DATE: July 11, Ron Davis, City Manager/Executive Director

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1 DATE: July 11, 2017 TO: FROM: Ron Davis, City Manager/Executive Director Patrick Prescott, Community Development Director/Assistant Executive Director VIA: Simone McFarland, Assistant Community Development Director By: Maribel Leyland, Housing Authority Manager SUBJECT: CONSIDERATION OF A PROPOSED AFFORDABLE HOUSING AGREEMENT AND MASTER LOAN AGREEMENT AMENDMENT WITH THE BURBANK HOUSING CORPORATION, DETERMINATION OF CATEGORICAL EXCLUSION AND EXEMPTION, AND BUDGET AMENDMENT FOR THE ELMWOOD PRESERVATION PROJECT RECOMMENDATION 1. BURBANK HOUSING AUTHORITY (BHA) BOARD ADOPT THE PROPOSED RESOLUTION (EXHIBIT A) TO APPROVE THE AFFORDABLE HOUSING AGREEMENT (AHA) AND MASTER LOAN AGREEMENT AMENDMENT AMONG THE CITY OF BURBANK (CITY), THE BHA, AND THE BURBANK HOUSING CORPORATION (BHC) FOR THE ELMWOOD PRESERVATION PROJECT. 2. CITY COUNCIL ADOPT THE PROPOSED RESOLUTION (EXHIBIT B) TO APPROVE THE AHA (EXHIBIT C) AND MASTER LOAN AGREEMENT AMENDMENT (EXHIBIT D), AMONG THE CITY, THE BHA, AND THE BHC, MAKE A DETERMINATION OF CATEGORICAL EXCLUSION UNDER THE NATIONAL ENVIRONMENAL POLICY ACT (NEPA) AND CATEGORICAL EXEMPTON UNDER THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA), AND APPROVE A BUDGET AMENDMENT FOR THE ELMWOOD PRESERVATION PROJECT. BACKGROUND The City has $336,000 in 2015 federal HOME Investment Partnerships Program (HOME) funds to commit to a project by the commitment deadline of July 31, 2017 or otherwise these funds will need to be returned to the federal agency. BHC has submitted a proposal to utilize these HOME funds on three properties in the Elmwood neighborhood. The proposed Elmwood Neighborhood Preservation Project (Project) is an opportunity to utilize these restricted HOME funds to preserve and protect the City s initial investment in the Elmwood neighborhood.

2 The City Council has recently directed staff to develop a strategy to provide affordable housing in the community to all segments of the population that lives or works in Burbank. Staff and Council have discussed the existing policy documents and current and future goals for the creation of affordable housing for all households of all income levels in the community. 1 One goal highlighted in the strategy and included in the City s adopted Housing element is preserving housing through the conservation and improvement of existing housing units. The housing strategy goes on to highlight that one way of providing housing while revitalizing neighborhoods is to invest in areas that are suffering from deferred maintenance. As highlighted in the strategy, for almost 20 years, the City has partnered with BHC to provide long-term affordable housing units to lower-income households in identified focus neighborhoods. 2 This strategic approach has been revitalizing neighborhoods through acquisition and rehabilitation efforts, establishing long-term affordability covenants on properties, and providing community serving uses such as childcare centers and family resource centers to serve the households and families of those neighborhoods. The result has been the transformation of these neighborhoods neighborhoods that at one time had higher incidents of crime, and had property after property in disarray with deferred maintenance and building/zoning code violations - into neighborhoods where families have taken pride of ownership in maintaining their units, parents and children feel safe to walk the neighborhoods to school and/or the family resource center/achievement center, and privately-owned properties have been improved and renovated. Federal HOME Funds One funding source to invest in these neighborhoods is federal HOME funds. Since 1992, the City has received an annual allocation of federal HOME dollars to provide housing for lower income households in the City. The City has leveraged HOME funds with other housing dollars to create more than 300 affordable housing units in the partnership with BHC. The most recent HOME assisted project was the 11-unit Veteran Bungalow project for homeless veterans. Like other federal dollars, HOME funds are highly regulated, and come with funding commitment and expenditure requirements. 3 Since the Veteran Bungalow project, staff has worked with BHC, Family Promise, a private donor and other community partners to identify other properties for additional affordable housing opportunities with these funds. Two separate properties were identified, but the cost of acquiring housing property in Burbank, and a competitive market, have proven to be very challenging; especially given the two-year timeframe. 1 The housing strategy provides a definition for affordable housing in the community that includes subsidized housing for lower-income households, to housing that is affordable to Burbank s moderate-income households and workforce, to executive and luxury housing. 2 These neighborhoods were identified through housing needs assessments and studies, and had similar characteristics such as higher densities, and higher number of multi-family deteriorated properties. 3 HOME regulations require a grantee commit the funds within 24-months of receipt of funds, and expend the funds within five (5) years. 2 P age

3 The Elmwood Neighborhood In 1995, the former Redevelopment Agency (Agency) acquired and rehabilitated nine apartment buildings for a total of 59 units on the 100 Block of West Elmwood Avenue (Exhibit E). 4 Elmwood was the first focus neighborhood, and one of the first efforts on behalf of the City to provide affordable housing units in the community while at the same time revitalizing a neighborhood that had the most calls for Police service; high gang activity; and had several properties in disrepair with deferred maintenance and code violations. The former Agency conducted limited rehabilitation of the units based on available funds, and two of the units were converted into the award-winning Elmwood Achievement Center to provide an after-school educational program targeted to area residents (Exhibit F). The transformation of the neighborhood involved years of work and a collaboration with several City departments including the Burbank Police Department. On November 30, 1999, the City and the former Agency approved a Purchase and Sale Agreement with BHC for the sale of the nine Elmwood properties. The City s purpose in creating BHC was to establish a Community Housing Development Organization (CHDO) that could be the recipient of HOME 5 funds reserved for a CHDO to own or develop affordable housing projects. 6 Since that time, BHC has been responsible for enforcing affordability and income restrictions and maintaining the properties through operation and capital replacement reserves. Furthermore, BHC is responsible for the operation of the Elmwood Achievement Center; the educational center that has served to equip the families of the neighborhood for success. For almost 20 years, families have been utilizing the after-school, summer, and mentoring programs of the Elmwood Achievement Center. Parents, students (former and current), volunteers and staff have shared their stories, and how the achievement center not only helped turnaround the neighborhood, but also impacted their lives for the better. Reyes (his last name is not used to protect his identity) is one of the original students of the Elmwood achievement center. He still lives in the Elmwood neighborhood today, and now works for one of BHC s Achievement Centers. Reyes credits the excellent center staff for helping him graduate high school (along with a specialized technical school, academy and related certifications), and giving him a safe place to do homework and make friends - so he didn t hang out with the wrong crowd. One of his fondest memories was going to his first Dodger game through a center outing. Today, he states his time in Elmwood has come full circle, and he s happy to be working in another Achievement Center for today s generation of 4 On July 17, 2001, the City approved an AHA with BHC to add 199 W. Elmwood Avenue to the Elmwood portfolio. 5 HOME funds may be used by a grantee or nonprofit organization for acquisition, rehabilitation, or new development of affordable rental or homeownership units. Furthermore, the FY 2017 Action Plan includes eight priorities on utilizing HOME funds. The priorities that fits the Elmwood Preservation Project are: Sustain and Strengthen Neighborhoods through affordability, accessibility, and neighborhood revitalization; and Preserve existing affordable housing. 6 A CHDO is an entity operating independently of the City and operating as a developer, owner, and/or sponsor of a project as defined by the HOME Program. The City is obligated to certify a CHDO annually, and is required to commit a minimum of 15% of HOME funds to a certified CHDO. 3 P age

4 kids. Reyes still remembers the impact of the rehabilitation of his family s apartment, stating he loved to live in a nice place, and his family worked hard to take care of it. Other current students and their parents have shared the visible decline of crime, vandalism, and gang activity in the neighborhood. 7 The neighborhood is quiet, clean and safe so children (and their parents) feel safe to play outside, and can also walk to the center from other neighboring streets; showing the impact of the Elmwood Neighborhood revitalization has spread beyond this one cul-de-sac. Current students credit the center with providing confidence and independence by allowing a safe and organized place to complete homework, meet new people, and provide opportunities to volunteer. One student shared she didn t like talking to people, but after 3 years of attending the center, she s come out of her shell. She s also thankful for the tools she learned to work on her studies as she enters high school in the fall. These are the sorts of successes BHC is hoping to build on with this rehabilitation project. DISCUSSION Since the Elmwood properties were sold to BHC to own, operate, and maintain, BHC has provided strong property management of the properties, and enforced affordability covenants. Furthermore, as capital replacement reserves (cap reserves) are available, and vacancies have allowed, units have been upgraded and renovated improving the units from the initial/limited rehabilitation, and the wear-and-tear of almost 20 years. However, utilizing cap reserves is a long-term approach with delayed results. BHC, as the City s partner, has an obligation to hold itself accountable to provide housing that is maintained and safe for its residents just the same as we expect of private landlords. Therefore, BHC is seeking $442,500 in HOME funds (the $336,000 to expire July 31, 2017, and an additional $106,500 available) to rehabilitate 10 units located at 153, 159 and 199 West Elmwood Avenue, in order to bring up the standard of the units to the level of new BHC properties, and more importantly, to extend the useful life of this vital housing resource. If the City does not commit the funds by the deadline, the City will lose the funds and they will get awarded to other HUD grantees the following year. Scope of Work BHC proposes to rehabilitate 10 units with a mix of 5 two-bedroom and 5 one-bedroom units. The following is a summary of the scope of work that may vary unit-to-unit depending on conditions. The overall goal is the level of rehabilitation that the community has come to know and expect from BHC. Full bathroom and kitchen upgrades, using water-efficient fixtures and energy-efficient exhaust fans; Upgrade all plumbing and electrical fixtures; Install energy-efficient fluorescent interior and exterior lighting; Stucco repair and paint with low or zero VOC paint throughout interior/exterior of units; Replace flooring with LEED rated materials (carpet tiles and vinyl); 7 Police reports show that calls for service for the most violent crimes against persons or property have remained consistently lower since the City s initial involvement in the late nineties. 4 P age

5 New appliances and window coverings; Replace two concrete pads in front of 199 West Elmwood Avenue; Repair exterior staircases and paint handrails/guardrails; and Façade and landscaping improvements. BHC will make any improvements necessary to improve air quality and safety, and specifically, BHC will abate and remove any remaining lead based paint as necessary. 8 Furthermore, interior and exterior improvements will be included as necessary to improve the safety of households. The following is a breakdown of the funding request for the proposed project: Estimated Budget Rehabilitation - 10 Units $ 315,000 Site Work (Landscape & Hardscape) - Three (3) Properties $ 110,000 Moving Costs Estimate 10 units $ 17,500 Total $ 442,500 BHC s in-kind contribution to the project is approximately $115,000. This includes waiving the customary developer fee of 15%, and acting as Owner-Builder for the project generating a savings of 10%-20% on the rehabilitation costs. BHC will absorb the loss of rent during the construction period that at this time is unknown, and that may take several months to complete, in order to be less disruptive to residents. The rehabilitation of units would only be conducted as units become available. Households will not be displaced during this process. As households will move voluntarily into available units, BHC s property manager will handle all appropriate noticing, moves, payments and original security deposits. Finally, a relocation plan is not required as none of the existing residents will be displaced, saving additional funds. BHC will utilize past experience with these voluntary moves to balance the requests and needs of tenants, with the overall proposed Project parameters. Affordable Housing Agreement The proposed AHA describes the terms and conditions for the rehabilitation of the properties, defines the financial assistance, and establishes the conditions for disbursement of the funds. With the use of HOME funds, rents applied to all units would reflect the rents imposed by HOME regulations and are classified as very-low and low income units. In addition, the affordability covenant for these properties, and all BHC projects, will be extended an additional 55 years from the last project approval in 2015 (the Veteran Bungalow project). Income and affordability limits and the details of the financial assistance are described in the AHA. As part of the consideration of the AHA, the City Council is also being asked to amend the Master Loan Agreement between the City, BHA, and BHC. This agreement established unified loan terms as to the payment and administration of the all loans to BHC. The proposed 8 Lead based paint remediation and abatement was conducted during acquisition in P age

6 Amendment to the Master Loan Agreement is intended to increase the balance of that loan to reflect this development without changing any of the agreement terms. ENVIRONMENTAL REVIEW The City, acting as the lead environmental review agency, and staff have concluded and determined that in accordance with NEPA, the proposed development is categorically excluded under Department of Housing Urban Development (HUD) regulations, 24 CFR, Part 58. Furthermore, the project qualifies for a categorical exemption under the CEQA in accordance with Section of the State CEQA Guidelines for minor alterations to existing facilities. FISCAL IMPACT Amend the Fiscal Year (FY) Budget by appropriating $442,500 from capital account 128.CD25A (HUD Affordable Housing Program Fund, Grants, Public Improvements, Affordable Housing) to project account number 128.CD25A (HUD Affordable Housing Program Fund, Grants, Public Improvements, Elmwood Preservation Project). CONCLUSION The proposed Elmwood Neighborhood Preservation Project would protect the City s initial investment in the Elmwood neighborhood by extending the useful life of the units; a critical housing asset in the community. Furthermore, approval of the AHA and related documents will provide the funding necessary to support the rehabilitation, and the Project will satisfy the requirements of the HOME expenditure deadline. Finally, with the City Council s support, the proposed Project is protecting and preserving the City s investment in its first focus neighborhood, and all BHC projects, with an affordability covenant that is extended an additional 55 years from the last project approval date in As described earlier in the report, a goal of the City is to conserve, maintain and improve existing housing stock for future members of the community. EXHIBITS A BHA Resolution B City Resolution C Affordable Housing Agreement D Master Loan Amendment E Neighborhood Map F Property Photographs 6 P age