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HomeMy WebLinkAbout23 - Senior Affordable Housing RecommendationsSUBJECT: SUGGESTED ACTION: BackEround Hearing Date: September 25, 2001 Agenda Item No.: 23 Staff Person: Sharon Z. Wood (949) 644 -3222 REPORT TO THE MAYOR AND CITY COUNCIL Affordable Housing Task Force Recommendations on Proposals for Senior Affordable Housing 1. Decline all proposals 2. Direct staff to continue exploring use of in -lieu fees to provide affordable housing The City Council approved circulation of a request for proposals (RFP) for senior affordable housing on April 24, 2001. Staff sent it to 17 companies, and received three proposals by the deadline of June 15. Proposals Taylor Woodrow Homes and The Olson Company submitted a proposal to develop 82 for -sale units within the proposed Newport Banning Ranch project. This would be 10% of the units proposed for the project area within Newport Beach. KDF Communities, LLC proposed two apartment projects, both on City -owned parking lots. The first project would include 46 units on the Oasis parking lot at the comer of Marguerite and Fifth Avenues, and the second project would include 51 units on the parking lot off Avon Avenue in the Mariner's Mile area. The City Council Affordable Housing Task Force considered the proposals at meetings on July 10 and September 13. For the second meeting, the financial pro formas for the projects were reviewed by Keyser Marston Associates, Inc. The Task Force concluded that it is premature to make any commitments with regard to the Banning Ranch project. Moreover, the City's Housing Element will require the developer to provide some percent of units as affordable housing, and the Task Force prefers to use the City's in -lieu fund to generate affordable units in addition to those required of market rate developers. The Task Force is recommending that the City Council also decline the two proposals from KDF Communities. Senior citizens and staff at Oasis do not support a housing project on the parking CITY OF NEWPORT BEACH 4aEWP°Rr ° COMMUNITY AND ECONOMIC '^ DEVELOPMENT PLANNING DEPARTMENT 3300 NEWPORT BOULEVARD NEWPORT BEACH, CA 92658 (949) 6443200; FAX (949) 6443250 SUBJECT: SUGGESTED ACTION: BackEround Hearing Date: September 25, 2001 Agenda Item No.: 23 Staff Person: Sharon Z. Wood (949) 644 -3222 REPORT TO THE MAYOR AND CITY COUNCIL Affordable Housing Task Force Recommendations on Proposals for Senior Affordable Housing 1. Decline all proposals 2. Direct staff to continue exploring use of in -lieu fees to provide affordable housing The City Council approved circulation of a request for proposals (RFP) for senior affordable housing on April 24, 2001. Staff sent it to 17 companies, and received three proposals by the deadline of June 15. Proposals Taylor Woodrow Homes and The Olson Company submitted a proposal to develop 82 for -sale units within the proposed Newport Banning Ranch project. This would be 10% of the units proposed for the project area within Newport Beach. KDF Communities, LLC proposed two apartment projects, both on City -owned parking lots. The first project would include 46 units on the Oasis parking lot at the comer of Marguerite and Fifth Avenues, and the second project would include 51 units on the parking lot off Avon Avenue in the Mariner's Mile area. The City Council Affordable Housing Task Force considered the proposals at meetings on July 10 and September 13. For the second meeting, the financial pro formas for the projects were reviewed by Keyser Marston Associates, Inc. The Task Force concluded that it is premature to make any commitments with regard to the Banning Ranch project. Moreover, the City's Housing Element will require the developer to provide some percent of units as affordable housing, and the Task Force prefers to use the City's in -lieu fund to generate affordable units in addition to those required of market rate developers. The Task Force is recommending that the City Council also decline the two proposals from KDF Communities. Senior citizens and staff at Oasis do not support a housing project on the parking lot because it is used for some senior programs. In addition, Task Force members and staff heard concerns about this project from residents at Jasmine Park, directly north of the site. The Mariner's Mile site may require expensive construction, and the Task Force is concerned that using it for a housing development could limit the City's ability to make long term improvements in Mariner's Mile. Additionally, for both proposals, the developer proposed that the City donate the sites and provide assistance from the in -lieu fund. The Task Force does not think that the small number of units that could be gained justifies the level of City assistance needed. Use of In -Lieu Fund After reviewing the proposals, the Task Force concluded that the City was not more successful with the RFP because we do not have a site for a housing project. They recommended that staff explore other ways of using the in -lieu fund to provide affordable housing, including working with parties who own or can assemble sites, extending the term of covenants on existing affordable units, and making existing units affordable. The last idea was raised by the Planning Commission in their first review of the draft Housing Element update, and staff has begun working on this possibility. SHARON Z. WOOD Assistant City Manager Page 2 KDF COMMUNITIES, LLC BUILDING A BRIGHT FUTURE FOR OUR NEIGHBORHOODS THROUGH AFFORDABLE HOUSING The KDF "CITY PARTNERS" HOUSING PROGRAM A Partnership between KDF and selected municipalities to preserve and develop affordable housing 4685 MacArthur Court Suite 422 Newport Beach, California 92660 (949) 622.1888 Fax (949) 851.1819 THE PROGRAM Affordable housing is in critically short supply in all areas of California. This is due to many factors including lack of available land, restrictive zoning, local ' NIMBY" opposition, and high prices for existing apartments. In order to develop new housing or rehabilitate existing housing at affordable rental rates, various subsidies are required for both for -profit as well as non -profit owners. California cities are seeking partnerships to help them meet their mandated support of affordable housing. KDF is an experienced owner /developer of affordable housing that has developed an approach to partnering with cities that offers the following key benefits to California cities: • A partner you can trust. • The lowest possible cost to cities per unit of affordable housing. • A plan to help cities execute their vision for affordable housing. • A framework for realistic incentives to insure the cities' objectives are met. • No city liability whatsoever beyond any direct subsidy. • Flexibility to either develop new housing, rehabilitate older housing projects, preserve existing affordable housing or implement adaptive re- use of obsolete commercial space. • Little if any tenant relocation on rehabilitated projects. • Secure, attractive housing you can be proud of. A PARTNER YOU CAN TRUST KDF is a trustworthy and competent long -term partner. Over the past five years KDF has rehabilitated or developed 16 affordable housing projects in California, comprising 1750 units. All of these projects were developed in conjunction with the respective cities in which the housing is located. In most cases the city reviewed the program and issued tax- exempt bonds to finance the project, and continues to maintain an ongoing interest in seeing that our housing persists in meeting the needs of their citizens. Several cities have also been our financial partners by providing grants or interest free loans to KDF in order to make projects financially feasible. We have received grants or loans from Buena Park, Camarillo, Huntington Beach, and Santa Ana. KDF is a long -term holder. Our profit motive is in long term cash flow as opposed to up front fees. In many of our projects there are no large fees paid up front. In some projects we receive development or rehabilitation fees paid as work is completed over a two year period to cover operating overhead, but in all cases the bulk of our profit is earned over the long term. Also the principals of KDF make significant long -term personal guarantees to both maintain the property's financial and physical condition as well as insure compliance with affordability regulations. KDF projects have sound financing to guarantee long term viability. Our objectives are squarely aligned with City objectives. All of our projects are financially audited by outside CPA's as well as audited for affordability compliance by third parties. Additionally, our relationships and track record with each city are easily reviewed. Our projects are local and we invite prospective partners to visit and verify our capabilities with the city officials and institutions with which we do business. We are proud of our record and invite you to contact our financial and political references. LOWEST POSSIBLE COST TO OUR CITY PARTNER PER UNIT OF AFFORDABLE HOUSING KDF finances its projects with tax- exempt bonds, tax credits, partial property tax abatements (in conjunction with our non -profit partners - city partners may continue to receive tax proceeds identical to their normal share of property taxes), and where needed with supplemental County, State, Federal or HUD grants. In some cases the combination of available financing is sufficient to finance a project without any city funding; however, in California's superheated housing market additional subsidies are often needed. The City normally funds some of the cost with set -aside or in -lieu funds on hand or with a bond issue financed by future set -aside funding.. Additional subsidies that a City might provide are from Federal CDBG funds or HOME loans. The combination of (1) eliminating the County portion of property taxes (2) 4% tax credits and (3) low interest rate tax- exempt bonds comprises a large direct subsidy (at no City cost) that dramatically lowers the cost per unit to our City partners where subsidies are required. The only other approach with comparably low costs is the 9% tax credit program which requires deeply discounted rents and has a low probability of meeting city objectives, because the odds against receiving credits are currently 4:1 due to intense competition for the 9% credits. A PLAN TO HELP CITIES EXECUTE THEIR VISION FOR AFFORDABLE HOUSING. KDF proposes to enter into a preferred developer relationship with selected cities that want to provide affordable housing. Cities entering into this relationship will agree to provide KDF a commitment for a specified amount of financial support over a two -year period. In return for this preferred relationship, KDF agrees to develop a housing plan in conjunction with city staff and city council that identifies city objectives and corresponding rehabilitation and new development opportunities throughout the city that support these objectives. KDF will undertake this work at no cost or obligation to our city partners. Identified projects would be brought under control and development scenarios would be presented to staff for further discussion and ultimate presentation to city council for approval. KDF has the experience to do ground -up construction as well as rehabilitate or re- position projects. We develop seniors as well as family projects, and offer tailor -made tenant services such as computer learning centers for children. A FRAMEWORK FOR INCENTIVES AND MUTUAL COMMITMENTS TO INSURE THAT THE CITIES' OBJECTIVES ARE MET. The preferred developer agreement provides the incentive necessary to spend the time and money required in assisting the City to execute their program. Furthermore KDF is a long-term holder (for at least 15 years) that normally invests part or all of any development fees in its projects. The bulk of our profit comes from recurring cash flow, not up front fees. We therefore are motivated to maintain our project's competitive position and physical condition. The tax credit program requires that we make substantial long term personal guarantees (often for millions of dollars) to assure that we properly administer and maintain our projects. Our interests are therefore aligned with our city partners. NO CITY LIABILITY Our city partners have no financial liability beyond their financial commitment, which may come from available Federal grant programs. Cities can choose to induce and issue property specific tax- exempt bonds or we will have bonds issued through statewide issuers. The city's responsibility will be limited to holding the necessary TEFRA hearings to allow bonds to be issued. PROGRAM FLEXIBILITY Each community has different needs that we are prepared to meet. Whether it is re- development of older commercial, creation of senior housing, preservation of older HUD projects, extensive rehabilitation or new construction, KDF is prepared to implement a program responsive to each community's need. Tenants are not displaced from existing projects. Cities can choose to do mixed- income projects or 100% affordable as well as vary the levels of affordability pursuant to their goals. COMMUNITIES TO BE PROUD OF Our goal is to provide attractive and secure communities at affordable rents. We do this through providing new or fully rehabilitated projects with sufficient economic reserves to maintain the physical property in tip -top shape for many years. Our managers demand that all tenants follow simple rules so that all may enjoy a clean, quiet and secure environment. Gang and criminal elements are not tolerated at our complexes. We strive to provide adequate recreational opportunities for our children and seniors, as well as educational programs for tenants of all ages. Tenant programs are typically run by our non -profit partners and funded by us. These may include English as a second language (ESL), computer learning centers, and subsidized childcare among others.