HomeMy WebLinkAbout6/13/2001 - STAFF REPORTS DATE: JUNE 13, 2001
TO: COMMUNITY REDEVELOPMENT AGENCY
FROM: REDEVELOPMENT DIRECTOR
APPROVING A DISPOSITION AND DEVELOPMENT AGREEMENT WITH GARDEN
SPRINGS APARTMENTS, A CALIFORNIA LIMITED PARTNERSHIP TO FACILITATE
THE APPLICATION FOR LOW INCOME HOUSING TAX CREDITS AND THE
DEVELOPMENT AND CONSTRUCTION OF THE GARDEN SPRINGS APARTMENTS,
LOCATED AT THE SOUTHEAST CORNER OF INDIAN CANYON DRIVE AND SAN
RAFAEL ROAD
RECOMMENDATION:
It is recommended that the Agency approve a Disposition and Development
Agreement with Garden Springs Apartments, A California Limited Partnership,
providing up to $1,000,000.00 (One Million Dollars) in Agency financial
assistance for the construction of a low-income apartment complex, referred to
as the Garden Springs Apartments, at the southeast corner of Indian Canyon
Drive and San Rafael Road.
SUMMARY:
This resolution approves a Disposition and Development Agreement with the
developers of the Garden Springs Apartments in the amount of $1,000,000.
The Agency would purchase the 3.63 acre site from the developer and
contribute it back to the project, when necessary, to assist with the Low Income
Housing Tax Credit application process. In addition, once construction on the
apartments has commenced, the Agency would pay the developer five
payments of $100,000 each, at each 20% completed. Finally, the Agency and
the City agree to reduce the utility undergrounding requirement to cap the
developer's undergrounding budget at $150,000. The Agency would cover the
difference between any necessary undergrounding and the $150,000. In return,
the Developer agrees to proceed with the LIHTC application and the
restructuring of the financing, and, once funded, to construct the project as
proposed and approved by the City Council in January, 2000. The developer
also agrees to dismiss any litigation against the City of Palm Springs related to
this project.
BACKGROUND:
Agency members are familiar with the Garden Springs Apartments project,
which was approved on January 19, 2000. On February 10, 2000 staff
received a request for Community Redevelopment Agency assistance from
CBM Group, the developer and general partner of the project, specifically
related to the cost of undergrounding the utility lines that surround the property.
The undergrounding portion was part of the Engineering Conditions of Approval
when the City Council approved the project. The estimated cost of the
undergrounding, as calculated by CBM's utility consultant, was $650,300.
The project was delayed from February into April because of a citizen's petition
asking to overturn the approval. The decision not to place the issue on a
special election ballot, based on California law, was made by the Council in
a" - A
April, but project construction did not get underway until nearly the end of June.
By early August, the general partner determined that because of the IRS'
absolute December 31, 2000 completion deadline for receipt of their 9% tax
credits it was more financially prudent to shut down the project and risk the
$1,700,000 they'd already spent rather than risking the entire $6 million in tax
credits, which would have been disallowed had the project not been completed
by the deadline.
CBM is now trying to restructure the project financing in order to complete the
project. The Developer has an application ready to submit for 9% credits
(LIHTC) this week but tax credit applications are extremely competitive and the
project may be starting out with negative points because of its previous unused
tax credit allocation. The 9% program is the most favorable form of affordable
housing financing because it creates substantial equity in the project, thereby
reducing the debt load. The tax credit investors receive their return on
investment through a discount paid to the developer for the credits. Since the
tax credit equity does not seek a return, the lower debt means the project can
serve lower income households. Even receiving a LIHTC allocation will leave a
gap in the project, partly as a result of the lengthy carry period on the project.
Agency financial participation in the project will make the developer's LIHTC
application much stronger and make the project more likely to be built. The deal
is structured according to a Settlement Agreement negotiated by the City and
CBM to settle litigation brought by the Developer against the City. The terms
include:
1. The Agency would pay CBM and take title to the property without
encumbrances. Payment would be made upon execution of the
purchase/sale agreement and close of escrow.
2. The developer commits to keeping the project as originally proposed,
including the architectural upgrades, noise buffering, quality landscaping,
day care, and other components. A regulatory agreement with the
Agency will assure that the units will count towards the City's low and
moderate income housing goals.
3. The Agreement contains language that limits the Developer's utility
undergrounding cost to $150,000. The undergrounding shall be limited,
to the extent technically possible, to the Developer's own frontage along
Indian Canyon Drive, without crossing any streets. If the cost of the
necessary undergrounding exceeds the $150,000 amount, the Agency
shall cover the difference.
4. The Agency shall assist the Developer in applying for the Low Income
Housing Tax Credits in every way possible.
5. The Agency agrees to contribute the land to the project when the project
is fully funded, all permits have been obtained, and the Developer is
prepared to commence construction. The Agency would retain reverter
rights if the Developer fails to proceed or complete the project.
Garden Springs Apartments DDA
June 13, 2001
Page 2
Z
6. Plans and Drawings: Project plans and drawings would become property
of the Agency at the time of the land transfer and would be necessary to
the Agency in the event it becomes necessary for the Agency to
complete the project.
7. Additional Financial Assistance: The Agency will commit an additional
$500,000 to the project in the form of structured payments made as the
project is developed; the Agency shall pay the Developer$100,000 per
payment as each 20% of the project is completed.
8. All litigation between the Developer and the City of Palm Springs shall be
dismissed.
Half of the project's units (30) shall count in the Agency's inventory of Low/Mod
Housing Units. The 30 Agency-funded units, at a total subsidy of$1,000,000,
equates to $33,333 per unit, well within the prototypical financing gap in a tax-
credit-funded, family multi-unit project. This gap is calculated only on Agency-
restricted units; since the entire project will be affordable due to the tax credit
restrictions, the effective subsidy is $16,666 per unit.
A Summary Report describing the purchase and sale of the property, as
required by California Health and Safety Code Section 33433 (a), is enclosed
with the resolution.
Because of the timing of the tax credit application round and the structure of the
DDA, it is likely that only $500,000 will be necessary to appropriate to the
project in the 2001-2002 fiscal year; the construction payments would be due as
the project is developed, in 20% increments. A budget resolution, appropriating
the $500,000 from the Fund Balance of the Low/Mod Housing Fund, is included
with the resolution. The additional $500,000 would be appropriated once the
project receives a tax credit allocation and nears the construction phase.
Sufficient funds are avvaiilaabble, ii Fund Balance to cover both phases of the DDA.
A� /�Zi�" " W
J HN S. RAYMOO
R�pdevqrbpment it ctor
APPRO >
Executive Director
ATTACHMENTS:
1. Resolution
2. Dispostion and Development Agreement
3. Budget Resolution
4. Summary Report
5. Public Hearing Notice
6. City Council Concurring Resolution
7. City Council Approval of Settlement Agreement
Garden Springs Apartments DDA
June 13, 2001 REVIEWED BY DEFT.OF FINANCE
Page 3
i �
SUMMARY REPORT:
DISPOSITION AND DEVELOPMENT AGREEMENT
BY AND BETWEEN
THE PALM SPRINGS COMMUNITY REDEVELOPMENT AGENCY
AND
GARDEN SPRINGS APARTMENTS,
A CALIFORNIA LIMITED LIABILITY PARTNERSHIP
JUNE 2001
y
INTRODUCTION
Before real property acquired by a Community Redevelopment Agency with tax increment
proceeds may be sold or leased, the transaction must be approved by the Agency Board in
accordance with California Health and Safety Code Section 33433. This Section requires a
"Summary Report", which describes and specifies certain information in regard to the proposed
transaction, be available for public inspection.
DESCRIPTION OF THE PROPOSED AGREEMENT
Site and Interests to be Conveyed
The Site consists of a single parcel of land of approximately 3.63 acres. The Site is located at
southeast corner of San Rafael Road and North Indian Canyon Drive in the City of Palm Springs.
The Developers of the Property, CBM Group, Inc, and the Garden Springs Apartments, a
California Limited Liability Partnership, are seeking Agency financial assistance in developing a
proposed 60-unit low- and very low-income apartment project on the site. Part of the assistance
will be that the Agency shall purchase the land from the developer and convey it back to the
project when the project is ready to proceed to the construction phase. The Agency shall also
make payments to the developer as the project is built, based on each 20% of completion.
Proposed Development
The Purchaser is building 60 low-income apartment units on the vacant land, including 28 two-
bedroom units, 24 three-bedroom units, and 8 four-bedroom units ranging in size from 904 square
feet to 1,403 square feet. The 60 units will be contained in four two-story buildings, with each
building containing from 12 to 16 units. The project, while receiving several reductions in
development standards and a density bonus required under Section 65915 of the California
Government Code,contains significant architectural and landscaping upgrades as well a day care
center and tot lot. This project helps the City meet its requirements to provide affordable housing
under California law.
Financing
The developer is seeking an allocation of Low Income Housing Tax Credits through the California
Tax Credit Allocation Committee and established pursuant to the Internal Revenue Code Section
42, as the primary source of project financing. Based on the restricted rents, the project's
economics support a minimal amount of private financing, leaving a gap of at least $1,000,000.
The Developer has sought Agency financial assistance to cover its gap in the project.
Agency Responsibilities
The Agency agrees to pay the Developer$500,000 for the site as well as an additional $500,000
spread over five payments once the construction on the project commences. The Agency agrees
to contribute the land to the project when the project is fully funded, all permits have been
obtained, and the Developer is prepared to commence construction. The Agency would retain
reverter rights if the Developer fails to proceed or complete the project. In addition, the Agency
agrees to assist the Developer in applying for Low Income Housing Tax Credits. The Agreement
also contains language that limits the Developer's utility undergrounding cost to $150,000. The
undergrounding shall be limited,to the extent technically possible,to the Developer's own frontage
along Indian Canyon Drive, without crossing any streets. If the cost of the necessary
undergrounding exceeds the $150,000 amount, the Agency shall cover the difference.
Developer Responsibilities
The developer commits to keeping the project as originally proposed, including the architectural
upgrades, noise buffering, quality landscaping, day care, and other components. A regulatory
agreement with the Agency will assure that the units will count towards the City's low and
moderate income housing goals. Project plans and drawings would become property of the
Agency at the time of the land transfer and would be necessary to the Agency in the event it
becomes necessary for the Agency to complete the project. Finally, all litigation between the
Developer and the City of Palm Springs shall be dismissed.
This amendment will exclude any and all attorneys' fees and costs incurred by Developer in
connection with the drafting, negotiation and implementation of this Agreement, including, but not
limited to, attorneys fees incurred in connection with the preparation of the DDA or any litigation
between Developer and the City of Palm Springs.
Agency's other standard terms and conditions, including non-discrimination and maintenance
covenants, and other terms and conditions remain as in Disposition and Development Agreement
for Developer.
COST OF AGREEMENT TO THE AGENCY
The Agency will commit an amount of $1,000,000 to the project should it receive a tax credit
allocation and proceed to the construction phase. In addition, if the utility underground cost for
the project, as amended, exceeds $150,000 and the amount of undergrounding is deemed
necessary from a technical perspective, the Agency shall bear the difference between the actual
cost and the $150,000 commitment from the Developer.
Wednesday,June.6�
Lice , Public Notice Public Notice,P,';,,,,'
No.8294 ' l
CITY OF PALM SPRINGS
NOTICE OF PUBLIC,HEARING YY ri•rr .'.
NOTICE IS HEREBY GIVEN that the Commi ,
- Redevelopment Agency of the City of Palln;, ;
)efo to Springs will hold a Public'Hearing 0 all, in the Largga i)
REC- `v
Conference Ropm of Gity.H Iscated a�320<^
EC- ,Tahquitz Cgganyon Wa Palm Springs;.CaiForniaLi ,
3ooth -13, 20.01afon conside the Porllowing:nesday,.JHeeY�
h Su- . Provisipn of Financial AsaIatanps
I Dis fora Dimpositlon and Development;r,f1,,,,y.
Ave- Agreement(DDAI with CBM Group of; :
4.51 r Auburn CaOgfornia ta,Aaalat '+,I'
ict'a Garden Sprtings Apertmenta.located
o1.10' ' , on'theBcutheaat Corner otNorth '..r
of 20 Indian Canyyon and San BafaeL
Palm Spd Igo,California 92282`•'
. The Community Redevelopment Agency ofitltei f "
in,as 'City of Palm Springs,('A9ency')proposes to enter,:•;'
Into d ispositlon and DeyelopmentAg too
menQ,!
'with CBM Group of Au bum,California pro?;,,
IM '.vI Ing,financial,,assistance m.the,,amount-of
9 ..$1,0 000 to Garden Springs ar ments.Td W'
,'prove{Ire'DDA'•,the Coinmpin Redevelopment
i a Y is to7tared to'make.certaln.findings pur i
TTHN19�'auant,to'Heahh end Safety Code Section 3343�7f;.
Sand pdor'to making those iindings,a Public Heae`f„
Is held to raceme public,Input on the matter.'c'
:,;Alf intereste&persons.are,Invited to,attend"the';',:r
s will 'public Ha Ing'and expFress opinionwon the Item;
ment, listed above. If you'd ailenge the nature of the;;;.
itigat- proposed'actlon in court;;you may be,,limitedyfc„
)r wilt �ra�sm99 onlythose'Issues you or someone else"
Sated,"ralsetl at the Public Hearing,described In'this np-'4.
tice,-or in written correspondencedelivered to the I
d the Clty'Clerk,.at the address listed'above,,atior pylori,; ,
iy be to the, mat(on, I Public Hearing.
n.to Furthor�inforncluding a copy of 4he',pio=,S'
De- posed 'DDA' and a Summary Re ort prepat d,,in.
per accordance with Health and Safetpy Code =Igp'y
lest, 33433,Is available In the Office of the CRy Clerk;,
ion, ,PATRICIA A. SANDERS,'CI}y'Clark: ,
no- FUBi May 29;June 6;2001
ind
RESOLUTION NO. 1129
OF THE COMMUNITY REDEVELOPMENT AGENCY OF
THE CITY OF PALM SPRINGS, CALIFORNIA APPROVING
A DISPOSITION AND DEVELOPMENT AGREEMENT WITH
GARDEN SPRINGS APARTMENTS,A CALIFORNIA LIMITED
LIABILITY PARTNERSHIP TO EFFECTUATE THE
DEVELOPMENT OF A LOW-INCOME APARTMENT
COMPLEX AT THE SOUTHEAST CORNER OF INDIAN
CANYON DRIVE AND SAN RAFAEL ROAD
WHEREAS, the Community Redevelopment Agency of the City of Palm Springs (the
"Agency")has established an affordable housing setaside fund in accordance with Section
33000 et. seq. of the California Health and Safety Code; and
WHEREAS, the funds are earmarked for the acquisition, construction, or rehabilitation of
affordable housing to benefit the community; and
WHEREAS, the Garden Springs Apartments, proposed for low-income families, was
approved in January 2000 by the Palm Springs City Council; and
WHEREAS, the property developers, CBM 96, LLC, sought Agency financial assistance
to cover the cost of undergrounding utilities, estimated to be up to $650,000; and
WHEREAS, the property developers, CBM 96, LLC and Garden Springs Apartments, a
California Limited Partnership,are resubmitting a tax credit application to the California Tax
Credit Allocation Committee for the June 15, 2001 application round and have requested
Agency assistance to strengthen the application; and
WHEREAS, Section 33430 of the Community Redevelopment Law allows that an agency
may, "for purposes of redevelopment, sell, lease, for a period not to exceed 99 years,
exchange, subdivide, transfer, assign, pledge, encumber by mortgage, deed of trust, or
otherwise, or otherwise dispose of any real or personal property or any interest in
property;" and
WHEREAS,the owners shall agree to restrict, though a Regulatory Agreement approved
as an attachment to the Disposition and Development Agreement, the rents on half of the
proposed units (30)to levels affordable to families with incomes no more than 60%of Area
Median Income (AMI); and
WHEREAS, a Notice of Public Hearing concerning the Disposition and Development
Agreement was published in accordance with applicable law; and
WHEREAS,the Agency has considered the staff report, and all the information,testimony
and evidence provided during the public hearing on June 13, 2001.
NOW THEREFORE BE IT RESOLVED by the Community Redevelopment Agency of the
City of Palm Springs, as follows:
SECTION 1. The above recitals are true and correct and incorporated herein.
SECTION 2. Pursuant to the California Environmental Quality Act (CEQA), the
Community Redevelopment Agency finds as hollows: Iry U ;
r-m w 6m
a) The City Council adopted a Mitigated Negative Declaration
for the project based on the preparation of an Initial Study
and the recommendation of the Planning Commission.
Mitigation measures are included in the project design and
adopted as part of the Conditions of Approval for the
Project.
b) The Agencyfinds thatthe Planning Commission adequately
discussed the potential significant environmental effects of
the proposed project(land use,traffic/circulation,parking,air
quality, noise, aesthetics, geology/soils, water quality,
drainage, public utilities, public services,
archaeological/historic resources, public controversy, and
light and glare). The Community Redevelopment Agency
further finds that the Mitigated Negative Declaration reflects
its independent judgment.
SECTION 3. The Developer has proposed building 60 low-and very low-income
apartment units on the site, including 28 two-bedroom units, 24
three-bedroom units, and 8 four-bedroom units ranging in size from
904 square feet to 1,403 square feet. The 60 units will be
contained in four two-story buildings, with each building containing
from 12 to 16 units. The project, while receiving several reductions
in development standards and a density bonus required under
Section 65915 of the California Government Code, contains
significant architectural and landscaping upgrades as well a day
care center and tot lot. This project helps the City meet its
requirements to provide affordable housing under California law.
SECTION 4. The Agency agrees, through this Disposition and Development
Agreement,to pay the Developer$500,000 for the 3.63 acre site as
well as an additional$500,000 spread over five payments once the
construction on the project commences. The Agency agrees to
contribute the land to the project when the project is fully funded, all
permits have been obtained, and the Developer is prepared to
commence construction. The Agency would retain reverter rights if
the Developer fails to proceed or complete the project. In addition,
the Agency agrees to assist the Developer in applying for Low
Income Housing Tax Credits. The Agreement also contains
language that limits the Developer's utility undergrounding cost to
$150,000. The undergrounding shall be limited, to the extent
technically possible, to the Developer's own frontage along Indian
Canyon Drive, without crossing any streets. If the cost of the
necessary undergrounding exceeds the $150,000 amount, the
Agency shall cover the difference.
SECTION 6. The Agency does hereby find and determine as follows:
(a) The project was originally approved by the City
Council on January 19, 2000. In February, 2000 the
Developers requested Community Redevelopment
Agency assistance, specifically related to the cost of
undergrounding the utility lines that surround the
C. rot on< Z
property. The undergrounding portion was part of
the Engineering Conditions of Approval when the
City Council approved the project. The estimated
cost of the undergrounding, as calculated by the
Developer's utility consultant, was $650,300.
(b) The project was delayed from February into April
because of a citizen's petition asking to overturn the
approval. The decision not to place the issue on a
special election ballot, based on California law, was
made by the Council in April, but project construction
did not get underway until nearly the end of June.
By earlyAugust,the general partner determined that
because of the IRS' absolute December 31, 2000
completion deadline for receipt of their 9% tax
credits it was more financially prudent to shut down
the project than to continue.
(c) The Developer has sought since August, 2000 to
restructure the project financing in order to complete
the project. The Developer intends to reapply for9%
credits (LIHTC),and Agency financial participation in
the project will make the developer's LIHTC
application much stronger and make the project
more likely to be built.
(d) The DDA is structured according to a Settlement
Agreement negotiated by the City and Garden
Springs Apartments to settle litigation brought bythe
Developer against the City of Palm Springs.
(a) The DDA effectuates the purposes of the
Community Redevelopment Law by assisting in the
development of housing affordable to families with
incomes below 60% of Area Median Income and
preserving the affordability of that housing for a
period of 55 years.
(f) The DDA effectuates the purposes of the
Community Redevelopment Law as it is intended to
eliminate blight and promote the health, safety and
general welfare of the people of Palm Springs.
SECTION 7. The proposed project is consistent with the Implementation
Plan for the Palm Springs Community Redevelopment
Agency, insofar as this project will provide additional
housing for persons of low- or moderate income within the
City of Palm Springs.
SECTION 8. Based on foregoing reasons, this DDA with Garden Springs
Apartments, a California Limited Partnership, is hereby
approved and incorporated herein by this reference.
cr7a.. a - c3
SECTION 9. The Chairman, or his designee, is hereby authorized to execute on
behalf of the Agency the Disposition and Development Agreement
and other documents necessary to the Agreement, and make minor
changes as may be deemed necessary, in a form approved by
Agency Counsel.
ADOPTED this day of , 2001.
AYES:
NOES:
ABSENT:
ATTEST: COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF PALM SPRINGS, CALIFORNIA
By
Assistant Secretary Chairman
REVIEWED &APPROVED AS TO FORM
CMaG
RESOLUTION NO. 1130
OF THE COMMUNITY REDEVELOPMENT AGENCY OF
THE CITY OF PALM SPRINGS, CALIFORNIA, AMENDING
THE BUDGET FOR THE 2000-01 FISCAL YEAR.
-------------
WHEREAS Resolution 1101 approving the budget for the fiscal year 2000-01 was adopted on
June 14, 2000; and
WHEREAS the Executive Director has recommended, and the Agency desires to approve,
certain amendments to said budget;
NOW THEREFORE BE IT RESOLVED that the Director of Finance is authorized to record
inter-fund cash transfers as required in accordance with this Resolution, and that Resolution
1101, adopting the budget for the 2000-01 fiscal year is hereby amended as follows:
SECTION 1. ADDITIONS
Fund Activity Account Amount
No: 882 8382 Garden Springs $500,000
Apartments DDA
Title: Low/Mod Housing
Purpose: To provide financial assistance to the Garden Springs Apartments project
SECTION 2. SOURCE
Fund Activity Account Amount
No: 882 Fund Balance $500,000
Title: Low/Mod Housing
Adopted this l gkb day of June 2001.
AYES: Agency Members Jones, Oden, Reller-spurgin and Chairman Rleindienst
NOES: Agency Hodges
ABSENT: None
ATTEST: COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF PALM SPRINGS
By
Assistant Secretary Chairman craw
REVIEWED AND APPROVED: (�•