MEETING DATE:
DECEMBER 9, 2014
SUBJECT:
Title
RESOLUTION NO. SHA 2014-011 - SUPPLEMENTAL HOUSING SUPPORT AGREEMENT WITH NATIONAL CORE
Body
Recommendation
Recommendation
ADOPT a Successor Housing Agency (SHA) resolution approving the Supplemental Housing Support Agreement (SHSA) with National CORE (the Developer)
Body
Board or Commission Action
City Council approved an Exclusive Negotiating Agreement and predevelopment loan on Sept. 9, 2014
Relevant Council Strategic Theme
Planning for the Future
Relevant Department Goal
Facilitate Affordable Housing Production
Introduction
Recent legislation enacted by the State of California eliminates affordable housing Payment in Lieu of Taxes (PILOT) fee after December 31, 2014. The new legislation adds Section 214.06 to the Revenue and Taxation Code. Specifically it prohibits local governments from entering into a "payment in lieu of taxes (PILOT) agreement with a property owner of a low-income housing project." The new legislation defines in Section 214.09 a "payment in lieu of taxes agreement" as "any agreement entered into between a local government and a property owner of a low-income housing project that requires the owner of the low-income housing project to pay the local government a charge to compensate the local government for lost property tax revenues resulting from the low-income housing project receiving an exemption pursuant to subdivision (g) of Section 214."
Discussion
PILOT fees are paid to the City by affordable housing projects. They are an established, effective and integral component of funding affordable housing in San Marcos. Under California law, affordable housing projects are able to apply for an exemption to the payment of property taxes. They routinely do so. This allows an affordable housing development to avoid the payment of property taxes, thereby shifting the burden of providing basic City services to the project solely to the City.
Therefore, the City routinely required affordable housing developers to enter into agreements that allow for a PILOT fee payment to help mitigate the loss of property tax revenue and thereby maintain the integrity of the City budget. With the demise of the RDA and loss of its income stream, PILOT fees had become increasingly critical to maintaining a revenue stream adequate to support affordable housing and comply with all of the regulatory and reporting requirements mandated by the State.
PILOT fees may no longer be charged effective January 1, 2015. However, the legislation is not effective until January 1, 2015. San Marcos has two emerging affordable housing projects that fall within the time window. These are Villa Serena II and Richmar Station. The City Council authorized an Exclusive Negotiating Agreement and predevelopment loan with both developers on September 4, 2014. Developers of both of these projects recognize that affordable housing projects do not fully bear all costs of providing City services and regulatory requirements associated with such projects, and are amenable to payment of a fee to assist in the City's affordable housing efforts.
The supplemental housing support fee is not specifically related to the City's loss of property tax revenues; rather, it is to fund SHA efforts to provide affordable housing. However, it appears prudent to secure approval of the same prior to December 31, 2014 to ensure it is not in conflict in any way with the newly-enacted Revenue and Taxation Code section discussed above.
The "supplemental housing support" name is used to more accurately reflect that the fee will be used only for affordable housing and that it will be placed in the SHA affordable housing fund. Absent entering into a SHSA, the City will be precluded from imposing this fee.
Fiscal Impact
None
Attachment(s)
1. Resolution No. SHA 2014 - XXX
2. Supplemental Housing Support Agreement
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