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HomeMy WebLinkAbout12/1/2004 - STAFF REPORTS DATE: DECEMBER 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 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. JohAS. ym n Dir ctor f Co m nity & Economic Development APPROVED:-.--- Executive Director'r ATTACHMENTS: 1. Agency & City Resolution 2. Public Hearing Notice 3. Sample Developer Pro Forma 4. Sample Buyer Qualifications 5. Disposition and Development Agreement Proof of Publication In Newspaper STATE OF CALIFORNIA County of Riverside Laura Reyes says: NOTICE OF JOINT PUBLIC HEARING NOTICE IS HEREBY GIVEN, that the Community 1. 1 am a citizen of the United States, a Redevelopment Agency of the City of Palm Springs and the resident of the Cityof Indio, Count of City of Palm Springs will hold a Joint Public Hearing in the City Y Council Chambers, located at 3200 Tahqultz Canyon Way, Riverside, State of California, and over the Palm Springs, California 92262, beginning at 7:00 p.m., age of 18 ears. Wednesday,December 1,2004,to consider the following g Y Disposition and Development Agreement ("DDA") 2. 1 am the Office & Production Manager of between Century Crowell Communities, LP and the The Public Record, a newspaper of Community Redevelopment Agency of the City of Palm Springs, for 5 single family intill homes for moderate general circulation printed and published in income households In the Desert Highland Gateway area the City -Of Palm Springs, Count of of the city, north of Las Vegas Road, Palm Springs, Y p g Y aliforniag2252. _ -- Riverside, State of California. Said The The Community Redevelopment Agency of the City of Public Record is a news a er of eneral Palm Springs("Agency")proposes to enter a DDAwilh Century p p g Crowell Communities,LP for the purpose of developing five(5) circulation as that term is defined in moderate income single family homes in the Desert Highland Government Code section 6000, its status Gateway area of the city.All of the hones would be Century's Model 102 of approximately 1,400 at.The homes would be as such having been established by judicial located on Jiminez Circle, El Dorado Boulevard, Avenida decree of the Superior Court of the State of Coma,and Bon Air Drive.The Agency shall make the homes p available for moderate income households, with mortgages in and for the County of Riverside - affoujabletotrousehndaat„9r ofamamediaoidnome This- California - in Proceeding No. Indio 49271, dated March homes will be subject to affordability restrictions contained in Regulatory Agreement;the Agency will provide a subsidy to the 31, 1987, entered In Judgment Book No. homeowners to make the homes affordable.Such subsidy shall 129, page 355, on March 31, 1987. be repayable subject to the terms contained in a Promissory Note and Deed of Trust.Finally,in order to make the puce of ppp 3. The Public Record is a newspaper Of the homes affordable and the Developer to make a standard y 3 general circulation ascertained and return on inveslmentfor the construction,the Agency may pro- f vide a subsidy to the developer,including the contributed of the established in the City of Palm Springs in Agency-owned land to the project The general partner in the project is Century Vintage the Count of Riverside, State of California, �l Y Homes,a Century Crowell Communities entity,located in San Case No. RIC 358286 Filed June 8, 2001. Bernardino, Guillermo. Century is the developer of the 4. The notice, of which the annexed is a true Mountain Gate project famous are neighborhood. toa All interested persons are mw[etl to adend the Public printed copy was published In the Hearing and express opinions on the item listed above If you newspaper on the following publication challenge the nature of the proposed action m court,you may g p be limited to raising only those issues you or someone else dates to wit: raised at the Public Hearing described in this nonce,or in writ- ten correspondence delivered to the City Clerk,at the address listed above,at or prior to the Public Hearing November 16, 2004 Members of the public may view this document and all November 23, 2004 referenced documents in [lie Community Redevelopment Department, Clty Hall, and submit written comments to the Community Redevelopment Agency at or prior to the Community Redevelopment Agency Meeting at or prier to the I certify under penalty of perjury that the publinheadng described in this notice above is true and correct. Further Informehcn, including a copy of the DDA and Resolution, prepared in accordance with Health and Safety Dated at Palm Springs, California, this 23m Code Section 33433,Is available In the Ogee of the City Clerk, day of November, 2004. at the above address. Kathie Had,CMC Acting Assistant Secretary November 16,23,2004 ra Reyes 0 ice & Prod c ' n Manager RESOLUTION NO. 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 (AMI); 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 seo.• the Community Redevelopment Agency finds that this Project qualifies as a "In-Fill' categorical exemption k"x&,, b 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 projectwill 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