SUBJECT: PUBLIC HEARING FOR APPROVAL OF A
DISPOSITION AND DEVELOPMENT AGREEMENT FOR THE TRANSFER OF CITY-OWNED PROPERTY
AT 937-943 LOCUST STREET TO EMERGENCY HOUSING CONSORTIUM, INC., OR ITS
DESIGNATED AFFILIATE, AND FUNDING FOR DEVELOPMENT OF AN EMERGENCY HOUSING
FACILITY FOR VICTIMS OF FIRES OR OTHER DISASTERS
COUNCIL
DISTRICT: 3
SNI
AREA: Washington-Guadalupe
It is recommended that the
City Council hold a public hearing and adopt a resolution:
1.
Approving a
Disposition and Development Agreement (DDA) between the City of San Jose and
Emergency Housing Consortium, Inc., or its designated affiliate, including
business terms for a conditional grant of up to $1,000,000 of 20% Housing Funds for the acquisition of 0.3 acres of
City-owned property located at 937-943 Locust Street, minor repairs to the
triplex, and the rehabilitation the Single Room Occupancy building to provide
emergency housing for up to 20 persons who are victims of fires or other
disasters.
2.
Finding
that the use of 20% Housing Funds for development of the subject development is
a benefit to the City’s Redevelopment Areas.
In 1998, the Redevelopment Agency acquired property located at 937-943 Locust Street from the Center for Employment Training (CET) as part of a larger property transaction with CET. Contained on this property are a triplex and a vacant, Single Room Occupancy (SRO) building that was designed for shared housing for up to 13 persons. The Redevelopment Agency and the Housing Department subsequently identified this property as a potential site for an affordable housing use.
On April 10, 2001, the City Council approved the transfer of this site from the Redevelopment Agency to the City for affordable housing use, and on June 5, 2001, the City Council approved a PD Rezoning of the property to provide emergency transitional housing in the SRO building for up to 20 victims of fires or other disasters. On June 22, 2001, the property was conveyed to the City.
The subject DDA is now needed
to transfer ownership of the property to Emergency Housing Consortium, Inc.
(EHC), or its designated affiliate, so that rehabilitation activities can
proceed in the SRO building and minor repairs to the triplex can be made to
complete this project. The following
discussion prior to the Analysis section follows a standard format for the
consideration of a DDA.
The subject DDA addresses
approximately 0.31 acres of property located at the northwest corner of Edwards
Avenue and Locust Street (937-943 Locust Street), which is currently owned by
the City of San Jose. The subject
property, which is improved with a triplex and a 13-room SRO dormitory
building, was transferred from the Redevelopment Agency to the Department of
Housing for future affordable housing use.
The City is proposing to transfer the subject site to EHC, or its
affiliate, who would develop the SRO building into emergency housing that would
be available to fire and other disaster relief victims for at least 30
years. The building would accommodate
up to four moderate-income households and a total of 20 persons. It is proposed that the American Red Cross
and EHC will manage this disaster victim housing operation. The triplex units would receive minor repair
work and would continue to be restricted to low-income households earning less
than 60% Area Median Income (AMI).
A. Summary
of the Proposed Transaction
Subsequent
to the City Council approval of the subject DDA, the City intends to provide a
conditional acquisition/construction/permanent grant in the amount of up to
$1,000,000 to EHC, or its designated affiliate. In addition to the grant, the City will transfer the land, which
has a fair market value of $875,000, to EHC in consideration for
rehabilitating, managing and operating the property as affordable housing for
at least 30 years. The actual outlay of
funds will total $1,000,000, which will fund the rehabilitation of the
dormitory building for disaster-relief housing for families, and fund minor
repairs to the triplex. No repayment of
the City’s grant will be required so long as the project is operated in
accordance with the City’s grant documents.
The
Redevelopment Agency acquired the subject property and improvements at no cost
from the Center for Employment Training (CET).
Subsequently, the Agency transferred the property at no cost to the City
provided that it is used for affordable housing and that affordability
restrictions be recorded on the property.
At the time the property was received by the Redevelopment Agency, it
had a value of $625,000 as established by an appraisal completed by Hulberg and
Associates on May 20, 1998. Based on a
broker evaluation completed on August 16, 2001 by Capital Properties, Ltd., the
subject property is determined to have a fair market value of $875,000.
The subject
DDA provides for the conveyance of the 0.31-acre housing parcel to EHC, or its
affiliate for a purchase price of zero dollars in consideration for 30 years of
affordability to low/moderate income households and the developer’s ongoing
management of the property. The DDA
also includes a construction grant of up to $1,000,000. No repayment will be required under the
City’s grant so long as all of the terms are met by the grantee. The fiscal impact of this transaction is
included in the Financial Analysis section of this report.
B. Housing Development Budget and Source of
Funds
The total project cost for
the property acquisition and rehabilitation of the SRO building is $1,875,000
(reflecting the transfer of the property at fair market value to the developer
for zero dollars). All of the financing
for the rehabilitation of the project will be from the City’s development grant
of up to $1,000,000 from the City’s 20% Housing Fund. Of this rehabilitation budget amount, approximately $58,000 will
be used for painting and minor repairs to the triplex units.
C. Financial Analysis and
Restricted Rent Levels
The proposed transaction
involves the fee transfer by grant deed of City-owned land, which has the fair
market value of $875,000, for zero dollars.
This transfer is essentially the same as if the City were to be making a
grant to the developer for the acquisition of fully rehabilitated real estate
at market value from a private party.
Also involved in this transaction is a construction grant of up to
$1,000,000 to rehabilitate the SRO building, make minor repairs to the triplex,
and complete other general site improvements.
At this stage, the construction budget and scope of work are in the
process of being completed. Following
is a general description of the existing plan and proposed plan for the SRO
building, which is subject to change:
Proposed
Emergency Housing Facility (SRO Building)
Basement Level (Existing
Plan):
Storage
Basement Level (Proposed
Plan):
Storage, with four separate,
locked rooms/cages
Ground Level (Existing
Plan):
Common Area: Kitchen, living room, dining room and
laundry room.
Living Space: Seven bedrooms,
two bathrooms and two half-bathrooms.
Ground Level (Proposed
Plan):
Common Area: Kitchen with additional counter space and
storage, living room with entertainment cabinet, game room, dining room,
laundry room, covered porch, manager’s office and powder room.
Living Space: One
three-bedroom/one-bath suite, one two-bedroom/one-bath suite and a manager’s
one-bedroom/one-bath suite.
Upper Level (Existing
Plan):
Living Space: five bedrooms and two bathrooms
Upper Level (Proposed Plan):
Living Space: Two
three-bedroom/one-bath suites
The three triplex units will
be restricted to families or households within the low-income category at less
than 60% of AMI. The four-unit
emergency housing facility to be located in the present SRO building will be
available to moderate-income families and individuals earning less than 120% of
AMI. Income from the triplex units and
any income from the emergency housing operation will by utilized to cover
operating costs for the entire project.
Since repayment of the City’s
grant will not be required, the value of the City’s land investment and
subsequent construction financing to this project is essentially the long-term
provision of the affordable units to low- and moderate-income families. City 30-year affordability restrictions will
be recorded against the property.
Conditional
Acquisition/Construction/Permanent Grant
Grantee: Emergency Housing
Consortium, Inc., or its designated affiliate
Grant
Amount: up to $1,000,000
Term: 30 years
Interest Rate: None
Repayment: None, subject to the terms of
the City’s conditional Acquisition/ Construction/ Permanent Grant
Subordination: As allowed by State law.
Affordability: Affordability restrictions with
a term of 30 years, requiring that the three triplex units be affordable to
low-income households and the four emergency SRO units and manager’s unit be
affordable to moderate-income households, will be recorded on the subject
property.
Security: The City’s conditional Acquisition/Construction/Permanent grant will be evidenced by a deed of trust and 30-year Affordability Restrictions.
ANALYSIS
The Locust Street property is located near the Sacred Heart Church and school, and is surrounded by single-family homes. Originally designed for a shared housing use, the SRO building can currently accommodate up to 13 people. This property consists of 13 single rooms, four full shared bathrooms, two half-bathrooms, a common living area, dining area, and kitchen. The SRO, which is currently vacant, is on the same parcel as the triplex. The triplex units are each two-bedroom/two-and-a-half bathroom with six attached, covered parking spaces. There are four uncovered parking spaces located behind the triplex that will serve as parking for the SRO building.
In order to implement the emergency housing concept, a PD Rezoning of the subject site was approved by the City Council on June 7, 2001. This rezoning action provides that the SRO building may be developed for up to four households with no more than 20 persons total, and the triplex remains as is. The use of the SRO building is restricted to emergency housing for victims of fires and other disasters that would otherwise leave them homeless. Affordability and occupancy restrictions will be placed on this property to assure that these zoning provisions are maintained over time. The proposed developer, EHC, has extensive affordable housing experience in San Jose and is fully capable to own and manage the subject project. American Red Cross is without peer in the operation of emergency facilities that support victims of fires and other disasters.
The estimated total cost is
approximately $1,875,000, which includes the value of the real estate, the
estimated cost of rehabilitation of the SRO building and repairs to the
triplex. As noted above, the City’s
proposed grant amount of up to $1,000,000 provides for the transfer of the
property, which has the fair market value of $875,000, for zero dollars, and
funds of $1,000,000 for the needed rehabilitation work. Approximately $58,000 of the construction
budget will be used for minor interior repairs and exterior painting of the
triplex.
A
community meeting was held on May 10, 2001 for this proposed housing
project. In attendance to hear concerns
and answer questions were the development team and staff from the Housing, the
Planning, Building and Code Enforcement, and the Parks, Recreation and
Neighborhood Services Departments and the Redevelopment Agency. The community representatives appeared
satisfied with the information that was provided and were assured that the
project would be a good neighbor to the community.
The
subject public hearing is required by State redevelopment law. Affordability restrictions with a 30-year
term will be recorded on the subject property.
The 20% Housing Funds for the proposed $1,000,000 rehabilitation grant are available in the Housing Department’s 2001-02 Fiscal year budget.
CEQA
CEQA:
EXEMPT
COORDINATION
The preparation of this report has been coordinated with Office of the City Attorney and the Redevelopment Agency.
The subject property is not located within a Redevelopment Project Area. Thus, it is required that the City make a finding, on behalf of the Redevelopment Agency, that any such activity which utilizes redevelopment funds is a benefit to redevelopment project areas. Since affordable housing is identified as vital to support the City’s economic growth, much of which is planned to occur in Downtown and industrial redevelopment project areas, staff recommends that the City Council find that the use of 20% Funds for the subject property at the northwest corner of Locust Street and Edwards Avenue is of benefit to the redevelopment project areas.
LESLYE CORSIGLIA
Acting Director of Housing
Attachments
Locust Street
Emergency Housing Facility
Fact Sheet
Development Team
Grantee: EHC,
or its designated affiliate
Developer: EHC,
or its designated affiliate
Program
Operator: EHC/American
Red Cross
Architect: Fullcircle
Design Group
Contractor: TBD
Property
Manager: EHC
Project Characteristics
Project
Location: Northwest
corner of Locust Street and Edwards Avenue
Acreage: Approximately
0.31 Acres
Council
District 3
Project
Type Family
Rental and Emergency Family Housing
Group Served: 3 low-income households (60% of
AMI) and 5 moderate-income households (120% of AMI)
Number
of Units: 8
1-Bedroom
2-Bedroom 3-Bedroom
Bedroom Mix
(Triplex):
3 @ 60% AMI
Bedroom Mix (SRO Bldg) 1 Mgr Unit 1 @ 120% AMI 3 @ 120% AMI
@ 120% AMI
Other Amenities (SRO Bldg): Common Dining Area,
Entertainment Room, Game Area, Covered Porch and Administrative Space.
Total
Project Cost: $1,875,000
Appraised Value (as is): $875,000, Broker Evaluation
completed on August 16, 2001 by Capital Properties, Ltd.
Planning Issues
GP
Designation: Medium
Density Residential (8-16 DU/AC)
Zoning
Status: PD
Rezoning approved
Planning
Approvals: PD
Permit pending
Building
Permit: Pending
Article
XXXIV Status: Authority
from Measure D (1994) is available.
Toxic
Issues: None
identified.
Relocation Needed: None
Affordability: 30-year
Affordability Restrictions will be placed on the subject property. State law provides that such restrictions
may be subordinated to senior public and private lenders.
Estimated
Project Development Timeline
October 2, 2001 Anticipated Approval of DDA including the City’s
Conditional Acquisition/ Construction/ Permanent Grant
October 2001 Anticipated Bidding Process
November 2001 Anticipated Building Permit Issuance and Start of
Construction
January 2002 Anticipated Construction Completion