MEETING DATE:
January 27, 2015
SUBJECT:
Title
RESOLUTION NO. 2015-8027 - REALLOCATION OF SELECT FUNDS RELATED TO THE PROMENADE AT CREEKSIDE AFFORDABLE HOUSING DEVELOPMENT
Body
Recommendation
Recommendation
ADOPT a Resolution reallocating the unused $250,000 originally authorized to facilitate orderly rescission and redirecting the money to the Promenade at Creekside project.
Body
Board or Commission Action
RDA Board approval of Exclusive Negotiating Agreement and predevelopment loan on June 8, 2010
RDA Board approval of $28,200,000 loan for project on May 10, 2011
City Council as SA & SHA approval of Rescission Agreement on September 24, 2013
City Council approval of $250,000 as contingency to resolve property tax issue on September 24, 2013
City Council as SA & SHA approval of ENA and predevelopment loan on September 24, 2013
City Council as SA & SHA approval of $17,023,000 loan for project on Jan 28, 2014
Relevant Council Strategic Theme
Planning for the Future
Relevant Department Goal
Facilitate Affordable Housing Production
Introduction
The original iteration of the project, formerly known as "The Shoppes and Residences at Creekside", was stuck in predevelopment limbo due to the complications, uncertainty and evolving regulatory guidelines caused by the State government's dissolution of the Redevelopment Agency (RDA) effective February 1, 2012.
The developer applied for and successfully secured the highly competitive 9% low income housing tax credits from the California Tax Credit Allocation Committee (TCAC) in the July 2011 application round. Unfortunately, the State of California Department of Finance (DOF) took a negative view of the project and sufficiently inhibited the project's ability to move forward to the extent that the developer was reluctantly forced, after exhausting all legal avenues, to return the tax credits in March 2012. The project remained frozen until August 2013 awaiting permission from DOF to move toward an orderly rescission. DOF issued a final determination letter dated August 29, 2013, thereby finally allowing a way forward toward concluding the original project via a Rescission Agreement authorized by the City Council as the Successor Agency and as the Successor Housing Agency on September 24, 2013.
Discussion
During the period of time in which DOF effectively froze the project in 2012, an unanticipated and confusing situation emerged regarding ownership and property tax liability. Prior to ex post facto DOF intervention in mid-2012, the plan was for the developer to receive from the RDA, via a Development and Disposition Agreement (DDA), all four properties that had been assembled over the course of several years by the City and the RDA. These four properties were in their original configuration, the combined acreage of which was to be used for various purposes. (Please refer to the GIS attachment depicting the original four parcels.)
Some acreage was to be retained by the affordable housing project itself. Some was to be deeded to the City for Creekside Drive and the Promenade right-of-way. Some was to be deeded to the City for floodway/floodplain management. And, some was simply excess acreage that was to be returned to the City for a potential future affordable housing project. The developer was responsible, via the map process and working with the City Engineering Department, for reconfiguring the parcels and converting them into new parcels reflecting their intended use. The developer moved forward on parcel reconfiguration after receiving the original four parcels via a Grant Deed in October 2011. The developer duly reconfigured the acreage and assigned the appropriate new parcels to the City. (Please refer to the GIS attachment depicting the reconfigured parcels.)
Upon DOF nullification of the DDA, the Assessor recognized only the original transfer of the four parcels to the developer. The Assessor did not recognize the subsequent transfer of the project property back to the City or the fact that the original transfer was not recognized by the DOF. In this unusual situation, the developer was left in the awkward position of accruing property tax liability on property that he did not own. The City was prevented from assisting the project with further loans and all parties were prevented from correcting the situation via a Rescission Agreement until DOF finally issued a final determination letter in August 2013. The cumulative tax bill was estimated to be up to $250,000 and would require resolution in order for the property to enjoy clear title. Therefore, a contingency funding authorization of up to $250,000 from the City Housing In-Lieu Fund was authorized by the City Council on September 24, 2013 via Resolution No. 2013-7845 in order to be available to resolve the clouded tax issue.
The real property was duly transferred back to the City as the Successor Housing Agency in accord with the Rescission Agreement effective October 1, 2013. Eventually, the developer, the City and the Assessor were able to unravel the complicated property tax issue in a manner that did not require the use of the $250,000 allocated by the City Council for this specific contingency.
Due to the effects of loss of RDA revenue, the new Promenade at Creekside project is being funded by the City as SHA at a significantly reduced level. Originally, the RDA Board authorized project funding at $28,200,000 for a unitary (one phase) Residences at Creekside project. In the post-RDA era, the City as SHA authorized project funding at only $17,023,000 for a bifurcated (two phases) Promenade at Creekside project. The effects of the loss of over $11 million for the project as a whole have been multi-faceted and significant. One result is to stretch the project budget to the point of inflexibility. Another result is to cause Phase II of the project to be significantly less competitive for 9% low income housing tax credits than would otherwise be preferred. The addition of the unused $250,000 would assist Phase II of the project in being more competitive for tax credits and would add a measure of enhanced financial elasticity to the project.
Fiscal Impact
None. This Resolution simply redirects up to $250,000 previously authorized from the City Housing In-Lieu Fund to fund a possible rescission contingency toward the Promenade at Creekside project funding for Phase II.
Attachment(s)
1. Resolution
2. GIS exhibit depicting the project site
Prepared by: Harry Williams, Housing Programs Manager
Submitted by: Karl Schwarm, Director, Housing & Neighborhood Services Division
Reviewed by: Lydia Romero, Deputy City Manager
Approved by: Jack Griffin, City Manager