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Report on Affordable Housing Obligations w Attachments INTEROFFICE MEMORANDUM Date: September 4, 2018 To: Mayor Marchand and City Council Members From: Jason R. Alcala, City Attorney Subject: Affordable Housing Obligations – Livermore Village On April 23, 2018, at the request of Vice-Mayor Woerner, the City Council directed the City Attorney to report on the affordable housing obligations for the Livermore Village site and to identify the documents showing those obligations. Here is that report. Introduction The Livermore Village site consists of approximately 5.8 acres of land, as shown in Attachment 1. The properties that make up the site were acquired for redevelopment by the City and the former-Redevelopment Agency of the City of Livermore (the “former- RDA”). Consistent with the Downtown Specific Plan and the former-RDA’s plans, the goal was to assemble the properties for a project to create retail and office space, community amenities, and affordable housing opportunities. The properties were transferred between the City and the former-RDA through a number of transactions. When the State dissolved the former-RDA, the California Department of Finance authorized the Livermore Village site properties to be transferred to the City as governmental purpose properties and as housing assets. This memorandum provides information on the housing asset properties that make up the Livermore Village site, which are identified in Attachment 1 as follows: 1. Anderson Pacific Property (which was subdivided into the Remainder Parcel, the Regional Theater Parcel, and the Plaza Parcel); 2. Harris Property; and, 3. Kibler Property. This memorandum is accompanied by a whitepaper for each property that identifies the staff reports, resolutions, agreements, and other documents showing the property’s acquisition and proposed use as a housing asset. This memorandum is also accompanied by whitepapers providing information about the funding sources and obligations that resulted in the designation of those properties as housing assets. September 4, 2018 Page 2 of 6 Executive Summary The Livermore Successor Agency’s Long Range Property Management Plan designates the Livermore Village site properties as housing assets because they were acquired with either Livermore Affordable Housing Fees (Fund 611), or a combination of those fees and funds from the California Housing Finance Authority’s (“CalHFA”) Residential Development Loan Program. The California Department of Finance approved the transfer of the housing asset properties to the City because it elected to perform the former-RDA’s housing functions.1 Those housing functions include administering and enforcing the former- RDA’s affordability covenants, as well as monitoring affordable housing made available to persons and families of low or moderate income through redevelopment.2 The affordable housing obligations related to the funding sources are as follows:  Livermore Affordable Housing Fees (Fund 611). The City has limited discretion to determine how to satisfy the Affordable Housing Fees obligation. The City collects these fees from developers to increase the supply of affordable housing due to the impact of their projects. The obligation to create affordable housing opportunities may be satisfied through one, or a combination of, the following: the housing assets themselves can be used to create affordable housing opportunities; they can be exchanged with other land or otherwise leveraged to create affordable housing opportunities in other locations; or, the fees can be repaid to Fund 611 so they can then be used to create affordable housing opportunities elsewhere. This restriction affects each of the housing asset properties.  CalHFA Residential Development Loan Program (“RDLP”) Funds. The City has very little discretion to determine how to satisfy the RDLP fund obligation. These funds were loaned from CalHFA to the City, and then from the City to the former- RDA, to acquire and specifically create affordable housing opportunities on the Anderson Pacific Property. To ensure that obligation was satisfied, CalHFA required a Notice of Affordability Restriction on Transfer of Property and Declaration of Covenants and Restrictions to be recorded against the property to require it be developed to provide 28 owner-occupied low-income housing units and 56 owner-occupied moderate-income housing units. A copy of the covenant is attached at Attachment 2. The covenant allows for a change in use (for example a change from ownership housing to rental housing), but it requires the property to still be used to benefit individuals and families whose incomes do not exceed 120 percent of the median income in Livermore. 1 City Council Resolution No. 2012-06; See also, Health & Safety Code § 34176. 2 See, Health & Safety Code §§ 34176(c) and 33418. September 4, 2018 Page 3 of 6 Discussion The affordable housing obligations for the Livermore Village site are derived from the fact that the housing asset properties that make up the site were acquired with housing funds, and because the City elected to perform the former-RDA’s housing functions. A. Affordable Housing Opportunities & Density on the Livermore Village Site The Livermore Village site shown in Attachment 1 is approximately 6 acres. If the site was used exclusively for housing, the Downtown Specific Plan would allow for the development of up to approximately 330 units (based upon an allowed density of 30-55 units to an acre and without taking into consideration the adjacent roadways). The Livermore Village site is located in the Downtown Specific Plan area that requires 10% of the residential units be set aside for affordable housing opportunities.3 In 2006, Livermore Village I LLC secured land use entitlements for the 5.5 acre portion of the Livermore Village site known as the Anderson Pacific Property to develop a 281 unit attached housing development with an affordable housing component, an artist community center, and approximately 7,000 square feet of retail and office space.4 That project would have resulted in the creation of 28 affordable housing units (10% of the 218 residential units). However, the amount of affordable housing was increased to 84 units by leveraging a loan of Livermore Affordable Housing Fees. The Great Recession prevented this project from being realized. In 2010, the former-RDA entered into an Exclusive Negotiating Rights Agreement with Eden Housing Inc. for a mixed-use retail and affordable residential project on the Harris and Kibler properties to complement the proposed regional theater project. The former- RDA’s dissolution and market conditions prevented this project from being realized. In 2016, the City Council authorized an Exclusive Negotiating Rights Agreement with Lennar Multifamily Communities after the applicant submitted its qualifications and conceptual vision to develop the Livermore Village site for residential and commercial uses, with up to 263 units of housing. In 2017, the City Council declined to extend the agreement with Lennar and it expired. In 2018, the City Council directed that a portion of the Livermore Village site (consisting of the Harris and Kibler properties, and the Regional Theater Parcel and the Plaza Parcel subdivided from the Anderson Pacific Property) be exchanged for City property at the Civic Center Campus, to satisfy all or a portion of the obligation arising from the use of Livermore Affordable Housing Fees to acquire those properties. The City Council also directed the creation of up to 130 units of workforce rental housing on an approximately two acre portion on the Remainder Parcel. Those opportunities are under development. 3 Livermore Municipal Code § 3.23.050.A.1.b. 4 City Resolution No. 2006-247, adopted October 30, 2006; City Ordinance No. 1803, adopted November 23, 2006. September 4, 2018 Page 4 of 6 B. Election to Perform the former-RDA’s Housing Functions The use of redevelopment powers to rejuvenate a community is balanced against the impact it causes on housing for low-income persons. One of the former-RDA’s primary purposes was to increase, improve, and preserve the supply of affordable housing. On January 9, 2012, the City elected to retain the housing assets and functions previously performed by the former-RDA and became its “Housing Successor.” That election imposed a statutory obligation on the City, as the Housing Successor, to enforce the affordability covenants and perform related activities, including monitoring housing affordable to persons and families of low or moderate income developed or otherwise made available through redevelopment.5 The City and the former-RDA are the parties to the Notice of Affordability Restriction on Transfer of Property and Declaration of Covenants and Restrictions that was recorded against the Anderson Pacific Property. As the Housing Successor to the former-RDA’s functions, the City has a statutory obligation to ensure that covenant is enforced. C. Livermore Affordable Housing Fees (Fund 611) Each of the housing asset properties that make up the Livermore Village site were acquired in whole or in part with Livermore Affordable Housing Fees. The use of those fees imposes an obligation to provide affordable housing opportunities consistent with Chapter 3.26 of the Livermore Municipal Code. Those opportunities include:  Mortgage subsidies and down payment assistance  Site acquisition  Banking of land for use in the development of affordable housing  Rental subsidies  Construction financing  Issuance of bonds  Providing predevelopment funds  Providing rehabilitation funds to preserve existing affordable housing stock  Other assistance increasing or maintaining affordable housing in Livermore. In 2018, the City Council directed that Affordable Housing Fee obligations associated with the Harris and Kibler properties, and the Regional Theater Parcel and the Plaza Parcel, to be satisfied in whole or in part through an exchange for City property at the Civic Center Campus. The Council further directed staff to determine how much of the obligation is satisfied by the affordable housing project for the Civic Center Campus. The City Council also directed staff to pursue the creation of up to 130 units of workforce rental housing on the Remainder Parcel. A separate whitepaper accompanying this report provides additional information about the Affordable Housing Fee. 5 See, Health & Safety Code § 33334.2. September 4, 2018 Page 5 of 6 D. CalHFA Residential Development Loan Program Funds On November 7, 2006, California voters approved Proposition 1C, The Housing and Emergency Shelter Trust Fund Act of 2006, for the sale of $2.85 billion in general obligation bonds to support a variety of affordable housing and housing-related infrastructure programs. The California Housing and Finance Authority (“CalHFA”) created the Residential Development Loan Program (“RDLP”) to utilize Prop 1C bond proceeds to create affordable housing opportunities through an innovative loan program available to local government entities. In 2007, CalHFA awarded the City an RDLP loan in the amount of $5,000,000 for the acquisition and pre-development of the Livermore Village Site. 1. Covenant to Build Affordable Housing on the Anderson Pacific Property In 2009, the City and the former-RDA entered into a Cooperation and Repayment Agreement for the City to loan the former-RDA $5,000,000 in RDLP funds, for the acquisition of the Anderson Pacific Property. As a condition of drawing the RDLP funds from CalHFA, the City and the former-RDA were required to record the Notice of Affordability Restriction on Transfer of Property and Declaration of Covenants and Restrictions on the Anderson Pacific Property to secure the obligation for its development to provide 28 owner-occupied low-income housing units and 56 owner- occupied moderate-income housing units. As the Housing Successor to the former-RDA’s functions, the City has a statutory obligation to ensure that covenant is enforced. That duty of enforcement may include changing the use for the property (for example changing the use from ownership housing to rental housing) while ensuring it will be used to benefit individuals or families whose incomes do not exceed 120 percent of median income in Livermore. 2. Anderson Pacific Property In 2010, to accommodate the regional theater, the Anderson Pacific Site was subdivided into the Remainder Parcel, the Regional Theater Parcel, and the Plaza Parcel. In 2014, the Disposition and Development Agreement between the City, the former- RDA, and LVPAC (“regional theater DDA”) was formally terminated and removed from the title for the Regional Theater Parcel, and the Plaza Parcel. In 2015, the California Department of Finance confirmed that the Regional Theater Parcel and the Plaza Parcel reverted to housing assets following the termination of the regional theater DDA, and it approved the transfer of all three of the subdivided Anderson Pacific Property parcels to the City as the former-RDA’s housing assets. In 2018, the City Council directed the creation of up to 130 units of workforce rental housing on the Remainder Parcel. September 4, 2018 Page 6 of 6 3. Modification to Affordability Covenant Required to Change Use from Owner-Occupied to Rental Housing Opportunities The RDLP covenant requires the development of 84 units of owner-occupied affordable housing units on the Anderson Pacific Property. The Council’s direction to develop up to 130 units of workforce rental housing on the Remainder Parcel will require a change in the property’s affordability use restrictions from owner-occupied to rental. The covenant allows for the change so long as the property is still used to benefit individuals and families whose incomes do not exceed 120 percent of the median income in Livermore. The following factors weigh in favor of the change:  Increasing the number of affordable units,  Extending the affordability restriction period for a longer period of time, and  Expanding the scope of the affordability restriction to lower-income households. The amendment to the covenant to reflect this change in use will be processed for the City Council’s approval along with the entitlements for the affordable housing project on the Remainder Parcel. Attachments 1. Livermore Village Site 2. Notice of Affordability Restriction on Transfer of Property and Declaration of Covenants and Restrictions Whitepapers and Supporting Documentation 1. Anderson Pacific Property 2. Remainder Parcel 3. Regional Theater Parcel 4. Plaza Parcel 5. Harris Property 6. Kibler Property 7. Livermore Affordable Housing Fee 8. Residential Development Loan Program cc: Marc Roberts, City Manager Douglas Alessio, Administrative Services Director Paul Spence, Community Development Director RAILROAD AVE. S. LIVERMORE AVE.FIRST ST. SECOND ST. S. L ST. S. K ST.S. J ST. 1a1b1c 4 5 6 7 32 A. Housing Asset Proper�es 1. Anderson Pacific Propert (a) Remainder Parcel (b) Regional Theater Parcel (c) Regional Theater Plaza Parcel 2. Kibler Property 3. Harris Property 4. Driveway Parcel 5. Train Sta�on Depot Building B. Governmental Purpose and City Proper�es 6. Garage Site 7. Alleyway Site Livermore Village Site Attachment 1 Attachment 2 Attachment 2 Attachment 2 Attachment 2 Attachment 2 Attachment 2 Attachment 2 Attachment 2 Attachment 2 Attachment 2 Attachment 2 Attachment 2