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RDA Resolution 2011-001RESOLUTION NO. RA 2011 - 001 A RESOLUTION OF THE LA OUINTA REDEVELOPMENT AGENCY APPROVING A DISPOSITION AND DEVELOPMENT AGREEMENT BETWEEN THE AGENCY AND CORAL MOUNTAIN PARTNERS, L.P. FOR THE PROPERTY LOCATED SOUTHEAST OF THE INTERSECTION OF DUNE PALMS ROAD AND HIGHWAY 111 CORAL MOUNTAIN PARTNERS, L.P. DISPOSITION AND DEVELOPMENT AGREEMENT WHEREAS, the La Quinta Redevelopment Agency ("Agency") is a public body, corporate and politic, organized and existing under the California Community Redevelopment Law ("Health & Safety Code § 33000 et seq.) ("CRL"); and WHEREAS, pursuant to the CRL, the City Council of the City of La Quinta ("City" or "City Council," as applicable) approved and adopted the Redevelopment Plan ("Redevelopment Plan") for Project Area No. 2 ("Project Area"), on May 16, 1989, by Ordinance No. 139; and WHEREAS, a fundamental purpose of the CRL is to expand the supply of low- and moderate -income housing (Health & Saf. Code, § 33071); and WHEREAS, Agency staff have negotiated a Disposition and Development Agreement ("Agreement") with Coral Mountain Partners, L.P., a California limited partnership ("Developer"), pursuant to which (i) the Agency would ground lease to the Developer certain real property located within the Project Area ("Property") and provide to Developer financial assistance (the "Agency Assistance") in an amount up to Twenty -Nine Million Dollars ($29,000,000) from the Agency's Low and Moderate Income Housing Fund ("Housing Fund"); and (ii) the Developer would develop on the Property a One Hundred Seventy -Six (176) unit multi -family affordable housing development restricted for rental to and occupancy by persons and families of very low-, low-, and moderate -income, at rent levels affordable to such persons, and certain on -site private improvements and off -site public improvements necessary to serve the development (collectively, the "Project"), all as more particularly described in the Agreement WHEREAS, pursuant to the Agreement, as a condition to Agency's ground lease of the Property and provision of the Agency Assistance, Developer and Agency would record against the Property an Affordable Housing Regulatory Agreement substantially in the form attached to the Agreement, that restricts the use of the Property, for a period of fifty-five (55) years, as an affordable rental housing project; and Resolution No. RA 2011-001 Coral Mountain Partners Disposition & Development Agreement Adopted: January 4, 2011 Page 2 WHEREAS, Agency's ground lease of the Property to the Developer would be pursuant to a ground lease substantially in the form attached to the Agreement that would provide for Developer to own the improvements during the term of the lease, with the ownership of the improvements revesting in the City, as the Agency's successor, at the end of the 55-year term; and WHEREAS, the Developer would be required to execute a note evidencing its obligation to repay the Agency Assistance, with such repayment based on the cash flow generated from Developer's operation of the Project; and WHEREAS, in the event the Agency Assistance is not fully repaid by the end of the 55-year term of the ground lease, the term may be extended for up to an additional twenty (20) years, which would result in an automatic extension of the term of the Affordable Housing Regulatory Agreement; and WHEREAS, the Planning Department of the City prepared an Environmental Impact Report (State Clearinghouse No. 2008101109 (the "EIR") under Environmental Assessment 2008-600 for, the development of up to 200 affordable housing rental units. The City Council certified the EIR on the 18" day of May, 2008. The City Council has determined that no subsequent or supplemental EIR is required because the Project is consistent with, and contemplated by, the EIR, and none of the events listed in Public Resources Code Section 21166 have occurred; and WHEREAS, Pursuant to Health and Safety Code Section 33334.3(j), prior to an agency's expenditure of funds from its Low and Moderate Income Housing Fund to fund more than fifty percent (50%) of the cost to develop affordable housing units, the agency must find that no other commercial or private means of financing the project at the same level of affordability and quantity are reasonably available to the developer or agency; and WHEREAS, the Developer will be seeking low income tax credits and multifamily housing mortgage revenue bonds to assist with the costs to develop the Project, in the maximum amounts that will be supported by the Project; and WHEREAS, despite the availability of the tax credits and housing bonds, there remains a financing gap for which no other private or commercial funds are reasonably available to the Agency and/or Developer; and WHEREAS, Agency staff recommends the Agency Board find and determine that the provision of the Agency Assistance is necessary because the Developer has made a good faith attempt but has been unable to obtain commercial or private Resolution No. RA 2011-001 Coral Mountain Partners Disposition & Development Agreement Adopted: January 4, 2011 Page 3 means of financing the Project with the number of units and at the level of affordability required by the Agreement. WHEREAS, Health and Safety Code Section 33433 requires that the Agency prepare a Summary Report to consider the Agency's proposed financial contribution to the Project as set forth in the Agreement, that the Agency Board and the City Council conduct a noticed joint public hearing with respect to the Agreement, and that the approval of the Agreement be accompanied by certain findings and determinations as set forth herein: and WHEREAS, a Summary Report for the Agreement has been prepared and the joint public hearing has been conducted in accordance with applicable requirements of law; and WHEREAS, the City Council and the Redevelopment Agency have considered all the information and evidence set forth in the Summary Report presented by the City/Agency staff and presented by persons wishing to appear and be heard concerning the impact of the Agreement on the Project Area and the City as a whole; and WHEREAS, the Agreement is in accordance with the Redevelopment Plan and is of benefit to the Project Area and the City of La Quinta; and WHEREAS, the Agency Board hereby determines that the Agency's financial contribution pursuant to the Agreement is necessary to effectuate the purposes of the Redevelopment Plan. NOW, THEREFORE, BE IT RESOLVED BY THE LA QUINTA REDEVELOPMENT AGENCY AS FOLLOWS: 1. That the above recitals are true and correct and incorporated herein. 2. That the Agency Board resolves as follows: a. The Agency hereby determines that no subsequent or supplemental EIR is required because the Project is consistent with, and contemplated by, the EIR, and none of the events listed in Public Resources Code Section 21166 have occurred. b. The Agreement effectuates the purposes of the Community Redevelopment Law (Health & Safety Code § 33000 et seq.) and of the Redevelopment Plan and is in the best interests of the citizens of the City of La Quinta. Resolution No. RA 2011-001 Coral Mountain Partners Disposition & Development Agreement Adopted: January 4, 2011 Page 4 c. The Agency's lease of the real property identified herein will provide housing for very low-, low-, and moderate -income persons and is consistent with the Agency's Five -Year Implementation Plan, based on the findings and conclusions of the Summary Report, which is incorporated herein. d. The consideration the Developer will pay for the lease of the real property to be conveyed by the Agency is not less than the fair reuse value at the use and with the covenants and conditions and development costs authorized by the lease, based on the findings and conclusions of the Summary Report. e. The Developer has made a good faith attempt but has been unable to obtain commercial or private means of financing the Project with the number of units and at the level of affordability required by the Agreement. 3. The Agreement, a copy of which is on file with the Agency Secretary, is hereby approved. The Agency Executive Director and Agency Counsel are hereby authorized and directed to make final modifications to the Agreement that are consistent with the substantive terms of the Agreement approved hereby, and the Agency Executive Director is authorized to thereafter sign said Agreement on behalf of the Agency. 4. The Agency Executive Director is authorized and directed, on behalf of the Agency, to (i) sign such other and further documents, including but not limited to subordination agreements and escrow instructions that require the Agency's signature, and (ii) take such other and further actions, as may be necessary and proper to carry out the terms of the Agreement. PASSED, APPROVED, AND ADOPTED at a regular meeting of the La Quinta Redevelopment Agency held this 4th day of January, 2011, by the following vote: AYES: Agency Members Adolph, Evans, Franklin, Chairperson Henderson NOES: None ABSENT: Agency Member Sniff ABSTAIN: None i TERRY NDERSON, Agency Chair City of Quinta, California Resolution No. RA 2011-001 Coral Mountain Partners Disposition & Development Agreement Adopted: January 4, 2011 Page 5 ATTEST: VERONICA OOONTECINO, Agency Secretary City of La 96inta, California (AGENCY SEAL) APPROVED AS TO FORM: KATHERINE JENS", Agency Counsel r of La Quinta, California Resolution No. RA 2011-001 Coral Mountain Partners Disposition & Development Agreement Adopted: January 4, 2011 Page 6 SUMMARY REPORT Disposition and Development Agreement Coral Mountain Partners, L.P. and the La Quinta Redevelopment Agency December 21, 2010 --- INTRODUCTIONS _ r This document is the Summary Report ("Report") for the Disposition and Development Agreement ("Agreement") by and between Coral -Mountain Partners, L.P. ("Developer") and the La Quinta Redevelopment Agency" ("Agency"): The Agreement facilitates a long term ground lease of 9.33 net acres: of property ("Site"), and the development and operation thereon of a 116:> multi -family residential complex ("Development"). The Site is located east of Dune Palms Road, south of Highway 111, west of the Costco Center, and north of the Desert Sands Unified School District's Administrative office. The dwellings will be affordable to very low-, low- and moderate -income households. This Report has been prepared pursuant to Section 33433 of the California Community Redevelopment Law ("CRL") and presents the following: • A summary of the proposed Development. • The cost of the Agreement to the Agency. • The estimated value of the interest to be conveyed, determined at the highest and best uses permitted by the Agency's Redevelopment Plan. • An explanation of why the lease of the property pursuant to the Agreement will assist in the elimination of blight. THE DEVELOPMENT City and Agency Housing Mandates Both the City of La Quinta ("City") and the Agency are mandated by the State of California to continually seek opportunities to increase and improve the supply of housing affordable to very low-, low- and moderate -income households. State Planning Laws mandate that the City pursue a housing mix that accommodates both local and regional housing demand for affordable dwellings. The CRL provides that the Agency insure that a minimum of 15% of all new and substantially rehabilitated dwellings within its redevelopment project areas are affordable to very low-, low- and moderate -income households, and of these, 40% must be affordable to very low-income households. If these dwellings are owner occupied, they must be affordable for 45 years; if they are rental units, they must remain affordable for 55 years. Resolution No. RA 2011-001 Coral Mountain Partners Disposition & Development Agreement Adopted: January 4, 2011 Page 7 The Site The Site is located in La Quinta Redevelopment Project Area No. 2 ("Project Area No. 2"), and was part of a larger 19.97 acre parcel. Up until the 1940's, the parcel was undeveloped; in the 1940's the eastern half of the parcel was converted to agricultural uses with two accessory structures, likely water tanks. The agricultural uses were terminated prior to 1974, at which point a trailer park, including a pool and two permanent structures, was operational in the northern section of the parcel. However, by 1980, residential occupancy at the trailer park had dwindled, with only a dozen or so trailers remaining. This minimal population remained until the early 2000's, when the final trailers vacated the site and all structures were removed. The Agency purchased the property in 2007 to facilitate the development of affordable housing and infill commercial development, both of which are identified as goals in the adopted Redevelopment Plan. Project Description Site development is governed by the Highway 111 and Dune Palms Road Specific Plan 0808-5 ("Specific Plan"). The General Plan designates the Site as Commercial Park, and the Specific Plan designates the Site as High Density Residential (RH), which allows up to 16 units per acre. When combined with the 35% density bonus provided for in LQMC Section 9.60.270, the Site may accommodate 201 units. The proposed Development will entail 176 one-, two- and three -bedroom units housed in 11 buildings. The proposed unit mix will be 40 one -bedroom, 82 two - bedroom, and 54 three -bedroom units. Covered surface parking will be provided as well as a pool, community room and ample open space areas. The development will feature modern architecture to compliment the Costco center to the east and Desert Sands Unified School District facilities to the south. In addition, the Development is conditioned to construct a two-lane public road along the west and northern boundaries, and a storm water drainage system that eliminates the need to reserve property for on -site storm water retention, and will facilitate storm water drainage into the La Quinta Evacuation Channel. Non -housing set aside funds will be used to design and construct the storm water drainage system that will serve the northern commercial parcel. Affordable Housing Mix The Developer will be using 4% tax credit financing to fund a portion of the design and construction costs. In order to qualify for this financing, 174 dwellings will be affordable to very low- and low-income family households; the remaining 2 dwellings (the on -site manager units) will be affordable to moderate -income households. The dwellings will remain affordable to said households for a minimum of 55 years. In order to accommodate Federal tax requirements, the term of the Agency's Resolution No. RA 2011-001 Coral Mountain Partners Disposition & Development Agreement Adopted: January 4, 2011 Page 8 ground lease may be extended for an additional 20 years (in order to repay the Agency Loan as described later in this Report). If the lease term is extended, then the Agreement provides that the dwellings will remain affordable to very low, low and moderate income households for the extended term of the lease (up to 75 years). Thirty-six units will be affordable to very low-income family households, 138 dwellings will be affordable to low-income family households, and 2 dwellings will be affordable to moderate -income family households. In 2010, very low-income is defined as households who earn $22,750 (one person) to $35,100 (five person); low-income is defined as households who earn $36,400 (one person) to $56,200 (five person); and moderate -income is defined as households who earn $56,400 (one person) to $84,250 (five person). THE COST OF THE AGREEMENT TO THE AGENCY The cost of the Agreement to the Agency will be $39,023,868; $9,347,545 in land cost (as detailed below), $676,323 in engineering, planning and environmental expenses (outlined in the Planning Cost section below) and $29,000,000 in project design and development costs (outlined in the Development Cost section below). The $29,000,000 of Agency development cost investment will be secured by a deed of trust that will accrue interest at 1 % ("Agency Loan"); further, the Agreement provides that the Agency will review and approve all development budgets as they are refined through the construction bid process, and the Agency will participate in any cost savings the Developer may achieve through the construction process. The $29,000,000 of Agency investment will be disbursed as follows: $2,421,978 to fund predevelopment costs; $5,037,754 to fund costs associated with securing building permits and to secure the bond financing; $12,140,412 to fund construction costs once the Development is 50% complete; and $9,399,857 when the construction financing is converted to permanent financing. Per the Agreement, the Agency Loan will be repaid by the Developer through a combination of the Agency receiving 50% of the residual receipt payments (revenue that remains after operating costs and debt service payments on the permanent mortgage), and the value of the Site and the Development at the conclusion of the Ground Lease. The fee ownership of the Site and Development will revert to the City once the Ground Lease terminates. Following industry standards for 4% tax credit transactions, the Agency has agreed to an allocation of the residual receipt income of 50% to the Agency and 50% to the Developer. The residual receipt income is projected to be $95,413 in year 3 of operation, $149,619 in year 10 of operation, $207,177 in year 20 of operation, and $341,055 in year 55 of operation; the Agency would receive 50% of this income. Resolution No. RA 2011-001 Coral Mountain Partners Disposition & Development Agreement Adopted: January 4, 2011 Page 9 Property Acquisition The Agency purchased the larger 19.97 acre parcel in 2007 for $20,006,759 or $23.00 per square foot of land area. Applying the $23.00 per square foot land cost to the 9.33 acre Site yields a land purchase cost of $9,347,545. Project Area No. 2 Low- and Moderate -Income Housing Fund revenue was used to fund acquisition costs of the Site. Site Planning Costs Subsequent to acquiring the property, the Agency proceeded to design the required roadway improvements, commissioned a specific plan, and prepared and processed an environmental impact report in order to position the commercial and residential parcels for development. The Agency expended $1,352,646 for the total effort related to these activities and of this amount $676,323 is allocated to the Site. Development Costs The Developer projects final design and construction costs, not including land, of $50,350,270 or $286,082 per unit. The sources of funds are as follows: $29,000,000 of Agency Low- and Moderate -Income Housing Fund proceeds, $13,347,696 of 4% Tax Credit Investor Funds, and a $7,933,689 permanent mortgage supported by unit rent income. Source and Cost of Agency Funds The Agency is using accrued funds from the Agency's Low- and Moderate -Income Housing Fund. No bond funds or other funding sources have been used to acquire the Site or finance the site planning activities, nor will bond or other funds be used to underwrite the $29,000,000 of development costs funded by the Agency. ESTIMATED VALUE OF THE INTEREST TO BE CONVEYED The Agency obtained an appraisal from Capital Realty Advisors. This report identified a value opinion, as of October 25, 2010, of $12.00 per square foot of land area or $4,876,980 for the Site. ESTIMATED VALUE OF THE INTEREST TO BE CONVEYED, DETERMINED AT THE USE AND WITH THE CONDITIONS, COVENANTS AND DEVELOPMENT COSTS REQUIRED BY THE AGREEMENT The Agency will be leasing the Site to the Developer. The ground lease payments will be $1.00 per year until the Agency Loan is repaid; when repaid, the ground lease payments will be 50% of the residual receipt income. EXPLANATION OF WHY THE LEASE OF THE PROPERTY PUSUANT TO THE AGREEMENT WILL ASSIST IN THE ELIMINATION OF BLIGHT Resolution No. RA 2011-001 Coral Mountain Partners Disposition & Development Agreement Adopted: January 4, 2011 Page 10 The conveyance of the Site and construction of the Development will address the following blighting conditions within Project Area No. 2: • Increase and improve the supply of affordable housing within the community through the construction and operation of 176 dwellings that will be affordable to very low-, low- and moderate -income households. The Development is listed in the Agency's Five Year Implementation Plan. The Agreement will be the subject of a joint public hearing of the Agency Board and City Council on January 4, 2011, at 7:00 PM or thereafter in the City Council Chambers of the City of La Quinta located at 78-495 Calle Tampico, La Quinta, California.