To: HONORABLE MAYOR AND From: Leslye Corsiglia

CITY COUNCIL

Subject: SEE BELOW Date: October 1, 2003

COUNCIL DISTRICT: 10

SNI Area: None

SUBJECT: PUBLIC HEARING FOR APPROVAL OF A DISPOSITION AND DEVELOPMENT AGREEMENT FOR THE SALE AND CONVEYANCE OF CITY-OWNED PROPERTY TO BARRY SWENSON BUILDER, OR ITS DESIGNATED AFFILIATE, FOR THE DEVELOPMENT OF THE SYCAMORE TERRACE PROJECT, A 32-UNIT FOR-SALE HOUSING DEVELOPMENT LOCATED ON THE CORNER OF ALMADEN EXPRESSWAY AND COLEMAN ROAD.

RECOMMENDATION

It is recommended that the City Council hold a public hearing and adopt a resolution:

Approving a Disposition and Development Agreement (DDA) between the City of San José and Barry Swenson Builder (BSB), or its designated affiliate, for the development of the Sycamore Terrace Development, a 32-unit family development on 1.42 acres of City-owned property, located at the northeast corner of Almaden Expressway and Coleman Road.

BACKGROUND

On November 20, 1990, the City Council approved a PD rezoning on a 1.42-acre site at the northeast corner of Almaden Expressway and Coleman Road to allow the development of Playa Almaden, an ownership housing project by Nelson-Maples Development. The project site was planned on two parcels: a 0.92-acre parcel which was privately owned and a 0.51-acre parcel owned by the City of San José and under the control of the Department of Parks, Recreation and Neighborhood Services.

Nelson-Maples acquired the privately owned parcel with a City Housing loan on February 7, 1991, and was negotiating an option agreement with the City for the acquisition of the second parcel. The building recession of the early 1990s stalled progress on the proposed housing project and Nelson-Maples defaulted on its land acquisition loan with the Housing Department. On February 16, 1996, the Housing Department acquired the housing parcel through foreclosure. On August 15, 2001, the City Council approved the transfer of the 0.51-acre site from the Parks Department to the Housing Department for the development of the Sycamore Terrace project. The City Council also directed that proceeds from the transfer of this parcel be used to fund improvements related to the Almaden Lake Park

On April 20, 2000, the Housing Department issued an RFP/Q to identify a new developer for the Playa Almaden project and, after interviews, staff recommended Pulte Home Corporation as the replacement developer. In January 2003, Pulte advised the Housing Department that, due to increased insurance costs for stacked condominiums, the proposed project was infeasible for Pulte Home Corporation and it requested to withdraw from the project.

In an effort to bring this project forward, staff entered into negotiations with Barry Swenson Builder (BSB), to complete the project. BSB agreed to take on the project with some suggested changes in the unit and building design. The new design includes 32 total townhouse units, 17 of which are affordable units.

Under Redevelopment Law, the noticed public hearing procedure is required for the sale or conveyance of the subject property since it was acquired with Low- and Moderate-Income Housing Funds. This Notice of Public Hearing will be published on October 3, 2003 and October 10, 2003. A summary report of this DDA and analysis has been completed by Keyser Marston Associates, Inc., pursuant to Section 33433 of California Redevelopment law. The results of that analysis are part of the public hearing packet on file with the City Clerk for this matter and have been incorporated into the subject report.

PROJECT DESCRIPTION

The subject DDA will transfer approximately 1.42 acres of City-owned vacant property located at the northeast corner of Almaden Expressway and Coleman Road. The City is proposing to transfer the property to BSB, or its affiliate, for the development of the Sycamore Terrace project, a 32-condominium for sale development, which includes 17 units affordable to low- and moderate-income persons or households.

PROJECT BUDGET AND ANALYSIS OF THE TRANSACTION

A. Summary of the Proposed Transaction

A Disposition and Development Agreement (DDA) will accomplish the sale and conveyance of the subject site to BSB, or its affiliate. The City will be providing a loan of up to $2,200,000, which consists of the value of the land to be conveyed. The City portion of the financing structure will be a source of development funds and a portion will be repaid from sales proceeds. The sponsor intends to secure the balance of the construction financing, as well as providing developer equity to fill the gap. Pursuant to the Delegation of Authority approved by the City Council on June 25, 2002, the City Manager will approve the specific business terms of the City loan.

B. Housing Development Budget and Sources of Funds

The total project cost is estimated at $11,682,945. The construction-financing package includes a private construction loan of approximately $8,952,449, a construction gap loan from BSB of approximately $530,496 and the City loan of up to $2,200,000.

C. Financial Analysis and Restricted Sales Levels

The proposed transaction involves a fee transfer by grant deed of City-owned land for an estimated amount of $2,200,000, which represents the market value as supported by an appraisal performed for the City by Hulberg & Associates, Inc., as of March 1, 2000.

It is anticipated that the development will provide two (2) two-bedroom units to be made available to households at 80% of Area Median Income (AMI); four (4) two-bedroom units at 90% AMI and eleven (11) two-bedroom units to be available to households at 110% AMI, with the remaining 15 units to be available at market rate prices. Thirty-year affordability restrictions have been recorded on the housing parcel. Amended restrictions (for up to 45 years) will be placed on the property as part of the DDA, which will affect only the affordable units. Restricted units will contain an equity share buy-out provision.

ANALYSIS

The PD Rezoning for the Sycamore Terrace (formerly known as Playa Almaden) project was approved by the City Council on November 20, 1990, and it allowed the development of 59 ownership-housing units.

The current development consists of 32 units of ownership housing that will be constructed on a 1.42-acre City-owned site. Of the 32 units, 17 will be affordable to low-and moderate-income households. It is anticipated that construction will begin in September 2004, and that the units will be ready for occupancy in Summer 2005.

As part of the development, the developer will be required to install a pedestrian bridge along the northwest side of the property across the Guadalupe Creek. The cost of the pedestrian bridge is in lieu of the fees otherwise payable to the City under the Park Dedication Ordinance. The map attached to this report shows the location of the proposed footbridge, which is in addition to the pedestrian bridge being installed by the City of San José across the Los Alamitos Creek, parallel to Coleman Road.

PUBLIC OUTREACH

Pulte Home Corporation hosted a neighborhood meeting on June 27, 2001 at the Almaden Lake Village Apartments and attended other public meetings to inform the neighboring residents and property owners of the details of the project. Additionally, the DDA public hearing notice will be published in the San José Post Record on October 3, and October 10, 2003. Also, the PD permit process for this project will require a public hearing process with notices sent to nearby property owners and residents.

LEGAL ISSUES

Thirty-year affordability restrictions have been recorded on the housing parcel. Amended restrictions (for up to 45 years) will be placed on the property as part of the DDA, which affect only the affordable units. Restricted units will contain an equity share buy-out provision.

COORDINATION

The preparation of this report has been coordinated with the Office of the City Attorney, the Department of Parks, Recreation and Neighborhood Services and the Department of Planning, Building and Code Enforcement.

COST IMPLICATIONS

On February 16, 1995, the Housing Department acquired the housing parcel through foreclosure. Funds for the transfer of the parks parcel to the Housing Department were disbursed from the Housing Department’s Fiscal Year 2001-2002 Budget. This project is consistent with the Council approved Budget Strategy Memo, adopted on February 4, 2003.

CEQA

Mitigated Negative Declaration (PDC 90-061)

LESLYE CORSIGLIA

Director of Housing

Attachments