2009 05 05 RDAea# 4 4 adja
Redevelopment Agency agendas are
available on the City' web page
dal www.la-quinta.org
REDEVELOPMENT AGENCY
AGENDA
CITY COUNCIL CHAMBERS
78-495 Calle Tampico
La Quinta, California 92253
Regular Meeting
TUESDAY, MAY 5, 2009
3:00 P.M. Closed Session / 4:00 P.M. Open Session
Beginning Resolution No. RA 2009-003
CALL TO ORDER
Roll Call:
Agency Board Members: Adolph, Franklin, Henderson, Sniff, and Chairman Kirk
PUBLIC COMMENT
At this time, members of the public may address the Redevelopment Agency on any
matter not listed on the agenda. Please complete a "request to speak" form and limit your
comments to three minutes.
CLOSED SESSION
NOTE: Time permitting the Redevelopment Agency Board may conduct Closed Session
discussions during the dinner recess. In addition, persons identified as negotiating parties
are not invited into the Closed Session meeting when acquisition of real property is
considered.
1. CONFERENCE WITH THE AGENCY'S REAL PROPERTY NEGOTIATOR,
DOUGLAS R. EVANS, PURSUANT TO GOVERNMENT CODE SECTION
54956.8 CONCERNING POTENTIAL TERMS AND CONDITIONS FOR THE
ACQUISITION AND/OR DISPOSITION OF REAL PROPERTIES IDENTIFIED AS
APNS: 773-370-028 AND -029, SILVERHAWK APARTMENT HOMES,
PROPERTY OWNER/NEGOTIATORS: APARTMENTS AT LA QUINTA
VILLAGE, L.P., JAMES C. GIANULIAS, AND DEUTSCH BANK, BERKSHIRE
MORTGAGE, INC., MARK S. PENCHECK, ESQ.
Redevelopment Agency Agenda 1 May 5, 2009
0'
2. CONFERENCE WITH AGENCY'S REAL PROPERTY NEGOTIATOR, DOUGLAS
R. EVANS, PURSUANT TO GOVERNMENT CODE SECTION 54956.8
CONCERNING POTENTIAL TERMS AND CONDITIONS FOR THE
ACQUISITION AND/OR DISPOSITION OF REAL PROPERTY LOCATED
SOUTHEAST OF THE MILES AVENUE AND WASHINGTON STREET
INTERSECTION AND NORTH OF THE WHITEWATER CHANNEL. PROPERTY
OWNER/ NEGOTIATOR: CP DEVELOPMENT LA QUINTA, LLC, RICHARD
OLIPHANT.
RECESS TO CLOSED SESSION
RECONVENE AT 4:00 P.M.
4:00 P.M.
PUBLIC COMMENT
At this time members of the public may address the Redevelopment Agency on any matter
not listed on the agenda. Please complete a "request to speak" form and limit your
comments to three minutes.
CONFIRMATION OF AGENDA
APPROVAL OF MINUTES
1. APPROVAL OF MINUTES OF APRIL 21, 2009.
CONSENT CALENDAR
NOTE: Consent Calendar items are considered to be routine in nature and will be approved
by one motion.
1. APPROVAL OF DEMAND REGISTER DATED MAY 5, 2009.
BUSINESS SESSION - NONE
STUDY SESSION
1. DISCUSSION REGARDING ESTABLISHING A NEW AFFORDABLE HOUSING
PROGRAM INVOLVING THE PURCHASE, REHABILITATION AND SALE OR
RENTAL OF FORECLOSED SINGLE FAMILY HOMES.
002
Redevelopment Agency Agenda 2 May 5, 2009 '
CHAIR AND BOARD MEMBERS' ITEMS - NONE
PUBLIC HEARINGS - NONE
ADJOURNMENT
The next regular meeting of the Redevelopment Agency will be held on May 19,
2009, commencing with closed session at 3:00 p.m. and open session at 4:00
p.m. in the City Council Chambers, 78-495 Calle Tampico, La Quinta, CA 92253.
DECLARATION OF POSTING
I, Veronica Montecino, City Clerk of the City of La Quinta, do hereby declare that
the foregoing agenda for the La Quinta Redevelopment Agency meeting of May 5,
2009, was posted on the outside entry to the Council Chamber at 78-495 Calle
Tampico and on the bulletin boards at 51-321 Avenida Bermudas and 78-630
Highway 1 1 1, on May 1, 2009.
City of La
Public Notice
Any writings or documents provided to a majority of the Redevelopment Agency regarding
any item on this agenda will be made available for public inspection at the City Clerk
counter at City Hall located at 78-495 Calle Tampico, La Quinta, California, 92253, during
normal business hours.
003
Redevelopment Agency Agenda 3
May 5, 2009
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CE` OF
COUNCIL/RDA MEETING DATE: May 5, 2009
ITEM TITLE: Demand Register Dated
May 5, 2009
RECOMMENDATION:
It is recommended the Redevelopment Agency Board:
Receive and File the Demand Register Dated
May 5, 2009 of which $386,258.88
represents Redevelopment Agency Expenditures
AGENDA CATEGORY:
BUSINESS SESSION
CONSENT CALENDAR
STUDY SESSION
PUBLIC HEARING
PLEASE SEE CONSENT CALENDAR ITEM NUMBER 1 ON CITY COUNCIL AGENDA
004
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COUNCIL/RDA MEETING DATE: May 5, 2009
ITEM TITLE: Discussion of Establishing a New Affordable
Housing Program Involving the Purchase, Rehabilitation
and Sale or Rental of Foreclosed Single Family Homes
RECOMMENDATION:
AGENDA CATEGORY:
BUSINESS SESSION:
CONSENT CALENDAR:
STUDY SESSION:
PUBLIC HEARING:
Review the materials presented in this report and provide direction regarding acquiring
and rehabilitating foreclosed homes, and establishing a housing authority.
FISCAL IMPLICATIONS:
None for this action. If the Agency Board elects to establish this program, specific
implementation activities and funding parameters would be reviewed as part of the
Fiscal Year 2009-2010 Agency budget.
BACKGROUND AND OVERVIEW:
The La Quinta Redevelopment Agency has a State mandate to preserve and produce
housing that is affordable to very -low, low- and moderate -income households. This
mandate requires that the Agency secure at least 1,994 affordable dwellings by 2029;
these dwellings must feature covenants that require single family dwellings to remain
affordable for 45 years and multi -family dwellings for 55 years. The Agency annually
invests 20% of the tax increment revenue to fund affordable housing initiatives. By
2010, the Agency will have secured 1,523 covenant restricted affordable dwellings,
which represents 76 percent of its affordable housing mandate.
Since 1994, the Agency has funded a variety of affordable housing initiatives
including:
• Silent second trust deed loans that facilitate single family home acquisition;
• Senior apartment communities;
• Family apartment communities;
• Senior single family home community
005
• The acquisition and redevelopment of dilapidated residential properties; and
• Single and multi -family dwelling rehabilitation.
The various housing projects and programs funded early this decade are near
completion. In order to continue the Agency's production momentum, Agency staff
and Agency consultants have been reviewing a variety of property acquisition
opportunities, and specifically have been investigating the potential for the acquisition,
rehabilitation and sale or leasing of foreclosed single family homes. This Study Session
will review the foreclosed home purchase opportunities and will outline parameters for
the purchase, rehabilitation and sale or rental of foreclosed homes.
Foreclosed Home Purchase Opportunities
As of April 21, 2009, there were 130 bank owned single-family and condominium
units in the two Redevelopment Project Areas; 91 were located in Project Area No. 1
and 39 in Project Area No. 2. The following table identifies the lenders who own
these units:
La Quinta Redevelopment Project Areas
Bank -Owned Properties by Lender
Bank
Project
Areal
Project
Area 2
Total
Other Financial Institutions
35
12
47
Federal Government
12
5
17
Chase 2
6
5
11
Bank of America 3
5
3
8
Bank of New York
2
5
7
US Bank
7
0
7
Wells Fargo
4
3
7
Aurora Loan Services
5
1
6
IndyMac
3
3
6
Deutsche Bank
3
1
4
GMAC
3
1
4
Argent Securities
3
0
3
Wlor an Stanlev
3
0
3
Total
91
39
130
1 U.S. Govemmentheld mortgages (Fredde Mac/Fannie Mae)
Includes Chase, JP Morgan, and Wash ington Mutual
Includes Countrywide and Bank of America
11 •
The average time the Project Area No. 1 and the Project Area No. 2 units were on the
market is six months and five months, respectively. While staff has not contacted
these lenders to ascertain the selling prices, RSG has discussed potential acquisition
price points with local realtors. They indicate that these homes sell for $130,000 to
$200,000 per unit, depending on location and condition.
If the Agency initiates this program, there will be additional opportunities to purchase
bank owned homes in the next several years since many existing mortgages will have
interest rate adjustments.
Agency Affordable Housing Credit
The Redevelopment Law provides that the Agency may gain affordable housing credit
for single family homes if they are either newly constructed or substantially
rehabilitated. Since these units would not be new construction, the Agency could only
gain affordable housing credit if it purchased and substantially rehabilitated the single
family dwellings. The Redevelopment Law defines substantially rehabilitated as
meaning the rehabilitation improvement value is at least 25% of the dwelling's land
and improvement value. In order to use the Agency's Low- and Moderate -Income
Housing funds and gain affordable housing production credit, the Agency must
purchase and then substantially rehabilitate the dwelling (the Agency previously did
this when it purchased and then substantially rehabilitated the 50 Cove homes in
1995). Assuming the Agency could purchase homes at an average price of $150,000,
the Agency must then invest at least $37,500 in order to substantially rehabilitate the
dwelling and receive affordable housing credit. The total anticipated investment would
be $187,500. Since the Agency must substantially rehabilitate these units in order to
obtain affordable housing credit, the Agency's acquisition focus should be on dwellings
that are in need of repair; discussions with local realtors indicate that potential
homebuyers are less interested in this type of dwelling and they remain on the market
for a longer period of time. Further, rehabilitating these properties would create
demand for construction jobs and construction materials. The Agency would be
providing some fiscal stimulus to the local economy.
Available Funds
As part of the annual budget process, the Agency prepares five-year cash flow
projections that identify anticipated revenue and expenditures. While there are pending
affordable housing projects whose funding needs have yet to be identified (the Shovlin
apartment proposal adjacent to Costco, the new development adjoining the
Washington Street Apartments, and the north Dune Palms Road property) the Agency
is projected to have $18.0 million in unencumbered housing funds available for new
projects/programs during Fiscal Year 2009-2010. This projection assumes that Project
Area assessed values do not increase during this period.
007
Subsequent Disposition
Once rehabilitated, the Agency could then sell the rehabilitated homes to low- and
moderate -income households or pursue leasing options. In order to meet the Agency's
affordability requirements, the Agency would offer a silent second trust deed loan; this
loan would fund the difference between the Agency's acquisition and rehabilitation
cost, and a mortgage affordable to low- and moderate -income households. The
mortgage amounts would range from $30,000 to $120,000 depending on income
level and household size. The Agency currently has 489 silent second trust deed
mortgage loans in place that total $27.7 million. These loans are 30 to 45 years in
duration, have occupancy and maintenance standards, and affordability covenants that
impose resale restrictions. The homeowner is not required to make mortgage payments
unless they violate the Agency's covenants. In order to qualify, the homebuyer must
be income qualified, qualify for a 30-year fixed rate first trust deed loan, and have at
least 5% of the purchase price to fund the down payment and a pro-rata share of
closing costs.
The affordability covenants and underwriting requirements may limit the Agency's
ability to sell these units in this market. Discussions with local realtors indicate that if
a homebuyer could purchase a similar dwelling without the required resale restrictions,
they will purchase the home that does not have the restriction. The Agency could
elect to retain ownership and rent these dwellings to low- and moderate- income
households to retain the covenants. In order to have long-term ownership, the
City/Agency would need to establish a housing authority.
Housing Authority
Per the Redevelopment Law, the Agency does not have the authority to operate rental
housing beyond the time reasonably necessary to sell or lease the housing
development. While the Agency does own 25 single family dwellings in the Cove, it
originally purchased 50 of these homes and has sold them at a rate of two or more per
year to either existing occupants or to qualified very -low and low-income households.
Staff recommends that if the Agency added 15 to 20 foreclosed home purchase
dwellings to its existing inventory of 25 Cove homes and 73 Washington Street
apartment units, the resulting inventory would trigger the need to establish a program
to manage rental housing.
An option would be for the City to establish a housing authority. Per State law, a
housing authority may be activated by the City Council via resolution. Findings must
be made regarding the unavailability of safe or sanitary dwellings to persons of low
income at rentals they can afford, or that unsanitary or unsafe inhabited dwelling
accommodations exist in the City.
11:
The law provides for three governance options:
✓ The mayor appoints (with City Council confirmation) the commissioners that
govern the housing authority; two of the members must be tenants of housing
authority properties;
✓ The City Council declares itself as the housing authority and appoints two tenants
of housing authority properties to sit with the city council as part of the
commission; or
✓ The City Council declares itself as the housing authority commission and appoints
a housing commission (like a planning commission) of which two members are
tenants of housing authority properties.
Both the Cities of Palm Desert and Rancho Mirage have housing authorities. The
respective City Councils sit as the governing bodies, and a housing commission is
appointed to advise them. The Palm Desert Housing Authority owns 15 properties
that contain 1,100 units. The Rancho Mirage Housing Authority owns 3 senior
apartment complexes with 146 units, and a 126 space mobile home park.
Representatives from both communities indicated that they established housing
authorities in order to have more control over their affordable housing inventory and
manage long-term operation.
Suggested Strategy
If the Board elected to develop a foreclosed home purchase and rehabilitation program,
staff recommends the Board consider the following parameters:
. Home Inventory
✓ Purchase at least 15 to 20 units in order to generate a significant impact.
✓ Negotiate bulk purchases with the lenders who have the largest
inventory.
✓ Select the dwellings that are in need of substantial rehabilitation; doing
so would accomplish two purposes — satisfy the substantial rehabilitation
criteria in order to count the units and remediate blight.
✓ Select dwellings that are located in both Project Areas.
. Rehabilitation Priorities
✓ Correct health and safety deficiencies.
✓ Replace substandard systems that will require future homeowner
investment including roofs, HVAC systems, windows, plumbing fixtures,
appliances, floor coverings and irrigation systems.
✓ Embrace sustainable operating and maintenance standards, and mirror the
standards the Agency requires in its new affordable housing
developments.
✓ Install drought tolerant front and rear yard landscaping per the City's
Cooperative Landscape Water Management program.
✓ Retain local contractors to undertake rehabilitation projects; use the
City's building staff to manage these contractors.
• Resale Parameters
✓ Sell the rehabilitated dwellings at housing costs that are affordable to
low- and moderate- income households.
✓ Provide an Agency funded silent second trust deed mortgage to fund the
difference between an affordable, fixed rate, 30-year first trust deed
mortgage and a 5% down payment, and the sale price.
✓ If current market conditions do not support unit sales, then rent the
rehabilitated dwellings to low- and moderate -income households.
• Housing Authority
• Funding
✓ Recommend to the City Council that it:
■ establish a housing authority to own these units.
■ designate the City Council as the governing body of the housing
authority and appoint a housing commission comprised of at least
two tenants and community members.
■ use City staff to manage the housing authority's governance
activities and retain property management companies to manage
the housing authority's properties where appropriate.
✓ Allocate $4.0 million of Fiscal Year 2009-2010 Low- and Moderate -
Income Housing Funds to underwrite this program.
✓ If the Agency can successfully sell the dwellings, up to $2.0 million could
be earned from dwelling sale income (20 units with first trust deed
mortgages of $100,000 each).
Next Steps
If the Agency Board elects to proceed with establishing a foreclosed home purchase
and rehabilitation program, then staff would:
• Draft the program parameters and guidelines for Board consideration.
• Contact lenders to identify bulk purchase potential.
• Work with local realtors to identify a marketing strategy that would attract
homebuyers.
-..n 010
• Identify Agency contracting requirements and prepare a request for qualifications to
establish a contractor bidding list.
• Prepare for City Council consideration housing authority formation and operations
criteria.
Respectfully submitted,
.4 �
Douglas R. Evans
Assistant City Manager — Development Services
Approved for submission by:
Thomas P. Genovese, Executive Director
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