HomeMy WebLinkAbout1/5/2005 - STAFF REPORTS (2) DATE: DEC EMBEa 1, 2004
TO: COMMUNITY REDEVELOPMENT AGENCY & CITY COUNCIL
FROM: DIRECTOR OF COMMUNITY & ECONOMIC DEVELOPMENT
JOINT PUBLIC HEARING TO APPROVE A DISPOSITION AND DEVELOPMENT AGREEMENT
WITH CENTURY VINTAGE HOMES TO CONSTRUCT FIVE (5) MODERATE-INCOME HOMES
ON AGENCY-OWNED PARCELS IN THE DESERT HIGHLAND GATEWAY AREA FOR THE
PURPOSE OF FACILITATING THE DESERT HIGHLAND INFILL PROGRAM
RECOMMENDATION:
That the City and Agency approve a DDA with Century Vintage Homes for the construction
of five single family homes in the Desert Highland area of the City for moderate-income
families on Agency-owned lots,APNs 669-353-001, 669-413-019, 669-394-004, 669-394-
005 and 669-394-006 and authorize the Executive Director to execute documents
necessary to close the transaction.
SUMMARY:
The Community Redevelopment Agency established a Desert Highland Infill program in
2002 with the issuance of an RFP to builders interested in constructing single-family
homes in the neighborhood on Agency-owned parcels. These properties will be targeted
at moderate-income families recently priced out of the single-family market in Palm
Springs.
Century Vintage Homes, the builder of the neighboring Mountain Gate project, was the
successful proposer in that RFP. For the past year staff has been negotiating a DDA with
Century that would commit them to construct the five homes on the parcels identified
above, but be open-ended so that by mutual agreement additional parcels could be added
and additional homes built. The Agency currently owns five parcels in the Desert Highland
Gateway area is a about to close escrow with Coachella Valley Housing Coalition on five
more. In addition, the Agency has approved the purchase of two lots from the County of
Riverside Tax Collector(which will close in early 2005)and the City approved an exchange
of two C-1 lots for an 8,000 s.f. R-1 lot; that exchange has closed.
The DDA was brought to the Agency for approval on October 6, but held over for another
30 days until several small issues had been resolved. Since it was not on the November
3 agenda, it was re-noticed for December 1.
Staff intends to use the Century DDA as a model for other homes to be constructed in the
neighborhood on the additional lots. Staff is working with two other builders active in the
neighborhood to develop a similar package as the Century DDA.
Several issues have made the negotiations challenging: (1) staff originally had a concern
that a subsidy on the part of the Agency could trigger prevailing wages on the project,
thereby making it infeasible, but affordable housing remains exempted from prevailing
wages(except when receiving state or federal funds); (2)since the Agency's resources are
limited, staff set the income guidelines at"moderate-" rather than "low" income in an effort
, N __
to reduce the Agency's subsidy; (3) Century's unexpectedly brisk sales at Mountain Gate
created some project management issues,which have since been resolved; and (4) laying
out the actual models on the lots created development standards issues with the possible
need for variances, but those have also been resolved.
The DDA now proposes that Century construct five (5) of their Model 102 homes (1,400
s.f.) on the five lots. Staff has analyzed their pro forma against the model pro forma for
subsidized single family housing created by the National Development Council (NDC).
Within the pro forma are the following assumptions: (1) that the Developer pays the
appraised value for each of the lots; (2)that the Developer is entitled to a developer profit;
(3) that both hard and soft costs are part of the project costs; and (4) that the Developer
has set a home price that is competitive in the market (at market or slightly below). Staff
confirmed the price by learning that the other new homes in the neighborhood are listing
for $209,000. Since the October 6 meeting, staff has commissioned an appraisal of a
Model 102 home on one of the infill lots: that value came in at $228,000 after taking a
major discount for location.
Century will sell the homes for$229,990 each. Based on the analysis of the pro forma at
a $159,990 price the Developer would have needed a subsidy on each of the homes. A
spreadsheet is attached showing the sample costs based on Model 102's. The subsidy
per home would have been approximately $25,000-$35,000; most of that could be
accomplished by the contribution of the lot at a value of $22,000 per lot. (Century
now will pay the Agency fair market value for the lot —the subsidy could then be passed
on to the buyer.) However, allowing Century to charge a market price for the home where
they could cover all of their costs and make a small profit eliminates the need for
Developer subsidy, but posed two risks: (1) it creates a market risk in that there are more
alternatives available to potential buyers in the same price range and (2) from an
underwriting perspective, because the monthly housing expense is limited under
redevelopment law, a higher price would require more cash subsidy to the buyers from the
Agency in the form of second loans.
The appraisal reduces some of the worry about market risk; and, two sample loan
worksheets are included, one for a family at the highest possible income in the moderate
income category, and one for a family at $51,000 in income. In the first case no buyer
subsidy would be needed; in the second case a small amount of subsidy would be
required. Contributing the value of the parcels ($22,000) could accomplish all or most of
the necessary subsidy for a wide range of buyers, even with the home priced "at market."
The buyer's subsidy would be included in the financing as a "silent second" loan. In
addition, Redevelopment Law requires that subsidized for-sale housing have a provision
that requires an "equity sharing" provision in the CC &Rs for a period of time. For buyer
subsidy programs, staff will return to the City Council to reprogram the sale proceeds of
the Sunrise Norte lot sales to the buyers' side of the Desert Highland Infill Program which
have been deposited into DBG Program Income.
A14�
Joh,fi S. RbymOm
Dir ctor f Conity & Economic Development
APPROVED:-
Executive Director`
ATTACHMENTS:
1. Agency & City Resolution
2. Public Hearing Notice
3. Sample Developer Pro Forma
4. Sample Buyer Qualifications
5. Disposition and Development Agreement
The Ventanas at Desert Highlands - Palm Springs RDA
Pro Forma Analysis by Plan
Overall Project Data: Project Data:
Model Required No Unit City Palm Springs
Plan Number 102 Alt. Totals Averages Seller Palm Springs RDA
Product Mix 5 0 Traci Number To Be Determined
BetlmOms/Balhs/Stories 3/211 Min Acres/Lot Size To Be Determined
Livable Area Square Footage 1,400 7,000 1,400 Number of Phases 0
Finished Guest or Bonus Area 0 0 0 Number of Units 5
Semifinished Guest or Bonus Arson) 0 0 0 Number of Models Use Existing
Total Buill Out Square Fonta a 1.400 7.000 1,400 Entitlement Status Semi-Fmishetl Lot
Product Type To Be Determined
Sales Revenues: IA,wmpd,4 JV Partner Troxler$Century
Proforma Sales Prices 1 100.50% 229,900 1,149,500 229,900 Project Lender Indy Mac
Option Income-Other 2 0.00% 0 0 0
Option Upgrade/Phase increases 3 0.00% 0 0 0
Buyers Incentives 4 0.00% 0 0 0 Project Assumptions:
Lehman/CPM Fee F o500 5 .0.50% 1,150 5,748 11150 1 Preliminary Pricing
Net Sales Revenues 100.00% 2211,751 1,143,753 228,751 2 00.Income-Other
3 Option Upgrade/Phase-Increases
Estimated Project Costs: 4 Buyers Incentives 0.00%
Land Cost 6 0.00% 0 0 0 5 Lehman/CPM Fee 0.50%
Land Subordinated Note 7 0.00% 0 0 0 6 Land Cost
Land Cost at House Closing 8 0.00% 0 0 0 7 Land Subordinated Note
RE Tax,Carry B Other Land Costs 9 0.13% 30D 1,500 300 8 Land Cost at House Closing
Total Land Costs 0.13% 300 1,500 300 9 RETax,Carry A Other Land Casts
Site Improvement Costs 10 9.74% 22,280 111,401 22,250 10 Site Improvement Casts
Site lmar.Contingency soE 11 4.87% 11,140 55,701 11.140 11 Site lmpr.Contingency 50.00%
Other 12 ON% 0 0 0 12 Other
Permits and Fees 13 4.69% 10,735 53,675 10735 13 Permits and Fees
Schaal Fees per sq.ft.,, S2.24 14 1.37% 3,136 15,680 3,136 14 School Fees per sq.ft. Palm Springs $2.24
Building Permits per sq.ft Ht $200 15 122% 2,800 14,000 2.800 15 Building Pernik per sq.ft.(1) $2.00
Ullity,Installation Costs 16 0.19% 445 2,225 445 16 UtiLty Installation Costs
Common Area/HOA 17 0.00% 0 0 0 17 Common Area/HOA
Other 18 0.00% 0 0 0 18 Other
Utility Refunds 19 0.00% 0 0 0 19 Utility Refunds
Finished Lot Costs 22.22% 50,836 254,182 50,836 20 Direct Onside Costs
Direct Onside Costs 20 37.41% 85,582 427,910 85,582 21 Bonus Roam Butdouts 1
Bonus Room BuildOuls l'1 21 000% 0 0 D 22 Me Spbnkiers/Poat Tension Slabs et$110 paf-1 Muse only(Lot 63)
Fire sprloklerePost Tuamn slabs Fstto 22 0.13% 1,540 1.540 308 23 Fencing(Block Wall')
Fencing(Block Wall?) 23 2,82% 6,450 32.250 6.450 24 Front Landscaping
Front Landscaping 24 1.21% 2,775 13.875 2.75 25 Indirects
Indirects 25 2.85% 6,522 32.610 6.522 26 Insurance
Insurance 26 2.N% 6,715 33,575 6,715 27 Customer Service
Customer Service 27 0.46% 1,100 5,500 1,100 28 Long Tenn Reserve
Long Term Reserve 28 0.49% 1,119 5,596 1,119 29 Per Cash Flow
Interim Financing Costs 29 1.17% 2,686 13,428 2,686 30 Take Out and Closing
Take Out and Closing 30 3.28% 7,500 37.500 7,500 31 Marketing Start Up Costs
Marketing Start Up Costs 31 0.64% 1,228 6,140 1,228 32 Marketing On Going Costs
Marketing On Going Costs 32 1.22% 2,800 14,000 2.800 33 Sales Commissions on Grass 3.00%
Sales Commissions on Grass 3 op% 33 302% 6,897 34.485 6,897 34 General and Admin on Gross 3.00%
General and Admin on Gross 3.00% 34 302% 6.897 34,485 6.897 35 Troxler Fee on Gross 1.00%
Troxler Fee on Gross 1.W% 35 1.01% 2,299 11,495 2,299 36 Palm SpdWx Subsidy Reimbursement-Palo??
Palm Springs Subsidy Reimbursement 36 000% 0 0 0 37 Project Contingency on Gross 5.00%
Project Contingencyon Gross 5q07.1 37 503% 11,495 57,475 11,495 38 Per Cash Flow
Estimated Costs 89.37% 204,441 1,022,207 204,441 39 Per Cash Flox
\_ Estimated Profits 24,309 121,546 24,309 40 ProOt Splits as Indicated
Profit Percentage 10.63% 10.63%
Prpfprme Distributions: Approved By: Sonaturg Date
\ Other 3B 0 0 0 John Pavelak _._..........._..____________
1j Preferred Returns to Troxler/Century 39 0 0 0 Gary Welnlraub----__-__-____-___-__-______---_-_-------------------
-`+-� Land to City at House Close if available 40 22,000 110,000 22000 Tog2 Scimia --------- ---------------------- -------------
Profits to: Other a an 40 0 0 0 Palli B_yerX
Troxler so use 40 1,155 5,773 1.155 Jim Bennett--------------- ------------------ 1
Century Crowell 5a 0o% 40 1,155 5,773 1.155 Finance -
Statistical Data: Value Ratio Per Square Fool Before Incentives $164.21 $164.21 George Mooratlian -
..... ......................_...___________________.__.........___
ValueRatioPerSquareFoot After Incentives $163.39 $163.39 Jerry Herman......................_..................-__---__-_-------
TaxctLoad CostAfter Square a 1.25% 61.13 Exdudes LLD Wanda
act Director Direct Cost Per 5 uare Foot $61.13 $81.13 Wantla Robinson -
le Assumes 50%of the Bonus areas will be built out with no offsetting option income. 1/4/2005 8:22 AM Daant HlgblmMa-Palm sprnga RDA-113004Gnence my Page 1
RESOLUTION NO. j :7;; '
OF THE COMMUNITY REDEVELOPMENT AGENCY
OF
THE CITY OF PALM SPRINGS, CALIFORNIA APPROVING
A DISPOSITION AND DEVELOPMENT AGREEMENT WITH
CENTURY VINTAGE HOMES TO EFFECTUATE THE
DEVELOPMENT OF FIVE MODERATE-INCOME SINGLE-
FAMILY HOMES IN THE DESERT HIGHLAND GATEWAY
NEIGHBORHOOD, MERGED AREA#1
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 Agency solicited proposals from builders and developers interested in
constructing affordable single-family homes on Agency-owned parcels in the Desert Highland
Gateway neighborhood, and received a successful proposal from Century Homes; and
WHEREAS,the property developers, Century Vintage Homes and Century Crowell Communities
are the developers of the successful Mountain Gate project adjacent to the neighborhood, and
have endeavored to provide service to the Desert Highland neighborhood; and
WHEREAS,the Agency has negotiated an Agreement with the Developer whereby the Developer
would construct five single-family homes on Agency-owned lots in the neighborhood; 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 Developer agrees to restrict, though a Regulatory Agreement approved as an
attachment to the Disposition and Development Agreement, the resale provisions on the five
homes to make the homes affordable to families with no more than 110%of Area Median Income
(AM[); and
WHEREAS, a Notice of Public Hearing concerning the Disposition and Development Agreement
was published in accordance with applicable law; and
WHEREAS, the City Council and Agency have considered the staff report, and all the
information, testimony and evidence provided during the public hearing on October 6, 2003 and
December 1, 2004.
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), Public
Resources Code Section 21000 et seg., the Community Redevelopment
Agency finds that this Project qualifies as a "In-Fill' categorical (exemption
a.N
14 CCR 15332. The Agency finds as follows:
(a) The project is consistent with the applicable general plan
designation and all applicable general plan policies as well as with
applicable zoning designation and regulations.
(b) The proposed development occurs within city limits on a project site
of no more than five acres substantially surrounded by urban uses.
(c) The project site has no value as habitat for endangered, rare or
threatened species.
(d) Approval of the project would not result in any significant effects
relating to traffic, noise, air quality, or water quality.
(e) The Site can be adequately served by all required utilities and
public services.
SECTION 3. The Developer has proposed building 5 moderate income single family
homes on infill lots in the Desert Highland neighborhood. The models are
Model 102's of the Ventana Collection from Mountain Gate (approximately
1,425 square feet). The project has not received any reductions in
development standards or any density bonuses allowed under Section
65915 of the California Government Code, and contains architectural and
landscaping upgrades. The project will help the City meet its requirements
to provide affordable housing under California law.
SECTION 4. The Developer agrees, through this Disposition and Development
Agreement, to acquire from the Agency the five parcels at an average
value of $22,000 each for the project; the Agency agrees to provide a
subsidy program to the qualified buyers of the homes up to the value of
the parcel plus an additional cash write-down of up to $15,000 per home.
The buyer subsidies will vary by household income. Through the creation
of a separate program, the City could participate in the project through the
use of CDBG- or other funds. The Agency retains reverter rights if the
Developer fails to proceed or complete the project. In addition,the Agency
agrees to assist the Developer in marketing the properties and qualifiying
buyers. The buyer subsidy shall remain on the title of the home as a
"Silent second"; in addition, the Regulatory Agreement shall contain equity
sharing provisions as required by California Law.
SECTION 5. The Agency does hereby find and determine as follows:
A) The parcels were acquired by the Community Redevelopment
Agency for the purposes of providing low- and moderate-income
housing on them, mostly as part of several phases of self-help
housing in the neighborhood.
B) The DDA effectuates the purposes of the Community
Redevelopment Law by assisting in the development of housing .
affordable to families with incomes below 120% of Area Median
Income and preserving the affordability of that housing for a period
of 45 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 6. The proposed project is consistent with the Amended and Restated
Redevelopment Plan for Merged Project Area #1, the Five Year
Implementation Plan and Housing Compliance 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 7. Based on foregoing reasons, this DDA with Century Vintage Homes is
hereby approved and incorporated herein by this reference.
SECTION 8. The Executive Director 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 2004.
AYES:
NOES:
ABSENT:
ATTEST: COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF PALM SPRINGS, CALIFORNIA
By
Assistant Secretary Chairman
REVIEWED &APPROVED AS TO FORM
�e
RESOLUTION NO.
OF THE CITY COUNCIL OF THE CITY OF PALM
SPRINGS, CALIFORNIA, CONCURRING WITH THE
COMMUNITY REDEVELOPMENT AGENCY REGARDING
THE APPROVAL OF A DISPOSITION AND
DEVELOPMENT AGREEMENT WITH CENTURY
VINTAGE HOMES FOR THE DEVELOPMENT OF FIVE
SINGLE-FAMILY MODERATE-INCOME HOMES IN THE
DESERT HIGHLAND AREA OF MERGED AREA#1
NOW THEREFORE BE IT RESOLVED by the City Council of the City of Palm Springs that it
concurs with the action of the Community Redevelopment Agency regarding the approval of a
Disposition and Development Agreement with Century Vintage Homes for the development of
five single-family moderate-income homes in the Desert Highland area of Merged Area #1.
ADOPTED this day of 12004.
AYES:
NOES:
ABSENT:
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By
City Clerk City Manager
REVIEWED &APPROVED AS TO FORM