Staff Report - April 2, 2002 - Agenda Item

The purpose of this report is to provide information to the Burbank Redevelopment Agency Board to consider a Loan Agreement (Exhibit A) to assist the Burbank Housing Corporation to acquire residential property located at 1722 Elliot Drive for the purpose of providing affordable housing.

BACKGROUND

Since 1997, the City of Burbank has implemented a pro-active approach to neighborhood revitalization in partnership with the Burbank Housing Corporation (BHC). By investing resources to improve the housing stock, provide affordable housing opportunities, and develop neighborhood-based Activity and Family Resource Centers, we have improved the living conditions of residents in the Verdugo-Lake, Elmwood, Golden State, and Peyton-Grismer Focus Neighborhoods. Most recently, we identified the Lake-Alameda Focus Neighborhood for revitalization efforts in the coming year.

In 2002, the City and BHC began implementing neighborhood revitalization efforts in the Peyton-Grismer Focus Neighborhood. Since that time, BHC has worked with the City to acquire and improve over 100 distressed housing units in that neighborhood. BHC currently owns and manages a 7-unit apartment building at 1721 Elliot Drive and is in the process of rehabilitating 12 additional residential units at 1729-1735 Elliot Drive. In addition, BHC is in the process of rehabilitating 70 residential units at 1801-1815 Grismer Avenue and has recently completed construction of the Peyton-Grismer Family Resource Center. A grand opening celebration for the Family Resource Center recently occurred on April 12, 2006.

While these efforts have already contributed to improving the living conditions of residents in the Peyton-Grismer Focus Neighborhood, more opportunities exist for revitalizing this important neighborhood. Staff and BHC have identified other distressed properties in the neighborhood for targeted revitalization and have discussed the benefits of providing home ownership opportunities to the lower-income families currently living in our Focus Neighborhoods by attracting long-term stakeholders and instilling pride of ownership in the neighborhoods.

In May 2005, at a Joint Study Session on Affordable Housing with the Planning Board and City Council, staff discussed a concept for providing affordable home ownership opportunities to lower and moderate-income families living in our Focus Neighborhoods. Increasing home ownership opportunities will complement our revitalization efforts and contribute towards stabilizing our Focus Neighborhoods.

Acquisition of 1902 Keeler Street

In July 2005, staff and BHC identified an opportunity in the Peyton-Grismer Focus Neighborhood for targeted revitalization and development of such an affordable home ownership project. With Agency assistance, BHC acquired a residential property located at 1902 Keeler Street. The property is located at the northeast corner of Keeler Street and Elliot Drive and consists of a single-family house and detached garage. The house was one of the more distressed properties on Keeler Street. BHC performed minor rehabilitation on the property and it is currently occupied by a moderate-income household at an affordable rent. The acquisition of 1902 Keeler Street provided an opportunity for additional affordable housing in the neighborhood and possibly for a larger master plan to develop a residential home ownership project to benefit lower and moderate-income families that reside in our Focus Neighborhoods.

On February 16, 2006, BHC entered into a purchase agreement with the owner of the property at 1722 Elliot Drive (Property). This property is visibly one of the most blighted properties in the Peyton-Grismer Focus Neighborhood. The site is approximately 7,050 square feet and is located on two adjacent parcels containing five dwelling units, including a 2-bedroom house, three 1-bedroom units and a studio unit. The Property is severely blighted and living conditions in all units are substandard. The entire lot is littered with junk and debris and dilapidated storage buildings (Exhibit B).

Otis E. Hackett & Associates, the Agency�s real estate appraiser, appraised the Property and determined its value to be $650,000. According to the appraisal report, public records of the Los Angeles County Assessor and City of Burbank Building Division, the legal use of the Property is a four-unit residential property. Thus, one of the five housing units may not be a legally permitted residential structure. The studio unit appears to be an illegal conversion of garage space.

The Property serves as housing for an extended family and is considered both owner and renter occupied. The property owner occupies the two-bedroom house. In addition, a one-bedroom unit is occupied by the property owner�s extended family. The remaining three housing units are renter occupied by households considered to be very low-income.

The purchase agreement between BHC and the seller includes a purchase price of $650,000 and relocation assistance of $150,000 to assist the property owner and specific residents of the property that have been identified as members of the owner�s extended family. Escrow on the Property is scheduled to close on April 28, 2006, contingent upon Agency Board approval. BHC has requested Agency assistance and proposes to purchase the Property and demolish the existing housing units in preparation for a future affordable home ownership development proposed for the site.

ANALYSIS

BHC�s Offer to Purchase the Property and Provide Relocation Assistance

As stated previously, the Property serves as housing to an extended family. The family appears to live off the income produced by the three rented units. There is no other apparent source of income and there are a number of children. BHC has offered a purchase price of $650,000, as per the appraised value. In addition, BHC has agreed to pay the property owner and specified members of the property owner�s extended family $150,000 in all-inclusive relocation assistance. This will allow the owner�s family to purchase habitable, safe replacement housing that is adequate for their needs.

Condition of Property and Proposed Demolition

As stated, the Property is in severely blighted condition. The five dwelling units are considered to be in substandard condition and contribute to poor living conditions for the residents. One of the units appears to be an illegal conversion of garage space. BHC has inspected the Property and determined that demolition of the structures is warranted. Rehabilitation would be too expensive considering the longer-term goal of developing new affordable ownership housing on the site.

Prior to demolishing the structures, it will be necessary to abate and otherwise remediate asbestos and lead based paint identified on the Property. Barr & Clark, the Agency�s environmental testing consultant, has performed testing on the Property to identify lead based paint and asbestos. BHC has used these reports to obtain bids from licensed abatement contractors to prepare the Property for demolition. BHC has also obtained bids to demolish the existing structures and other improvements on site. The estimated cost of performing the environmental abatement work and demolishing the site improvements is $27,700.

Replacement Housing Plan

California Redevelopment Law requires a redevelopment agency to adopt a replacement housing plan when entering into an agreement that would lead to the destruction or removal of residential units from the low and moderate-income housing market. The proposed acquisition and demolition of 1722 Elliot Drive will result in the removal of residential units from the low and moderate-income housing market. In anticipation of the Agency Board�s consideration of the Loan Agreement with BHC to acquire and subsequently demolish 1722 Elliot Drive, staff contracted with Overland, Pacific & Cutler, Inc., an acquisition and relocation consulting firm, to prepare a Replacement Housing Plan (Plan) that was previously approved by the Agency Board on April 4, 2006.

The Plan identifies three renter-occupied housing units at 1722 Elliot Drive that will require replacement by the Agency. The two owner-occupied housing units are not subject to the Replacement Housing Plan. Two of the replacement units required by the Plan must be affordable to extremely low-income households and the third unit must be affordable to a very low-income household. The Agency currently has a surplus of 324 replacement units created from other Agency affordable housing developments. The Agency will draw from this surplus of replacement units to satisfy the replacement obligations for the very low-income unit. However, the Agency currently has no surplus extremely low-income replacement units. As a result, the Agency will commit to providing two extremely low-income replacement housing units or bedrooms within a four-year period from the date of removal of the extremely low-income units from 1722 Elliot Drive. In addition, the extremely low-income replacement units or bedrooms will remain affordable for a period of at least 55 years. This will satisfy the Agency�s replacement housing obligations.

Relocation Plan

As a result of the proposed acquisition and demolition of the housing units at 1722 Elliot Drive, three renter households will be displaced from the Property and will require relocation assistance. Agency staff again contracted with Overland, Pacific & Cutler, Inc. to prepare the 1722 Elliot Relocation Plan (Relocation Plan) and provide professional relocation assistance to the households displaced from the Property. Displaced households will be eligible for relocation assistance pursuant to California Relocation Assistance Law and Real Property Acquisition Guidelines and in accordance with the Relocation Plan.

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

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. However, in this circumstance, a combination of factors, including the lower income level of the households to be relocated, the low rents currently paid by the households, and the high cost of replacement housing available in the market, may create a need for Last Resort Housing Payments to the relocated households. Last Resort Housing Payments are payments in addition to replacement housing payments cited previously 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, OPC performed a rental housing survey to identify comparable replacement housing units in close proximity to the Properties. The survey identified an adequate number of available market-rate units to meet the potential needs of households to be relocated. In addition, BHC�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 BHC units at an affordable rent. BHC has indicated there may be available affordable units to accommodate the households currently residing at the Property.

The total, actual amount of relocation assistance to be provided for the three (3) households has not yet been determined. The relocation budget for the households is estimated to be $115,000 for replacement housing payments, moving allowances and last resort housing payments 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 tenants of 1722 Elliot Drive. The 30-day public review period has ended and no public comments were received. Staff is recommending that the City Council approve the attached 1722 Elliot Relocation Plan (Exhibit C).

Agency staff has prepared for Agency Board consideration a Loan Agreement with BHC that would finance the Property acquisition, relocation assistance to the owner�s family, site preparation and demolition activities. The estimated Agency loan in the amount of $844,000 is summarized in the table below.

1722 Elliot Drive Proposed Agency Loan Amount to BHC
Purchase Price	$650,000
Closing Costs, Taxes & Title Insurance	$16,300
Relocation Assistance to Owner	$150,000
Site Preparation and Demolition	$27,700
Total	$844,000

Under the terms of the proposed Loan Agreement, the Agency will provide a no-interest, deferred repayment loan to BHC in the estimated amount of $844,000. The Agency loan will be secured by a first priority deed of trust on the Property. The loan may be refinanced by the Agency at a future date to provide financing for the proposed affordable home ownership development.

In addition, the Agency will be responsible for providing relocation assistance to the three (3) displaced renter households currently residing on the site. The estimated budget for the relocation assistance is $115,000. This amount is in addition to the $150,000 of relocation assistance to be provided to the property owner and extended family.

Burbank Housing Corporation will be responsible to use the loan proceeds to acquire the Property and pay all closing costs; provide $150,000 of relocation assistance to the property owner and identified extended family members; prepare the site for demolition, including performing abatement of lead-based paint and asbestos; and demolish the housing units and other improvements.

The term of the Loan Agreement is five years within which time BHC is required to achieve specific performance objectives that will include, but not be limited to, designing the proposed project and obtaining necessary entitlements to be ready to commence construction of an affordable ownership housing development on the site, subject to approval by the Agency Board. In the event that BHC does not meet the performance objectives, the Agency will have the right to obtain possession of the Property to develop it for affordable housing purposes. The Agency Board may consider a future Agreement with BHC for developing the Property.

Asset Management Fee

BHC will be responsible to secure and maintain the property during the interim period as plans are being developed for the proposed affordable home ownership development. In addition, BHC will maintain insurance on the Property and pay all property taxes. The estimated cost to secure and maintain the Property and pay the property taxes and insurance is $12,000 annually. Because the Property will generate no revenue to support these annual costs, Agency staff is proposing to provide an asset management fee to BHC to offset these costs. The proposed amount of the asset management fee is $60,000 payable to BHC in increments of $12,000 annually during the five-year term of the loan agreement. BHC will use the asset management fee to offset their costs incurred for maintaining and insuring the Property and paying property taxes.

ENVIRONMENTAL REVIEW

The Agency, acting as the lead agency pursuant to California Environmental Quality Act (CEQA), has determined that the proposed use of the Property is categorically exempt under CEQA guidelines section 15301 pertaining to demolition and removal of multifamily residential structures where no more that six dwelling units will be demolished. A Public Notice of Environmental Decision has been posted at the Planning Division counter.

Burbank Housing Corporation has entered into a purchase agreement to acquire the property at 1722 Elliot Drive. The Property is visibly one of the most blighted properties in the Peyton-Grismer Focus Neighborhood. BHC has requested the Agency�s assistance to acquire and subsequently demolish the Property in preparation for a proposed future affordable home ownership development on the site.

The fiscal impact to the Agency of the proposed acquisition is estimated at $1,019,000. This amount includes a loan to BHC to acquire and demolish the Property, payment of relocation costs for displaced households, and payment of an asset management fee to BHC as summarized below:

Relocation: $ 115,000

Total: $ 1,019,000

There are currently sufficient funds in the Low & Moderate Income Housing Unappropriated Fund Balance for these activities. A budget amendment appropriation is necessary to reallocate $1,019,000 from the Low & Moderate Income Housing Unappropriated Fund Account Number 305.ND000.30004.0000.00000 to the Focus Neighborhood Account Number 305.CD23A.70005.0000.13057 for the proposed costs.

Staff recommends that the Agency Board adopt the proposed resolutions approving of the attached Loan Agreement between the Burbank Redevelopment Agency and Burbank Housing Corporation and approving a $1,019,000 budget amendment appropriation from the Low & Moderate Income Housing Unappropriated Fund Balance. Staff also recommends that the City Council Adopt the proposed resolution approving the 1722 Elliot Relocation Plan.

BURBANK REDEVELOPMENT AGENCY

Tuesday, April 25, 2006

PURPOSE