APPROVAL OF HOUSING SUCCESSOR AFFORDABLE HOUSING PROPERTY DEVELOPMENT AND DISPOSITION STRATEGY

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1 Agenda Item No. 9A March 12, 2013 TO: FROM: SUBJECT: Honorable Mayor and City Council Members Attn: Laura C. Kuhn, City Manager Cynthia W. Johnston, Director of Housing Services APPROVAL OF HOUSING SUCCESSOR AFFORDABLE HOUSING PROPERTY DEVELOPMENT AND DISPOSITION STRATEGY DISCUSSION: Over the life of Vacaville s Redevelopment Agency from 1982 to 2012, more than 1,200 affordable housing units with long-term affordability covenants were produced; 500 low- and moderate-income households bought their first homes; and, 150 lower-income homeowners made health and safety improvements to their homes. These achievements were made possible through the use of Low- and Moderate-Income Housing Funds (LMIHF), generated by 20% of the annual Tax Increment received by the Agency. Assembly Bill 1X 26 and Assembly Bill 1484 eliminated redevelopment agencies throughout the state in 2011, yet allowed cities to retain affordable housing functions and authority and to retain the former redevelopment agency s LMIHF assets (primarily real property and loan portfolios), but not any unspent funds. Since dissolution, the City has retained the functions/rights as the Housing Successor. The City s Housing Successor has received approval of the Housing Assets List from the Department of Finance (DOF). Now that this asset list has been approved, a comprehensive strategy for these assets has been developed that will provide additional affordable housing opportunities. The strategy addresses 81 properties purchased by the former redevelopment agency which were purchased with the intention of developing affordable housing. Also, the asset list contains a loan portfolio consisting of primarily deferred or forgivable loans to individual homebuyers/owners and affordable housing non-profits. The Housing Successor has already transmitted all remaining cash balances to Solano County totaling $3,272,410. These funds were then re-distributed to the taxing entities who receive portions of the property tax including the County, School Districts, Library District, the City and others. AB1X 26 and AB 1484 require all Housing Successor properties to be used for affordable housing purposes, or, if disposed of for other purposes, sale proceeds must be used for affordable housing purposes. Staff has prepared a Development and Disposition Strategy (Attachments 1-4) that provides the framework for selling and/or developing the 63 Housing Successor properties. This plan also includes a short-term funding plan to support implementation of the strategy. The proposed overall Affordable Housing Strategy (see attached documents) consists of separate strategies, developed for the properties contained in four specific geographic locations. Any sale or lease of a property is subject to City Council approval at a future date. The following is a list of the geographic locations and number of properties identified on the approved assets list. Staff will review each strategy area and discuss the proposed use.

2 A. Markham/Rocky Hill Strategy (see map, Attachment 1): 20 properties Seven parcels (1.07 acres) are proposed to be sold for commercial development Six parcels (.96 acre) are proposed to be sold for a community garden One parcel (1.42 acres) is proposed to be sold for affordable housing Two parcels (7.43 acres) are proposed to be retained to meet long-term lease obligation Two parcels (1.13 acres) are proposed to be retained for future affordable housing development Two parcels (20 strips) are proposed to be quitclaimed to adjacent owners B. Callen/Bennett Hill Strategy (see map, Attachment 2): 20 properties Twenty parcels (74 rental units) are proposed to be sold for affordable housing C. Opportunity Hill Strategy (see map, Attachment 3): 30 properties Sixteen parcels (4.06 acres) are proposed to be sold for mixed use and potentially include an affordable housing component Eleven parcels (3.27 acres) are proposed to be sold for affordable housing and mixed use development Two parcels (.40 acres) are proposed to be sold for a Downtown entry development One parcel (.16 acres) is proposed to be sold to an adjacent property owner D. Scattered Sites Strategy (see map, Attachment 4): 11 properties Five parcels (6.25 acres) are proposed to be sold for retail/commercial, (existing) housing or social services activities One parcel (8.4 acres) is proposed to be sold for affordable housing Five parcels (.08 acres) are proposed to be retained for Housing Services Department office space Due to the lack of a dedicated source to fund Housing Successor activities, staff has prepared a proposed budget that will provide adequate staffing/funding to implement the strategy for the first year. Attachment 5 provides a draft FY Housing Successor Program budget and revenues summary. Funding sources in this first year include use of some reserve funds (Small Cities Community Development Block Grant and Rental Rehabilitation fund), Affordable Housing Loan portfolio payments, monitoring fees, 2006 Affordable Housing Bond proceeds, etc. In the second and subsequent years, funding will depend on sales proceeds, Supplemental Education Revenue Augmentation Fund repayment, loan payments, monitoring fees, and any new funding sources. Several of the properties owned by the Housing Successor have been the subject of interest by parties wishing to make purchases. In order to update these parties on the status of the Affordable Housing Strategy, staff has notified these parties about this agenda item. FISCAL IMPACT: No General Fund impact. Without the LMIHF, funding sources to develop affordable housing and staff to develop/monitor affordable housing is extremely limited. While limited resources

3 exist to provide base funding for the next four years, affordable housing activities will likely cease after that time in the City of Vacaville unless a new funding source is created/identified. RECOMMENDATION: By simple motion, to approve the Housing Successor Affordable Housing Property Development and Disposition Strategy. Attachments 1 Markham/Rocky Hill Strategy 2 Callen/Bennett Hill Strategy 3 Opportunity Hill Strategy 4 Scattered Sites Strategy 5 Draft FY Housing Successor Program Budget & Revenues Summary

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7 In August 2006, the former Redevelopment Agency (RDA) issued an $18,875,000 bond secured by the former RDA Low and Moderate Income Housing Fund (LIHF) for the revitalization of the Callen Street area including acquisition of properties and entering into an agreement with a developer for the rehabilitation/new construction of affordable housing. 23 parcels/86 units were purchased. 12 units were sold for the relocation and expansion of Opportunity House. At this time, $6,214, in project bond proceeds remain. The Redevelopment dissolution cleanup bill, AB1484, provides the ability for the Housing Successor to expend the remaining bond when Department of Finance (DOF) requirements are met for the purposes for which the bonds were sold (Health & Safety Code Section (c)(1)). The use of the bond proceeds will be reviewed by the Oversight Board and the DOF for final approval. Once approved, staff will complete negotiations with the developer selected through the Request for Proposal process and present the draft agreement to the City Council for consideration. Although the business points will be updated, the prior draft business points included: Total project consisted of 110 units: o 74 units owned by the Agency o 32 owned by private owner o 12 purchased by developer Callen/Bennett Hill Project Description Final project included: o New construction of 40-2 bedroom and 18-1 bedroom units o Rehabilitation of remaining units Project financing: o Former RDA Bond proceeds: 55-year, 1% interest, residual receipts acquisition and construction loan o Tax Credit Allocation Bond o Permanent Tax Exempt Bond o Deferred Developer Fee 55-year Affordability: o 70% of units restricted to 60% Area Median Income o 20% of units restricted to 50% Area Median Income o 10% of units restricted to 30% Area Median Income

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9 Attachment 3 OPPORTUNITY HILL STRATEGY Property Location/ Acreage 1 Mason/Wilson Catherine/E Main 16 parcels 4.06 acres 2 McClellan/Bush 11 parcels 3.27 acres 3 Depot 2 parcels.40 acres 4 Bush 1 parcel.16 acres Disposition Sell: Mixed-use and up to 65 units/acre with affordable housing component** Develop: Affordable housing w/mixeduse component** (all units affordable) Sell: Downtown entry development Sell***: To adjacent property owner Current Zoning* Downtown Commercial Residential Urban High Density Overlay (20-36 units/acre) General Commercial Residential Urban High Density Overlay (20-36 units/acre) General Commercial Residential Urban High Density Overlay (20-36 units/acre) General Commercial Residential Urban High Density Overlay (20-36 units/acre) *As part of the General Plan update process, the Opportunity Hill area is being considered to allow mixed-use development and up to 65 units per acre. **Development will require water main and sewer line upgrades and provide adequate parking. ***Property purchased with Community Development Block Grant (CDBG) funds. Proceeds must be used for CDBG eligible activity/project.

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19 Draft FY Housing Successor Program Budget & Revenues Summary Attachment 5 Program Purposes: To work with housing developers to acquire, rehabilitate, or construct permanently affordable housing; To ensure long term affordability requirements are met through monitoring and compliance activities; To implement the Community Development Block Grant Program. Goals & Objectives: To increase, improve, and preserve the community s supply of low- and moderate-income housing made available to moderate-, low-, verylow, and extremely-low income households; To provide neighborhood based services and assistance to lower-income Vacaville households. Salary & Benefits Services & Supplies Sal/Benefits NFT Total Salary & Benefits Directs Indirects Cost Allocation Total Services & Supplies Program TTL 556,539 46, ,459 68, ,558 45, ,541 $819,000 Note: Does not include CDBG program activities (loan payments, public services, etc.) Staffing: 3.2 FTE NFT

20 Projected Housing Successor Revenues Amount Funding Source Notes $200, Affordable Housing Bonds Eligible expenses per bond documents 45,000 Monitoring Fees Third party payments 50,000 Loan Repayments Affordable Housing Loan Portfolio generated (based on payments received in prior years) 74,000 Community Development Block Grant (CDBG) 350,000 Small Cities CDBG/Rental Rehabilitation Program Reserve Assumes 10% reduction from FY grant award Reserve balance currently at $400,000, leaving $50,000 ending balance Additional $300,000 owed to City by Vacaville Social Services Corporation (for relocation/expansion of Opportunity House) 100,000 Disposition Proceeds From sale of properties $819,000 TOTAL NOTE: Revenues source may change with Department of Finance approval of State Education Revenue Augmentation Fund (SERAF) loan repayment.