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Home My WebLink About10/6/2004 - STAFF REPORTS (2) �54 DATE: OCTOBER 6, 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 small City-owned C-1 lots for an 8,000 s.f. R-1 lot; that exchange should close within the next 60 days. 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 Cra possible need for variances, but those have also been resolved. The DDA proposes that Century construct four (4) of their Model 102 homes (1,400 s.f.) and one Model 104.home (1,820 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. Based on the analysis of the pro forma, the Developer would need a subsidy on each of the homes. A spreadsheet is attached showing the sample costs based on 3 Model 102's and 2 Model 103's. The final structure is somewhat different based on 4 Model 102's and one Model 104. The subsidy per home would be 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. The alternative would be to have Century charge a market price for the home (closer to $200,000)where they could cover all of their costs and make a small profit, but that poses 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. 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. 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. Jon S. aymoh Dire or of Cc unity & 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 ca OL Century Homes DDA - Desert Highland Infill Project Per unit Per Unit Totals Unit Notes Model 102 Model 103 5 Homes Averages Revenue a Sale of Units $159,990 $169,990 $829,950 $165,990 b Buyers Incentive 0 0 $0 $0 c Selling Costs (5%) 8328 8 848 $43,200 $8,640 Net Revenue $151,662 $161,142 $786,750 $157,350 Costs d Land Acquistion/Land Costs $22,300 $22,300 $111,500 $22,300 e Planning/Engineering 0 0 0 0 f Site Improvements 12,852 12,852 64,260 12,852 g Fees/Permits 9,252 9,252 46,260 9,252 g School Fee 3,136 3,642 17,198 3,440 g Building Permits 2,800 3,252 15,356 3,071 Utility Installation 111000 1 000 5 000 1 000 Finished Lot Costs $51,340 $52,298 $259,574 $61,915 House Construction $85,624 $94,845 $455,783 $91,157 fencing $2,870 $2,870 $14,350 $2,870 landscaping $2,472 $2,472 $12,360 $2,472 Soft Costs indirects $7,038 $7,477 $36,507 $7,301 insurance 3,128 3,323 16,225 3,245 customer service 782 831 4,057 811 long-term reserve 560 595 2,905 581 g & a 4,800 5,100 24,900 4,980 project contingency on gross 8,000 8,500 41,500 8,300 builder fee on gross 1,600 1,700 8,300 1,660 h Financing Cost(est.) $3,324 $3,645 $17,583 $3,517 ---------------------------------------------------------------------------------------------------------- -------------- Total Net Revenue $151,662 $161,142 $786,750 $157,350 Total Hard &Soft Costs $166,196 $178,314 $867,334 $173,467 ---------------------------------------------------------------------------------------------------------- -------------- Construction Profit(Shortfall) ($14,534) ($17,172) -$80,584 -$16,117 i Developer Profit $11,820 $9,087 $50,901 $10,180 Total Development Profit(Shortfall) ($26,354.00) ($26,259.00) -$131,485 -$26,297 Assumptions 1 Five (5) Homes, 3 Model 102's and 2 Model 103's 2 Sales Price for Model 102 = $159,990 3 Sales Price for Model 103 = $169,990 4 Buyers Incentive included in Buyer package Notes a Based on Century's assumed sales price b Buyers Incentive removed from developer pro forma and put in Buyer's assistance package c Selling costs include broker cooperation (5), marketing on-going costs (32), sales commission on gross (33) d Recent appraisal of lots in D-H have been $22-23 K; includes prorated taxes and carry costs. e Assumed no planning/engineering costs because of established product on finished lots f Site Improvement costs are gross including contingency g Based on Century's assumption on permit costs (based on Mountain Gate?) h Financing Cost is Century's Interim Financing Cost (29) plus take out cost(30) i Assumed a market return of 7.5% of sales price for model 102's and 5%for model 103's 09/07/04 Century Homes DDA — Desert Highland Infill Project Moderate Income Homebuyer Qualification/Subsidy Calculation Lender Income Analysis Annual Income $61,200 Monthl 1ricome $5,100 Bank Ratio _ 1st 0.281 $1,428 2nd 0.38 $1,938 Annual Monthly Monthly Income x 1st Ratio $1,428 taxes (1) $1,760 $147 insurance (2) $750 $63 other (3) $0 $0 Net Amount $1,219:MaximumDS(p+i)_9st.ratio: : $1,219 Annual Monthly Monthly Income x 2nd Ratio $1,938 taxes (1) $1,760 $147 insurance (2) $750 $63 other (3) $0 $0 Other debts loan payments (4) $300 credit card payments (5) $100 other .......... __. ...... .. Net Amount $1,329;Mgximum DS (p+i� 2nd ratio: . $1,329 Choose Lower DS $1,228 Debt Capacity = (monthly DS x 12)/c (6) c= 0.0759 DC (total) $194,150 Assumptions (1) Annual taxes are 1.1% of sales price ($159,990) (2) Homeowners insurance is $750/year (3) This does not assume assessment district financing (4) Loan payment is one car payment of$300 (5) Assume one credit card payment of$100/month (6) Assume a 30-year mortgage at 6.5%; constant= .0759 Moderate Income Criteria (Redevelopment Law) Maximum House Payment for a 3 bedroom house $1,636.25 Includes: principal and interest $1,228 mortgage loan insurance fees (PMI) $63 property taxes and assessments $147 fire and casualty insurance $63 property maintenance and repairs $25 reasonable utility allowance (garbage, sewer, water, electicity, gas) $150 homeowners assocation fees $0 space (or land) rent $0 Net Amount of Monthly Surplus for Housing (or Gap) based on 110% of median -$38.41 ct - Century Homes DDA — Desert Highland Infill Project Moderate Income Homebuyer Qualification/Subsidy Calculation Lender Income Analysis Annual Income $51 000Monthly Income.. $4,250 Bank Ratio_ .... .! 1st 0.281 $1,190 2nd 0.38 $1,615 Annual Monthlv Monthly Income x 1st Ratio $1,190 taxes (1) $1,760 $147 insurance (2) $750 $63 other (3) $0 $0 Net Amount $981 INaximum DS(p+,).1st ratio: $981 Annual Monthlv Monthly Income x 2nd Ratio $1,615 taxes (1) $1,760 $147 insurance (2) $750 $63 other (3) $0 $0 Other debts loan payments (4) $300 credit card payments (5) $100 other Net Amount $1,006 Maximum'DS(p+i) 2nd_ratio;Ty„j $1,006 Choose Lower DS $981 Debt Capacity= (monthly DS x 12)/c (6) c = 0.0759 DC (total) $155,099 Assumptions (1) Annual taxes are 1.1% of sales price ($150,000) (2) Homeowners insurance is $750/year (3) This does not assume assessment district financing (4) Loan payment is one car payment of$300 (5) Assume one credit card payment of$100/month (6) Assume a 30-year mortgage at 6.5%; constant= .0759 Moderate Income Criteria (Redevelopment Law) Maximum House Payment for a 3 bedroom house $1,636.25 Includes: principal and interest $981 mortgage loan insurance fees (PMI) $63 property taxes and assessments $147 fire and casualty insurance $63 property maintenance and repairs $25 reasonable utility allowance (garbage, sewer,water, electicity, gas) $150 homeowners assocation fees $0 space (or land) rent $0 Net Amount of Monthly Surplus for Housing (or Gap) based on 110% of median $208.59 C M � a-- Proof of Publication In Newspaper STATE OF CALIFORNIA County of Riverside Laura Reyes says: NOTICE OF JOINT PUBLIC HEARING 1. 1 am a citizen of the United States, a NOTICE IS HEREBY GIVEN, that the Community Redevelopment Agency of the City of Palm Springs and the resident of the City of Indio, County Of City of Palm Sprigs will hold a Joint Public Hearing in the City Riverside, State of California, and over the Council Chambers, located at 320o Tahpuifz Canyon way, Palm Springs, California 92262, beginning at 7:00 p.m., age of 18 years. Wednesday,October 6,2004,to consider the following: 2. 1 am the Office & Production Manager of Disposition and Development Agreement ('DDA") f between Century Crowell Communities,LP and the Community The Public Record, a newspaper Of Redevelopment Agency of the City of Palm Springs,for 5 sin- gle family inlAl homes for moderate income households In the general circulation printed and published in the City of Palm Springs, COunt of Desert Highlantl Gateway area of the city,noc of Las Vegas y y Road,Palm Springs,California 92262 Riverside, State of California. Said The The Community Redevelopment Agency of the City of Of general Palm Springs(Agency")proposes to enter a ODAwim Century Public Record is a newspaper 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 GatGovernment Code section 6000, Its status Model 102oway a pproxiof the city.Fourlheho and one home would Motlel tot of approximately 1,400 s.f.and one home would be as such having been established by judicial a Model 104 of approximately 1,820 s.f.The homes would be decree of the Su erior Court of the State of located on Jim[... Circle, El Dorado Boulevard, Avenida p Cerca,and Bon Air Drive The Agency shall make the homes California in and for the County of Riverside available for moderate income households, with mortgages in Proceeding No. Indio 49271, dated March affordable to households at110%of area median Income.The homes will be subject to affordability restrictions contained in a f` 31 1987,. entered In Judgment Book No. Regulatory Agreement;the Agency w 1provideasubsldy to the 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 3. The Public Record is a newspaper of Nate and Deed of Trust.Finally,in order to make the price of Lr.., ' general circulation ascertained and I the homes affordable and the Developer to make a standard F return on investment the construction the Agency they pro- established in the City of Palm Springs In vitleasubsitlytothetleveloper,developer,Incinclutlingthecontnbulionofthe the County of Riverside, State of California, Agency-owned land to the project The general partner in the project is Century Vintage Case No. RIC 358286, Filed June 8, 2001. Homes,a Century Crowell Communities entity,located in San 4. The notice, of which the annexed is a true Bernardino, California Century is the developer of the pprinted CO published In the Mountain Gate project near the neighborhood copy was p All interested parsons are invited to attend the Public newspaper on the following publication Hearing and express opinions an the Item listed above.If you dates t0 wit: challenge the nature of the proposed action in court,you may be limited to raising only those Issues you or someone else raised at the Public Hearing described in this notice,or in writ. Se tember 28, 2004 len correspondence delivered to the City Clerk,at the address p listed above,at or prior to the Public Hearing, October 5, 2004 Members of the public may view this document and all referenced documents in the Community Redevelopment Department. City Hall, and submit written commends to the I certify under penalty of perjury that the Community Redevelopment Agency at or prior to the above is true and correct. Community Redevelopment Agency Meeting al or prior to the public hearing described in[his notice Dated at Palm Springs, California, this 5'h Further information, including a copy of the DDA and day of October, 2004. Resolution, prepared in accordance with Health and Safety Code Section 33433,is available in the Office of the City Clerk, at the above address PATRICIAA SANDERS,City Clerk September 28,October 5,2004 i ra eyes Offi & Prod cti ana 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. 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 sea., the Community Redevelopment Agency finds that this Project qualifies as a "In-Fill' categorical exemption 14 CCR 15332. The Agency finds as follows: C __1 (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. Four of the models are Model 102's of the Ventana Collection from Mountain Gate (approximately 1,425 square feet) and one is a Model 104 (over 1,800 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 Agency agrees,through this Disposition and Development Agreement, to contribute the five parcels at an average value of $22,000 each to the project, and to write down the price of each house another $8,000 to $15,000. In addition, the Agency shall work with the buyers of the homes and offer buyer subsidies that 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. C e 0 1�_Cox �' � 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 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 2004. AYES: NOES: ABSENT: ATTEST: COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA By Assistant Secretary Chairman REVIEWED & APPROVED AS TO FORM 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 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. ADOPTED this day of 2004. AYES: NOES: ABSENT: ATTEST: CITY OF PALM SPRINGS, CALIFORNIA By City Clerk City Manager REVIEWED &APPROVED AS TO FORM Ira -'