/C 3,584,726 B/C 3,656,421 Management Fee 427,750 430,360 426,670 435,203 443,907 TOTAL EXPENDITURES 4,471,251 4,280,701 5,364,051 6,075,296 6,196,802 NET OPERATING INCOME 1,030,708 960,154 296,202 (159,324) (12,871) CAPITAL Replacement CostS5 511,348 454,458 195,681 Bic 199,595 B/C 203,587 Capitallmprovements5 654,731 381,388 98,101 13/c 100,063 B/C 102,065 TOTAL CAPITAL 1,166,079 835,846 293,783 299,659 305,652 . NET PROFIT & LOSS (135,370) 124,308 2,419 (458,983) (318,523) SERAF Loan Repayment' - 4,455,322 4,455,322 4,455,322 7?F.� ... ;i_., "Amounts estimated based on current year actuals. Notes: 1 Agency asset - Loan Receivable from Successor Agency totalling $17.8 million. To be paid in full by June, 2015 2 Agency asset - Loan Receivable from PD Development (Hovley Gardens Apts) totalling $6.8 million. To be paid annually upon positive net cash flow. 3 Agency asset - Loan Payoff's from Affordable Housing Loans made to qualified buyers. 4 Staffing includes housing salaries and benefits, which were previously funded by the Low/Mod Housing Fund. 5 Some costs have been listed on the EOPS, part of the reserve fund calculation, or are bond funded and qualify for reimbursement. A Includes 5% rent adjustment. B Includes reduction to PDHA costs of $200,000. C Does not consider potential sale of poor performing properties, which cost approx. $400,000 annually. D Does not consider for -sale housing assets that upon sale, can be used to fund future program costs for qualified buyers. E Amounts prorated for the balance of the year from February 1 through June 30. Costs before February 1 are paid from the existing cash in the low/mod fund. 2/2/2012 8:16 AM Resolution No. 2012-07 PALM DESERT HOUSING EXHIBIT B REAL PROPERTY LIST as of January 31, 2012 Approx Acres APN ProjeUse Date mm6 Public California Villas 3.53 637-190-006 (aka Country Club Estates) 3/14/2003 Affordable Rental 77-111 California Drive Housing Multi -family: (141) 1-br units 4,57 637 190 007 Candlewood Apartments 0.19 625-132-032 Affordable Rental 74000-74002 Shadow Mountain Dr. 8/3/2006 Senior Housing: (26)1-br, (4) 2-br units 0.09 625-132-045 Housing Catalina Gardens Apartments & Community Center 1/29/1998 3.07 627-111-027 Affordable Rental Senior Housing: 48 studio, 24 1-br units Housing Desert Pointe Apartments 0.75 640-071-002 Affordable Rental 43805 Monterey Ave 1/29/1998 Multi -family: (32) studio, (26)1-br, (6) 2-br units 1.43 640-071-003 Housing Laguna Palms Apartments 73-875 Santa Rosa Way 711/2003 0.45 627-122-005 Affordable Rental Multi -family: (4) studio, (18)1-br, (26) 2-br units Housing La Rocca Villas 42205 Eagle Ln 5/12/2005 2.65 624-432-001 Affordable Rental Senior: (27) studio Units Housing Las Serenas Apartments 73-315 Country Club Dr. 1/29/1998 7.25 622-020-002 Affordable Rental Senior: (150)1-br units Housing Neighbors Apartments 73-535 Santa Rosa Way 1/29/1998 1.39 627-102-022 Affordable Rental Multi -family: (24) 2-br units Housing One Quail Place 1.91 640-040-008 Affordable Rental 72-600 Fred Waring Drive 1/29/1998 Multi -family: (156) 1-br, (228) 2-br units 15.94 640-040-009 Housing Palm Village Apartments 73-650 Santa Rosa Way various 1.29 627-101-055 Affordable Rental Multi -family: (12) 2-br units Housing The Pueblos Apartments 73-695 Santa Rosa Way 1/29/1998 0.63 627-102-023 Affordable Rental Senior: 15 studio units Housing Sagecrest Senior 73-811 Santa Rosa Way 2/27/2009 0.67 627-122-004 Affordable Rental Senior: (14) studio units Housing Taos Palms Apartments 44-830 Las Palmas Avenue 1/29/1998 0.82 627-093-003 Affordable Rental Multi -family: (16) 2-br units Housing Total 46.63 Page 1 of 3 Resolution No. 2012-07 PALM DESERT HOUSING EXHIBIT B REAL PROPERTY LIST as of January 31, 2012 Approx Acres APN Date Publ cect/ HOUSING - Vacant Land Part of 4/15/2009 2.10 637-071-002 0.51 637-170-003 Carlos Ortega Villas Sr Affordable Rental 42615 Washington Ave Housing (aka Country Village Apts/ 66 studio units) 12/1/2006 0.46 637-170-004 72 Units 1.66 637-170-007 Sagecrest Apartments Affordable Rental Santa Rosa Way 2/28/2008 1.26 627-122-013 Multi -family: (1)1-br, (13) 2-br units Housing Sagecrest Apartments 73805 Santa Rosa Way 2/27/2009 0.16 627-122-003 Affordable Rental SFH Housing 73255 Country Club Dr 7/15/2011 7.12 622-020-089 Las Serenas Expansion Approved Habitat Lot 44885 San Benito Cir 12/18/2008 0.14 627-092-054 Donation for Build of SFH Approved Habitat Lot 44871 San Benito Cir 12/30/2010 0.19 627-092-050 Donation for Build of SFH Total 13.60 HOUSING - Other Candlewood Apartments 4i2/2010 0.17 625 132 035 Access Ingress/Egress Lot Candlewood Apartments 8/2/2006 0.09 625-132-045 Access Easement Lot Candlewood Apartments 8/2i2006 0.34 625 171 001 Landscape Easement Landscape Easement Lot 0.28 640-071-004 Desert Pointe 10/5/1988 0.29 640-071-005 Parking Parking Lot 0.31 640-071-006 0.35 1 640-071-007 La Rocca Villas Proposed Storage Lot L of Tract 30795 5/12/2005 0.28 624-441-025 /Maintenance Bldg Total 2.11 Page 2 of 3 Resolution No. 2012-07 PALM DESERT HOUSING EXHIBIT B REAL PROPERTY LIST as of January 31, 2012 Approx Acres APN Date pPbl cect/ HOUSING For -Sale Falcon Crest 42-075 Hovley Gardens Ln 2/25/2011 0.14 624-430-006 Homeownership 74-478 Falcon Ln 6/29/2011 0.14 624-430-018 Homeownership 42-190 Golden Eagle Ln 4/29/2011 0.11 624-431-011 Homeownership 42-253 Verdin Ln 5/27/2011 0.13 624-431-016 Homeownership 42-071 Verdin Ln 11/23/2010 0.11 624-431-029 Homeownership 42-190 Verdin Ln 6/28/2011 0.13 624-440-006 Homeownership 74-572 King Fisher Cir 1/22/2010 0.11 624-440-012 Homeownership 74-642 King Fisher Cir 6/4/2010 0.11 624-440-017 Homeownership 74-537 King Fisher Cir 10/18/2010 0.12 624-441-007 Homeownership 42197 Verdin Ln 11/28/2011 0.11 624-431-020 Homeownership 42218 Verdin Ln 10/28/2011 0.13 624-440-008 Homeownership 74670 King Fisher Cir 10/28/2011 0,11 624-440-019 Homeownership 42050 Golden Eagle Ln 12/7/2011 0.14 624-431-001 Homeownership Desert Rose 43-840 Blueberry Ln 9/9/2009 0.10 634-061-038 Homeownership 75-455 Wildflower Ln 6/30/2009 0.10 634-062-028 Homeownership 43-710 Kelsey Ct 11/30/2010 0.10 634-241-042 Homeownership 75-333 Kelsey Cir N 5/22/2009 0.09 634-242-019 Homeownership 9= 43155 Portola Ave #129 (For -Sale) 2/4/2011 0.08 622-351-129 Homeownership Lot 73 (For -Rent) 2/1/1998 0.09 622-351-073 Affordable Rental Housing Total 2.15 Page 3 of 3 CITY OF PALM DESERT STAFF REPORT REQUEST: ADOPT RESOLUTION NO. 2012-07 SELECTING THE PALM DESERT HOUSING AUTHORITY AS THE SUCCESSOR HOUSING AGENCY TO THE PALM DESERT REDEVELOPMENT AGENCY PURSUANT TO HEALTH AND SAFETY CODE SECTION 34176(b) SUBMITTED BY: Janet M. Moore, Director of Housing DATE: February 9, 2012 CONTENTS: Resolution No. 2012-07 Exhibit A — Housing Authority Projections Exhibit B — Housing Real Property List Recommendation By Minute Motion, that the City Council, 1) Adopt Resolution No. 2012-07 selecting the Palm Desert Housing Authority (PDHA) as the successor housing agency, pursuant to Health and Safety Code Section 34176(b), and 2) Authorize the PDHA to retain the responsibility for performing housing functions previously performed by the Redevelopment Agency, and 2) Authorize the transfer of all the assets, as allowed by law, and all rights, powers, assets, liabilities, duties, and obligations associated with the housing activities of the Redevelopment Agency to the Palm Desert Housing Authority Executive Summary As of February 1, 2012, the Palm Desert Redevelopment Agency is dissolved. According to the new laws, as of this date, the housing assets, with the exception of the cash on hand in the low and moderate income housing fund ("LMIHF"), will be transferred to the successor entity. The City then needs to decide whether it wishes to retain the housing assets or potentially turn them over to the Palm Desert Housing Authority or Riverside County Housing Authority. Discussion In the case of California Redevelopment Association, et al. v. Matosantos, et al. (Case No. S194861), the litigation challenging AB X1 26 ("AB 26) and AB X1 27("AB 27"), the Supreme Court largely upheld AB 26 (which provides for the windup and dissolution of redevelopment agencies), invalidated AB 27 (which provided for an alternative voluntary redevelopment program), and held that AB 26 may be severed from AB 27 and enforced independently. Staff Report - Adopt Resolution No. 2012-07 electing to retain the Housing Assets February 9, 2012 Page 2 of 4 As a result of the Supreme Court's decision, on February 1, 2012, all redevelopment agencies were dissolved, and cities do not have the option of making remittance payments to enable the continued operation of redevelopment agencies. The City is the successor agency for the Palm Desert Redevelopment Agency. Health and Safety Code Section 34176(a) authorizes a city that created a redevelopment agency to elect to retain the housing assets and functions previously performed by the redevelopment agency. If a city elects to retain the responsibility for performing housing functions previously performed by the redevelopment agency, Section 34176(a), as adopted, provides that all rights, powers, duties, and obligations, excluding any amounts on deposit in the LMIHF, shall be transferred to the City. Health and Safety Code Section 34176(b), as adopted, provides that if a city does not elect to retain the responsibility for performing housing functions previously performed by the redevelopment agency, all rights, powers, assets, liabilities, duties, and obligations associated with the housing activities of the redevelopment agency, excluding any amounts on deposit in the LMIHF, shall be transferred as follows: (1) where there is no local housing authority in the territorial jurisdiction of the former redevelopment agency, to the Department of Housing and Community Development; (2) where there is one local housing authority in the territorial jurisdiction of the former redevelopment agency, to that local housing authority; and (3) where there is more than one local housing authority in the territorial jurisdiction of the former redevelopment agency, to the local housing authority selected by the city that authorized the creation of the redevelopment agency. The Palm Desert Housing Authority and the Riverside County Housing Authority are in the territorial jurisdiction of the former redevelopment agency. Health and Safety 34176(c) provides that the entity assuming the housing functions formerly performed by the redevelopment agency may enforce affordability covenants and perform related activities pursuant to applicable provisions of the Redevelopment Law, including, but not limited to, Health and Safety Code Section 33418. Current Housing Information for Palm Desert Palm Desert's affordable housing functions consist of two basic components, 1) housing production and administration (including staff costs, housing development, acquisitions, for - sale and developer project compliance, Home Improvement Program, transitional housing, Neighborhood Stabilization Program, etc.) and 2) operations of the housing authority properties (approximately 1,000 units). Housing Production and Administration: Under Redevelopment law, the Agency was required to utilize twenty -percent (20%) of tax increment derived from the project areas to produce affordable housing. In the last several years, the Agency produced over 200 units of affordable housing, rehabilitated over 200, assisted in the resale of (12) twelve for -sale units, processed over (90) ninety-four applications under the Home Improvement Program, negotiated housing agreements with developers for over 200 additional units with income restrictions and purchased 2 homes under the Neighborhood Stabilization Program for re -sale to qualified lower income households. Staff Report - Adopt Resolution No. 2012-07 electing to retain the Housing Assets February 9, 2012 Page 3 of 4 Agency staff has also monitored the affordability covenants on all assisted for -sale and developer provided units consisting of over 650 units. The Agency also acquired a total of (17) seventeen homes in Desert Rose and Falcon Crest and is authorized to acquire two (2) more. As these houses are sold, the proceeds from the sales can be used to acquire and/or provide subsidy to future resales. Housing Authority Operations: In 1998 the Agency acquired 725 units from the County of Riverside that they operated on Palm Desert's behalf. At the time we took the complexes over, many of them were in need of significant deferred maintenance. The Agency has grown its portfolio to over 1,000 units, which includes fourteen (14) multi -family and senior complexes, whose estimated value in a stable market is over $100 million dollars. The complexes are operated by the Palm Desert Housing Authority and a contracted management company. Currently the operation of the Housing Authority properties, not including capital costs, has a positive cash flow. Staff will also be looking at modifying the rent structure, through attrition, to match the law which is expected to result in approximately $200,000 additional rental income per year. Staff will also be looking at potential savings of current expenses, including landscape, advertising, and courtesy patrol. This could also increase the positive cash flow by an additional $200,000. A projected cash flow for the housing authority properties, including moving housing staff and administrative costs to the Housing Authority is attached to this report (Exhibit A) although it should be noted that several issues remain with the interpretation of AB 26 that could affect these projections in either direction. The proposed cash flow should be considered a fluid document as there are many variables that can affect it such as the expectation that tenant incomes will remain at or above current levels. Monies have been set aside for the properties deferred maintenance and although we believe it should continue to be an obligation under the Stipulated Judgment, it is subject to review by the State. That said, the current condition of the Housing Authority properties is very good and they will need minimal capital maintenance over the next several years. Approximately 35% of the portfolio is new or rehabilitated within the last five years, i.e. Palm Village, La Rocca Villas, Sagecrest Senior, California Villas, Laguna Palms, and Taos Palms. Staff will continue to seek other funding alternatives for rehabilitation and capital maintenance when it is needed. Planned Affordable Projects: The Agency has a number of new projects slated for affordable housing. Among them are the senior complex known as Carlos Ortega Villas, Sagecrest multi -family complex construction, a 14 unit for -sale self-help project, an expansion to the complex known as Las Serenas and a fagade enhancement to Desert Pointe. These projects could be in jeopardy in the event the City cannot use bond funds issued for this purpose, however, staff is currently looking for alternatives to complete the noted projects. Staff Report - Adopt Resolution No. 2012-07 electing to retain the Housing Assets February 9, 2012 Page 4 of 4 Conclusion If the City Council selects the Palm Desert Housing Authority to become the successor housing agency, all the building and land assets paid for by the housing bonds or twenty - percent (20%) set -aside will be transferred to the Housing Authority and under the purview of the Housing Authority Board and not the Oversight Committee established under AB 26. A list of the housing assets (Exhibit B) that we expect to transfer is attached. The monies in the Housing Authority fund (871 fund), although they may be subject to initial review by the State, are derived from rents and should not be affected by AB 26 although it's unclear. The cash on hand in the LMIHF is slated to go to the taxing agencies although there is also pending legislation that would allow the successor housing agency to retain the balance in the fund. Fiscal Impact AB 26 does not appear to authorize a funding mechanism for performing housing functions previously performed by the redevelopment agency, however, it explains that outstanding loans to the LMIHF are to be repaid to the housing fund. Of course the interpretation is vague, but for Palm Desert this includes the loan from Hovley Gardens Apartments and the SERAF loan which total over $24 million dollars. The projected cash flow ("Exhibit A") for the housing authority properties is based on staff's assumptions for loan repayment, cost reductions and increased revenues. With these assumptions, the Housing Authority operations could be self- sustaining, however, there are many variables that cannot be confirmed at this point. In addition, SB 654 would allow the Authority to retain the balance in the LMIHF which is approximately $21.3 million dollars. The bill was passed by the Senate on January 31St however, it still requires passage by the Assembly and signature of the Governor. If it is passed, it will most likely not be implemented before the beginning of January of next year. Because of the many variables, assumptions and interpretations, the long-term financial impact is unknown at this time. Environmental Impact There will be no new environmental impact associated with any of the decisions outlined above. ,,S mitted by: anet .Moore, Director of Housing JMM:pI Approval DirectKof Finance M. Wohlmuth, City Manager H McCarthy, MEETING DATE AYES:eknSon NOES: ABSENT: ...t jQn ABSTAIN: _ J VERIFIED BY:- City Manager OTHER Original on File with City Clerk's Office Rsolution. No. 2012-07 HOUSING AUTHORITY PROJECTIONS FYE 6/30/2010 6/30/2011 6/30/2012* 6/30/2013* 6/30/2014* REVENUES Rental Income 4,729,313 4,728,432 4,750,465 A 4,987,988 A 5,237,387 Other Income 117,915 131,035 114,559 116,850 119,187 Reimbursement from Bonds 654,731 381,388 98,101 100,063 102,065 Hovley Loan Repayment2 - - 510,918 521,137 531,559 Housing Loan Repayments3 - - 186,210 189,934 193,733 TOTAL REVENUE 5,501,959 5,240,854 5,660,253 5,915,972 6,183,931 EXPENDITURES GENERAL COSTS Staff ing4 335,756 E 821,931 838,370 Administrative Costs (budget) 87,188 E 213,435 217,704 Programs5 - - 1,000,000 D.E 1,020,000 D 1,040,400 PDHA DIRECT COSTS Operation Costs 4,043,501 3,850,341 * 3,514,438 B/C 3,584,726 B/C 3,656,421 Management Fee 427,750 430,360 * 426,670 435,203 443,907 TOTAL EXPENDITURES 4,471,251 4,280,701 5,364,051 6,075,296 6,196,802 NET OPERATING INCOME 1,030,708 960,154 296,202 (159,324) (12,871) CAPITAL Replacement Costs5 511,348 454,458 195,681 B/C 199,595 B/C 203,587 Capitallmprovements5 654,731 381,388 98,101 B/C 100,063 B/c 102,065 TOTAL CAPITAL 1,166,079 835,846 293,783 299,659 305,652 NET PROFIT & LOSS (135,370) 124,308 2,419 (458,983) (318,523) SERAF Loan Repayment' - 4,455,322 4,455,322 4,455,322 Nf � �iJU _ v vie '";) _.iF tl is re#,; ' Amounts estimated based on current year actuals. Notes: 1 Agency asset - Loan Receivable from Successor Agency totalling $17.8 million. To be paid in full by June, 2015 2 Agency asset - Loan Receivable from PD Development (Hovley Gardens Apts) totalling $6.8 million. To be paid annually upon positive net cash flow. 3 Agency asset - Loan Payoff's from Affordable Housing Loans made to qualified buyers. 4 Staffing includes housing salaries and benefits, which were previously funded by the Low/Mod Housing Fund. 5 Some costs have been listed on the EOPS, part of the reserve fund calculation, or are bond funded and qualify for reimbursement. A Includes 5% rent adjustment. B Includes reduction to PDHA costs of $200,000. C Does not consider potential sale of poor performing properties, which cost approx. $400,000 annually. D Does not consider for -sale housing assets that upon sale, can be used to fund future program costs for qualified buyers. E Amounts prorated for the balance of the year from February 1 through June 30. Costs before February 1 are paid from the existing cash in the low/mod fund. Exhibit A 212/2012 8:16 AM Resolution No. 2012-07 PALM DESERT HOUSING EXHIBIT B REAL PROPERTY LIST as of January 31, 2012 Project/ Date Approx Acres APN Public Use California Villas 3.53 637-190-006 (aka Country Club Estates) 3/14/2003 Affordable Rental 77-111 California Drive Housing Multi -family: (141)1-br units 4.57 637 190 007 Candlewood Apartments 0.19 625-132-032 Affordable Rental 74000-74002 Shadow Mountain Dr. 8/3/2006 Senior Housing: (26)1-br, (4) 2-br units 0.09 625-132-045 Housing Catalina Gardens Apartments & Affordable Rental Community Center 1/29/1998 3.07 627-111-027 Housing Senior Housing:48 studio 24 1-br units Desert Pointe Apartments 0.75 640-071-002 Affordable Rental 43805 Monterey Ave 1/29/1998 Multi -family: (32) studio, (26)1-br, (6) 2-br units 1.43 640-071-003 Housing Laguna Palms Apartments 73-875 Santa Rosa Way 7/1/2003 0.45 627-122-005 Affordable Rental Multi -family: (4) studio, (18) 1-br, (26) 2-br units Housing La Rocca Villas Affordable Rental 42205 Eagle Ln 5/12/2005 2.65 624-432-001 Senior: (27) studio Units Housing Las Serenas Apartments 73-315 Country Club Dr. 1/29/1998 7.25 622-020-002 Affordable Rental Senior: (150)1-br units Housing Neighbors Apartments Affordable Rental 73-535 Santa Rosa Way 1/29/1998 1.39 627-102-022 Multi -family: (24) 2-br units Housing One Quail Place 1.91 640-040-008 Affordable Rental 72-600 Fred Waring Drive 1/29/1998 Housing Multi -family: (156) 1-br, (228) 2-br units 15.94 640-040-009 Palm Village Apartments Affordable Rental 73-650 Santa Rosa Way various 1.29 627-101-055 Housing Multi -family: (12) 2-br units The Pueblos Apartments Affordable Rental 73-695 Santa Rosa Way 1/29/1998 0.63 627-102-023 Housing Senior: 15 studio units Sagecrest Senior Affordable Rental 73-811 Santa Rosa Way 2/27/2009 0.67 627-122-004 Housing Senior: (14) studio units Taos Palms Apartments Affordable Rental 44-830 Las Palmas Avenue 1/29/1998 0.82 627-093-003 Housing Multi -family: (16) 2-br units Total 46.63 Page 1 of 3 Resolution No. 2012-07 PALM DESERT HOUSING EXHIBIT B REAL PROPERTY LIST as of January 31, 2012 Date Approx Acres APN ProjPublic eUse HOUSING - Vacant Land 4/15/2009 2.10 Part of 637-071-002 0.51 637-170-003 Carlos Ortega Villas Sr Affordable Rental 42615 Washington Ave Housing (aka Country Village Apts/ 66 studio units) 12/1/2006 0.46 637-170-004 72 Units 1.66 637-170-007 Sagecrest Apartments Santa Rosa Way 2/28/2008 1.26 627-122-013 Affordable Rental Multi -family: (1)1-br, (13) 2-br units Housing Sagecrest Apartments 73805 Santa Rosa Way 2/27/2009 0.16 627-122-003 Affordable Rental SFH Housing 73255 Country Club Dr 7/15/2011 7.12 622-020-089 Las Serenas Expansion Approved Habitat Lot 44885 San Benito Cir 12/18/2008 0.14 627-092-054 Donation for Build of SFH Approved Habitat Lot 44871 San Benito Cir 12/30/2010 0.19 627-092-050 Donation for Build of SFH Total 13.60 HOUSING - Other Candlewood Apartments 4/2/2010 0.17 625-132-035 Access Ingress/Egress Lot Candlewood Apartments 8/2/2006 0.09 625-132-045 Access Easement Lot Candlewood Apartments 8/2/2006 0.34 625-171-001 Landscape Easement Landscape Easement Lot 0.28 640-071-004 Desert Pointe 10/511988 0.29 640-071-005 Parking Parking Lot 0.31 640-071-006 0.35 640-071-007 La Rocca Villas Proposed Storage Lot L of Tract 30795 5/12/2005 0.28 624-441-025 /Maintenance Bldg Total 2.11 Page 2 of 3 Resolution No. 2012-07 PALM DESERT HOUSING EXHIBIT B REAL PROPERTY LIST as of January 31, 2012 Approx Acres APN rojPubl Date cectl HOUSING For -Sale Falcon Crest 42-075 Hovley Gardens Ln 2/25/2011 0.14 624-430-006 Homeownership 74-478 Falcon Ln 6/29/2011 0.14 624-430-018 Homeownership 42-190 Golden Eagle Ln 4/29/2011 0.11 624-431-011 Homeownership 42-253 Verdin Ln 5/27/2011 0.13 624-431-016 Homeownership 42-071 Verdin Ln 11/23/2010 0.11 624-431-029 Homeownership 42-190 Verdin Ln 6/28/2011 0.13 624-440-006 Homeownership 74-572 King Fisher Cir 1/22/2010 0.11 624-440-012 Homeownership 74-642 King Fisher Cir 6/4/2010 0.11 624-440-017 Homeownership 74-537 King Fisher Cir 10/18/2010 0.12 624-441-007 Homeownership 42197 Verdin Ln 11/28/2011 0.11 624-431-020 Homeownership 42218 Verdin Ln 10/28/2011 0.13 624-440-008 Homeownership 74670 King Fisher Cir 10/28/2011 0.11 624-440-019 Homeownership 42050 Golden Eagle Ln 12/7/2011 0.14 624-431-001 Homeownership Desert Rose 43-840 Blueberry Ln 9/912009 0.10 634-061-038 Homeownership 75-455 Wildflower Ln 6/30/2009 0.10 634-062-028 Homeownership 43-710 Kelsey Ct 11/30/2010 0.10 634-241-042 Homeownership 75-333 Kelsey Cir N 5/22/2009 0.09 634-242-019 Homeownership 143155 Portola Ave #129 (For -Sale) 1 2/4/2011 1 0.08 1 622-351-129 1 Homeownership I I I I I Lot 73 (For -Rent) 2/1/1998 0,09 622-351-073 Affordable Rental Housing Total 2.15 Page 3 of 3 RESOLUTION NO. 2012-07 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT MAKING AN ELECTION IN CONNECTION WITH HOUSING ASSETS AND FUNCTIONS UNDER PART 1.85 OF DIVISION 24 OF THE CALIFORNIA HEALTH AND SAFETY CODE AND TAKING CERTAIN ACTIONS IN CONNECTION THEREWITH RECITALS: A. AB X1 26 and AB X1 27 were signed by the Governor of California on June 29, 2011, making certain changes to the Community Redevelopment Law (Part 1 (commencing with Section 33000) of Division 24 of the California Health and Safety Code) (the "Redevelopment Law"), including adding Part 1.8 (commencing with Section 34161) ("Part 1.8") and Part 1.85 (commencing with Section 34170) ("Part 1.85"). B. The California Redevelopment Association and League of California Cities filed a lawsuit in the Supreme Court of California (California Redevelopment Association, et al. v. Matosantos, et al. (Case No. S194861)) alleging that AB X1 26 and AB X1 27 are unconstitutional. On December 29, 2011, the Supreme Court issued its opinion in the Matosantos case, largely upholding AB X1 26, invalidating AB X1 27, and holding that AB X1 26 may be severed from AB X1 27 and enforced independently. C. The Supreme Court generally revised the effective dates and deadlines for performance of obligations in Part 1.85 arising before May 1, 2012, to take effect four months later. D. As a result of the Supreme Court's decision, the Palm Desert Redevelopment Agency (the "Redevelopment Agency"), a redevelopment agency in the City of Palm Desert (the "City"), created pursuant to the Redevelopment Law, was dissolved pursuant to Part 1.85 on February 1, 2012. E. Health and Safety Code Section 34176(a) authorizes a city that created a redevelopment agency to elect to retain the housing assets and functions previously performed by the redevelopment agency. Pursuant to Section 34176(a), if a city elects to retain the responsibility for performing housing functions previously performed by the redevelopment agency, all rights, powers, duties, and obligations, excluding any amounts on deposit in the Low and Moderate Income Housing Fund, shall be transferred to the City. F. Health and Safety Code Section 34176(b) provides that if a city does not elect to retain the responsibility for performing housing functions previously performed by the redevelopment agency, all rights, powers, assets, liabilities, duties, and obligations associated with the housing activities of the redevelopment agency, excluding any amounts in the Low and Moderate Income Housing Fund, shall be 81000-0163\1417031v3.doc RESOLUTION NO. 2012-07 transferred as follows: (1) where there is no local housing authority in the territorial jurisdiction of the former redevelopment agency, to the Department of Housing and Community Development; (2) where there is one local housing authoring in the territorial jurisdiction of the former redevelopment agency, to that local housing authority; and (3) where there is more than one local housing authority in the territorial jurisdiction of the former redevelopment agency, to the local housing authority selected by the city that authorized the creation of the redevelopment agency. G. The Palm Desert Housing Authority and the Riverside County Housing Authority are in the territorial jurisdiction of the former Redevelopment Agency. H. Health and Safety 34176(c) provides that the entity assuming the housing functions formerly performed by the redevelopment agency may enforce affordability covenants and perform related activities pursuant to applicable provisions of the Redevelopment Law, including, but not limited to, Health and Safety Code Section 33418. I. The City Council desires to adopt this resolution in connection with the housing assets and functions previously performed by the Redevelopment Agency. NOW, THEREFORE, THE CITY COUNCIL HEREBY FINDS, DETERMINES, RESOLVES, AND ORDERS AS FOLLOWS: Section 1. The above recitals are true and correct and are a substantive part of this Resolution. Section 2. This Resolution is adopted pursuant to Health and Safety Code Section 34176. Section 3. Pursuant to Health and Safety Code Section 34176(b), the City Council hereby elects for the City not to retain the responsibility for performing housing functions previously performed by the Redevelopment Agency, and herby determines that all of the assets, as allowed by law, and all rights, powers, assets, liabilities, duties, and obligations associated with the housing activities of the Redevelopment Agency shall be transferred to the Palm Desert Housing Authority. Section 4. The officers and staff of the City are hereby authorized and directed, jointly and severally, to make all notifications of the Council's election, as set forth in Section 3 hereof, as deemed necessary or advisable and to execute all documents and take all actions which they may deem necessary or advisable to effectuate this Resolution, and any such actions previously taken by such officers and staff are hereby ratified and confirmed. -2- 81000-0163\14170310.doc G:,rda\Patty LconVMM`slaff report\RESOLUTIONS\City Council Resolution Making an Election in connection with Housing Assets and Functions.doc RESOLUTION NO. 2012-07 Section 5. The adoption of this Resolution is not intended to and shall not constitute a waiver by the City of any right the City may have to challenge the legality of all or any portion of AB X1 26 through administrative or judicial proceedings. Section 6. This Resolution has been reviewed with respect to applicability of the California Environmental Quality Act ("CEQA"), the State CEQA Guidelines (California Code of Regulations, Title 14, Sections 15000 et seq., hereafter the "Guidelines"), and the City's environmental guidelines. The City Council has determined that this Resolution is not a "project" for purposes of CEQA, as that term is defined by Guidelines Section 15378, because this Resolution is an organizational or administrative activity that will not result in a direct or indirect physical change in the environment. (Guidelines Section 15378(b) (5)). Section 7. This Resolution shall take effect immediately upon its adoption. PASSED, APROVED, AND ADOPTED this 9t" day of February, 2012 by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: Robert A. Spiegel, Mayor ATTEST: Rachelle D. Klassen, City Clerk -3- 81000-0163\1417031v3.doc Gnrda\Fatty Leon,JMM\staff report\RESOLUTIONS\City Council Resolution Making an Election in connection with Housing Assets and Functions.doc