PURPOSE

The purpose of this report is to provide the City Council with information on two proposed loan programs that are designed to assist homeowners with the cost of replacing existing wood roofs.

BACKGROUND

Major fires occur every year as a result of human carelessness combined with dry climate and high winds.  During these fires, many homes with wood shake or wood shingle roofing material have sustained greater damage or have been totally destroyed when compared to those homes having clay tile or asphalt shingle roofing material.  As a result, the City Council adopted Ordinance 3296 (effective August 14, 1992) mandating that no wood roofs be permitted to remain on any building or structure for 20 years from the date of the Ordinance.  Therefore, all homes in the City of Burbank having wood roofs made of exposed cedar shingles (wood) or shake material, or composition roofs installed over wood shake roofs must be removed or replaced by 2012. 

The Mountain Fire Zone is generally located at the foothills of the Verdugo Mountains of Burbank extending from the City boundary to the north and to the south, including those properties east of Sunset Canyon Drive, Bel Aire Drive and Kenneth Road (Exhibit A).  In October and November 2003, the largest and deadliest wildfires in California history charred over 1,200 square miles in Southern California.   More than 4,500 homes were destroyed and 22 people were killed by the fires. 

On April 6, 2004, Fire Chief Mike Davis provided clarification to the City Council and recommended that some revisions to the Burbank Municipal Code be made. On April 21, 2004, the City Council adopted Ordinance No. 3636, amending various sections of the Burbank Municipal Code relating to the installation and maintenance of wood shake/shingle roofing, wood exterior wall coverings and new brush clearance standards (Exhibit B).  This Ordinance further prohibits the use of wood roofs on any structure, and the existing period to remove existing wood roofs has been shortened for those homes located in the Mountain Fire Zone to be replaced or removed by August 14, 2005.  Subsequently, the City Council requested that staff explore the possibility of creating a City-sponsored loan program to assist home owners with the cost of replacing these roof types.  

ANALYSIS

According to a recent physical survey completed by the Fire Department in late 2003, there are a total of thirty (30) homes within the Mountain Fire Zone that have existing wood roofs to be replaced (Exhibit C).  Also, the Building Division has received an informal estimate from Precise Roofing, a licensed roofing contractor in the City of Burbank, estimating the number of homes with existing wood roofs throughout the City to be approximately 600 homes.  The average cost to remove and replace existing wood roofs has been estimated to cost between $8,000 - $15,000, depending on building size, although the cost could be higher for certain other roofs.  The Redevelopment Agency currently offers an income-restricted rehabilitation loan program designed to assist homeowners make necessary improvements to their properties.  Staff reviewed the Agency program to see if any of its parameters would be applicable for homeowners required to meet these new regulations. 

Income-Restricted Rehabilitation Loan Program

The Redevelopment Agency currently administers a loan program designed to assist persons of low and very low-income households with residential rehabilitation projects of single-family dwellings as well as some multi-family dwellings.  These income limits have been established by the California State Department of Housing and Community Development, revised annually and are adjusted for household size.  Staff uses the following income limits listed below to qualify each household. 

The Agency�s loan program offers maximum loan amounts up to $25,000 with low interest rates, flexible underwriting criteria and deferred payment plans.  This loan program, however, has affordability restrictions that limit the amount of household income allowed to qualify for this loan.  This program is geared for lower income households, and the Agency is subsidizing this program with 3% loans, and a small upfront fee of $409 to pay for title insurance expenses.  The cost for processing the loans including staffing is also born by the Agency.  A portion of tax increment revenues collected by the Redevelopment Agency (20% set aside) are used to fund this program. 

Potential City Loan Program

Staff began to analyze the components of a potential City loan program that would offer many of the same features as the existing Agency program with loan amounts of up to $25,000, flexible underwriting criteria as well as nominal fees associated with each loan.  In addition, this program would not contain any affordability restrictions, therefore any homeowner required to replace their existing wood roof located throughout the City would be encouraged to apply.  However, unlike the Agency�s income-restricted program where payments are deferred, staff would recommend that monthly payments be made on this new program, recognizing these are not income-restricted households. 

The potential City program would offer competitive interest rates when compared to other programs currently being offered in the marketplace today of approximately 6% - 7% (annual percentage rate).  According to a recent Wall Street Journal report, home equity loans are currently being offered at approximately 7%, but vary due to various factors including the term length of the loan.  A City program could be developed which would discount the loan rate by 1% to 2%, offering loans at 5% to 6%.  This would still be approximately 2-3 percentage points above the cost of funds currently being earned by the City, which could cover the costs for administering the loan program.  

Burbank City Employees Federal Credit Union Program

While reviewing the aforementioned Agency program and analyzing the pros and cons of a newly created City program, staff was approached by Burbank City Employees Federal Credit Union about a potential loan program that could be created specifically to assist homeowners meet the new roof replacement requirement.  Burbank City Employees Federal Credit Union presented to staff a program that would offer attractive loan rates and minimal underwriting criteria to assist property owners being required to replace existing wood shake and wood shingle roofs (Exhibit D).  The loan program would offer two options for repayment which include a 5-year payback period at 3.95% (APR) along with a second option that has a 10-year payback period at 4.95% (APR). 

The Credit Union sponsored loan program would not be restricted to any minimum or maximum income limitations and would feature loan amounts up to $25,000.  Also, there would be no minimum loan-to-value requirements.  There are other favorable terms as well including zero points and no closing costs or fees.  However, the property for which this loan is applied for must be the primary residence of the owner at the time of filing of any loan application.  City staff would not be responsible for administering this program as Burbank City Employees Federal Credit Union is better equipped to process the amount of new applications anticipated for this loan program.

The diagram below attempts to highlight some of the features of the proposed loan program offered by the Credit Union to assist in the cost of replacing wood roofs, as compared to the existing Income-Restricted program, and a new City program that could be created.  As you will see, the proposed Burbank City Employees Federal Credit Union Program is a more attractive program.  Staff would recommend that the City endorse the Burbank City Employees Federal Credit Union program.  For those homeowners on fixed-incomes, it is proposed that they apply under the existing Income-Restricted Rehabilitation Program, should the Burbank City Employees Federal Credit Union Program be too burdensome.

*  Required by the Burbank Municipal Code.

Marketing Efforts

Over the last four years, Building Division staff has continued to educate the public of upcoming changes to the Building Code pertaining to wood roofs.  Informational pamphlets explaining these changes are available at the Building Division public counter along with copies that have been included with monthly utility bills sent to each Burbank Water and Power customer.  Additionally, the Burbank Fire Department has created a fire prevention video that explains some of the potential hazards caused by wood roofs during fire situations.  This video has been broadcast on the Public Access Channel periodically to further inform homeowners of these potential hazards from having wood roofs and to provide information of the upcoming changes to the Burbank Municipal Code.

Staff proposes to mail special notices to those homeowners having wood roofs located in the Mountain Fire Zone, in an attempt to provide them with information pertaining to the new roof replacement requirement.  In order to inform all other homeowners with wood roofs throughout the City, staff proposes to continue its existing marketing efforts and work with Burbank City Employees Federal Credit Union to distribute other marketing material regarding the proposed loan program being offered.

CONCLUSION

Staff has reviewed its current rehabilitation loan program being offered to low and very low-income households as well as the possibility of creating a new City loan program to assist homeowners with the cost of replacing all wood shake and wood shingle roofs by the newly adopted deadline.  However, Burbank City Employees Federal Credit Union has created a new loan program that offers many attractive features including low interest rates and flexible qualifying requirements.  Funding for this program would be made available through Burbank City Employees Federal Credit Union and would be administered by credit union staff members.  Therefore, staff recommends that the City Council support the proposed loan program being offered by Burbank City Employees Federal Credit Union to assist homeowners in meeting the newly adopted requirements for all homes having wood roofs.

FISCAL IMPACT

There will be no fiscal impact to the City�s General Fund since loan funds and administrative costs will be provided by Burbank City Employees Federal Credit Union.

RECOMMENDATION

Staff recommends that the City Council support the proposed loan program offered by Burbank City Employees Federal Credit Union to assist homeowners in meeting the newly adopted requirements for all homes having wood roofs in the City of Burbank by August 14, 2005 and August 14, 2012 respectively.

EXHIBIT

Exhibit  A         Map of existing Mountain Fire Zone

Exhibit  B          Ordinance No 3636 effective May 22, 2004

Exhibit  C          List of homes having wood roofs in the Mountain Fire Zone

Exhibit  D         Proposed loan program prepared by Burbank City Employees Federal Credit Union

go to the top