PURPOSE

The purpose of this report is to provide the Burbank City Council and the Burbank Redevelopment Agency Board with information to consider an Affordable Housing Agreement between the City of Burbank (City), the Burbank Redevelopment Agency Board (Agency) and the Burbank Housing Corporation (BHC), to assist the Burbank Housing Corporation with acquiring and rehabilitating ten rental units located at 157 West Linden Avenue and 160 West Elm Court/159 West Linden Avenue (Project).

BACKGROUND

Since 1997, the City and Agency has partnered with the Burbank Housing Corporation (BHC) to support its ongoing efforts to acquire and rehabilitate properties in focus neighborhoods.  This partnership has been an instrumental component to improving the housing stock, providing affordable housing opportunities, developing neighborhood-based Family Resource Centers and improving the overall living conditions of residents in the Elmwood, Golden State, Verdugo-Lake, and Peyton-Grismer Focus Neighborhoods.

These actions have been consistent with several housing objectives and programs of the City�s affordable housing strategy, first put forth as recommended by the Blue Ribbon Task Force on Affordable Housing, later adopted by the City Council and Agency Board and reiterated at subsequent study sessions of the City and Agency�s affordable housing strategy, most recently in May 2005.  The two specific objectives that the Burbank Housing Corporation has been implementing are as follow:

Objective:  Sustain and Strengthen Neighborhoods

Program:  Continue acquisition/rehabilitation activities in focus neighborhoods

The City and the Agency have assisted the Burbank Housing Corporation with the acquisition and rehabilitation of more than 200 units in the City�s Focus Neighborhoods.[1]

Objective:  Create community in conjunction with housing

Program:  Integrate community-serving uses with housing development

Whenever possible, the Agency is to incorporate community-serving uses within new and existing residential developments that address the needs of the larger neighborhood.  The Agency has integrated Family Resource Centers in the Elmwood, Verdugo-Lake, Golden State and Peyton-Grismer Focus Neighborhoods.[2]

In 2005, the Lake-Alameda Focus Neighborhood was formally established at the direction of the City Council and Agency Board.  The proposed acquisition and rehabilitation of 157 West Linden Avenue and 160 West Elm Court/159 West Linden Avenue will be the first Project in this newest focus neighborhood.  These properties are adjacent to each other currently owned by separate parties and are both opportunity purchases.  On January 23, 2006, the Burbank Housing Corporation submitted a proposal requesting the City and Agency provide financing to acquire and rehabilitate the properties for the Project.

While the primary goal of the Agency is to focus on targeted purchases, in order to reduce costs, use less resources and provide more affordable housing units, the Agency also considers acquiring properties that are opportunity purchases as they may overlap with targeted acquisitions and require less rehabilitation.

The Project is located in an R-3, low density residential neighborhood located in the Lake-Alameda Focus Neighborhood.  The Project site is comprised of two parcels with frontage on Linden Avenue, Moss Street and Elm Court (Exhibit A).  Currently, the combined properties encompass ten residential units:  five one-bedroom units, four two-bedroom units and one three-bedroom unit.  The property at 157 West Linden Avenue contains a one and two-story apartment building constructed in 1960 and includes four, one-bedroom units and one, two-bedroom unit on a 7,600 square foot lot.

The property at 160 West Elm Court/159 West Linden Avenue is one 10,040 square foot lot.  The first structure at 160 West Elm Court contains a two-story triplex completed in 1994 and includes two, two-bedroom units and one, three-bedroom unit.  The second building on the property at 159 West Linden Avenue is a one-story duplex constructed in 1932 and contains one, one-bedroom unit and one, two-bedroom unit.

As mentioned, the two properties are being sold by two different property owners.  The asking price for 157 West Linden Avenue was $820,000.  The property owners, Karmen Grigorian and Rafik Bazikian, accepted Burbank Housing Corporation�s offer of $795,000.  The asking price for 160 West Elm Court/159 West Linden Avenue was $1.210 million.  The property owners, Donald Hopp II and Carol Hopp, accepted Burbank Housing Corporation�s offer of $1.150 million.  The Burbank Housing Corporation entered into separate purchase agreements with these property owners for a combined purchase price of $1.945 million.  The agreements are contingent upon City and Agency Board approval of financing and an Affordable Housing Agreement.  Otis E. Hackett & Associates, the Agency�s real estate appraiser, appraised both properties and determined the purchase price for each property is the fair market value.

ANALYSIS

The Affordable Housing Agreement is an agreement between the City, Agency and the Burbank Housing Corporation, which describes the terms and conditions for the acquisition, rehabilitation and operation of the properties.  The Affordable Housing Agreement also defines the financial assistance for the Project, and establishes the conditions for disbursement of these funds.  For this Project, the Affordable Housing Agreement outlines the use of the Agency�s Low and Moderate-Income Housing Funds.  In addition, the agreement also allows for the conditional commitment of HOME Funds.  Staff has completed the environmental review process and submitted a request to the U.S. Department of Housing and Urban Development (HUD) for the release of HOME Funds.  Once the City is authorized to commit HOME Funds to this Project, these funds will augment Low and Moderate-Income Housing Funds.  The following section summarizes the terms of the Affordable Housing Agreement including the conditional commitment of HOME Funds for the Project.

SUMMARY OF AFFORDABLE HOUSING AGREEMENT 

Scope of Rehabilitation  The scope of rehabilitation work will vary for each property.  The three unit structure located at 160 West Elm Court will require minimal rehabilitation.  The Burbank Housing Corporation estimates a total rehabilitation budget of $45,000, or $15,000 per unit, for this property.  However, the duplex located at 159 West Linden Avenue is very distressed and functionally obsolete.  Therefore, the Burbank Housing Corporation is proposing the reconfiguration of the internal layout of the duplex, in order to create a four-bedroom single-family unit.  The cost of this reconfiguration is $140,000.  The reconfiguration of the two units into a four-bedroom, single-family unit, meets the goal of providing affordable housing to larger families.

The five units located at 157 West Linden Avenue will require more significant rehabilitation.  In addition, the flat roof on this building has no drainage and leaks.  The Burbank Housing Corporation is proposing to replace the flat roof with a pitched roof.  A new pitched roof will prevent any future unforeseen problems that keeping the flat roof would pose.  Rehabilitation costs for the five units is estimated to be $155,000, or $31,000 per unit.  The cost of replacing the flat roof with a pitched roof is estimated at $31,000.  In addition, there is a carport and garage that needs rehabilitating as well as a concrete wall which needs to be reconstructed.  The cost for these items is $15,000.  The total rehabilitation budget for 157 West Linden Avenue is $201,000, or $40,200 per unit.

Generally, rehabilitation of the eight rental units and the reconfiguration of the two units into a four-bedroom, single-family unit will include the following improvements:

• New pitched roof (157 West Linden Avenue only);

• Reconstruction of a concrete wall (157 West Linden Avenue only);

• Repairs to stairs and decks (157 West Linden Avenue only);

• Abatement of asbestos and lead-based paint (except 160 West Elm Court);

• Renovation of kitchens and bathrooms (except 160 West Elm Court);

• Upgraded heating and air conditioning systems (except 160 West Elm Court);

• Replacement of exterior doors and windows (except 160 West Elm Court);

• Upgraded electrical and plumbing systems (except 160 West Elm Court);

• Repair and painting of interior and exterior walls;

• New carpeting; and

• Landscaping/site work.

Rehabilitation Costs  Rehabilitation costs represent $457,500 or 15 percent of the total proposed Project cost and involve reconfiguration of a duplex into a four-bedroom single-family unit, replacing a roof for 157 West Linden Avenue and rehabilitation and landscaping/site work affecting eight units. 

Project Funding and Requirements  Staff is proposing to use HOME Funds and Low and Moderate-Income Housing Funds to fund this Project.  HOME Funds are proposed for this Project as the U.S. Department of Housing and Urban Development (HUD) requires that $718,644 in HOME Funds be committed by July 2006.  Using HOME Funds in addition to Low and Moderate-Income Housing Funds, requires that prevailing wages be paid.  Paying prevailing wages for the proposed Project increases the amount of rehabilitation costs by roughly 25% or $114,375 for a total cost of $571,875.  While rehabilitation costs will increase by about $114,000, the additional cost is offset by not risking the loss of $718,644 of HOME Funds, which are approaching HUD�s spending deadlines.

Income and Affordability Requirements  The proposed Project will be structured as a mixed-income project.  The Burbank Housing Corporation is to restrict occupancy and rent at an affordable rate five of the units to very low-income households (gross annual income not exceeding 50 percent of the Los Angeles family median income, as adjusted for household size).  The units will be rented at the lesser of Low HOME rents or Agency Very Low-Income rents.  The remaining four units are to be rented at an affordable rate to lower-income households (gross annual income not exceeding 80 percent of the Los Angeles family median income, as adjusted for household size) at the lesser of High HOME rents or Agency Low-Income rent.

Designating all of the units in the proposed Project to very low and low-income households assists the Agency in meeting the Redevelopment Agency proportionality requirement.  Over a ten year period, the amount of Low and Moderate-Income Housing Funds expended must be proportionate to the percentage of very low, low, and moderate-income households in the community.  This requirement prevents Agencies from allocating all of their Low and Moderate-Income Housing Funds to moderate-income households.  Keeping all of the units in the proposed Project affordable to very low and low-income households, contributes to the Agency�s compliance with this requirement.  The following is a summary of the affordability requirements:

Relocation  It will be necessary to relocate the current residents of these properties to perform the rehabilitation.  Agency staff has contacted Overland Pacific Cutler, Inc. an experienced acquisition and relocation firm, to prepare a relocation plan for this Project and provide professional relocation assistance to households that are displaced.  Displaced households will be eligible for relocation assistance pursuant to California Relocation Assistance Law and Real Property Acquisition Guidelines and in accordance with the Linden Avenue and Elm Court Relocation Plan (Relocation Plan).

The Relocation Plan establishes a comprehensive relocation assistance program, including advisory and financial assistance that will be provided to households displaced.  Relocation assistance to be provided to households includes the following:

• Explanation of relocation rights and benefit options;

• Assistance completing relocation claims, rental applications and appeals forms, as requested;

• Assistance in locating comparable decent, safe and sanitary replacement housing;

• Moving assistance payments; and

• Replacement housing payments, including rental assistance or down-payment assistance.

Generally, relocation assistance is determined based upon monthly housing need over a 42-month period and limited to $5,250 per household plus an allowance for moving expenses.   Some households may be eligible for Last Resort Housing Payments depending upon household income, current housing costs and the cost of comparable replacement housing in the market.  Last Resort Housing Payments are payments in addition to replacement housing payments and are determined based upon the difference between each household�s current rent or 30% of gross income, whichever is less, and the market rent for a comparable replacement unit of sufficient size to accommodate the household over a 42 month period.

As part of the Relocation Plan, Overland Pacific Cutler, Inc. performed a rental housing survey to identify comparable replacement housing units in close proximity to these properties.  The survey identified an adequate number of available market-rate units to meet the potential needs of households that will be relocated.  In addition, the Burbank Housing Corporation�s Tenant Selection Plan gives preference to households displaced by governmental actions.  Thus, relocated households will be given first opportunity to rent available and comparable Burbank Housing Corporation units at an affordable rent.

The total, actual amount of relocation assistance that may be necessary to relocate the nine households will be determined as relocation occurs.  However, the relocation budget for the Project is estimated to be $76,000 for replacement housing payments, moving allowances and last resort housing payments, if necessary, as previously described.

In conformance with state relocation guidelines, the Relocation Plan has been made available for 30 days public review and comment, and notice was provided to the current residents.  As of the writing of this report, staff received no public comments and is recommending that the City and Agency approve the attached Linden Avenue and Elm Court Relocation Plan (Exhibit B).

Developer Fee  In order to sustain the Burbank Housing Corporation�s operations, including operation of the Family Resource Centers, Childcare Center and their administrative costs, Agency staff is proposing a 15% developer fee, deferred over a six year period.[3]  Consistent with the Burbank Housing Corporation recent Debt Restructuring, the Burbank Housing Corporation is in the process of amending their Articles of Incorporation and By-Laws to specify that the developer fee and income generated by developed units in Burbank may only be used for the Burbank Housing Corporation�s operations and community services such as operation of the Family Resource Centers and Childcare Center within the city of Burbank.

City/Agency Assistance and Loan Terms  The total development cost for the proposed Project with the Burbank Housing Corporation is $3,176,788 as summarized below:

The Burbank Housing Corporation is proposing to finance $48,625 in equity towards the Project.  Under the terms of the Affordable Housing Agreement, staff is proposing to provide the Burbank Housing Corporation $1,442,415 from HOME Funds,[6] and $1,685,748 in Low and Moderate-Income Housing Funds for the remaining property acquisition, rehabilitation, indirect and relocation costs.

Financial assistance for the acquisition and rehabilitation of the properties is proposed to be provided through two loans.  The loan from the City�s HOME Funds in the amount of $1,442,415 will be forgiven at the end of 55 years if all loan terms are met as outlined in the agreement.  The Agency loan for $1,232,217 will be amortized over a 55 year period, at three percent simple interest and repaid annually through residual receipts generated by the properties.  To be consistent with the recently approved Burbank Housing Corporation�s Debt Restructuring, prior to making the annual residual receipt payment, the Burbank Housing Corporation will be allowed to collect revenues combined from all their properties, including these new properties, to pay for their operating expenses, fund reserves and community services in Burbank.  As described above, if necessary, the Agency will be responsible to relocate the existing tenants at the properties at a budgeted cost of $76,000.

These loan terms are contingent on the completion of HUD�s environmental review process and authorization for the use of HOME Funds.  Should the HOME Funds not be received, the total Project will be funded with Low and Moderate-Income Housing Funds.  The proposed agreement outlines the administrative approval from the City and Agency to substitute HOME Funds in place of Low and Moderate-Income Housing Funds, in the likely event HUD approves the use of HOME Funds for this Project.  If only Low and Moderate-Income Housing Funds are used for the Project, the total Project cost is estimated to be $3,062,788 as prevailing wages would not be required for the rehabilitation portion of the Project.

ENVIRONMENTAL REVIEW

The City/Agency, acting as the lead agency, has determined that pursuant to the California Environmental Quality Act (CEQA), this Project is categorically exempt in accordance with CEQA guidelines and a Public Notice of Environmental Determination has been posted at the Planning Division public counter.  In accordance with the Federal National Environmental Policy Act (NEPA), City staff has completed an environmental review that concluded that the Project is categorically excluded under HUD regulation 24CFR58.  An Environmental Review Record that documents these determinations was available for review at the Redevelopment Agency�s public counter.  Upon completion of the review period, staff submitted a request to HUD for the release of HOME Funds.  Staff is awaiting HUD�s approval and certification expected by April 13, 2006.

FISCAL IMPACT

There will be no fiscal impact to the City General Fund.  The Project will be funded with Low and Moderate-Income Housing Funds, and if approved, through the conditional commitment of HOME Funds.  There are available Low and Moderate-Income Housing Funds in account number 305.CD23A.70005.0000.13057.  In the event the City is authorized to commit HOME Funds to this Project, funds are available in account number 128.CD25A.70005.0000.13057.

CONCLUSION

The proposed Affordable Housing Agreement between the City, Agency and the Burbank Housing Corporation for the acquisition and rehabilitation of 157 West Linden Avenue and 160 West Elm Court/159 West Linden Avenue by the Burbank Housing Corporation, is a great first step for the development of affordable housing units in the Lake/Alameda Focus Neighborhood.  In order to reduce costs and provide more affordable housing units, this Project also focuses on taking advantage of an opportunity purchase that requires less rehabilitation.  The success of providing affordable housing in our Focus Neighborhoods, through the acquisition and rehabilitation program, is largely due to the City/Agency�s partnership with the Burbank Housing Corporation. 

RECOMMENDATION

Staff recommends that the City Council and Agency Board adopt the proposed resolutions to approve the Affordable Housing Agreement between the City of Burbank, the Burbank Redevelopment Agency and the Burbank Housing Corporation and approve the Linden Avenue and Elm Court Relocation Plan.

EXHIBITS

Exhibit A         Project Site Map

Exhibit B         Linden Avenue and Elm Court Relocation Plan