Staff Report - April 2, 2002 - Agenda Item

The purpose of this report is to provide the Burbank City Council and the Burbank Redevelopment Agency Board with information to consider two Affordable Housing Agreements with the Burbank Housing Corporation that will assist in the acquisition and rehabilitation of two units located at 2219 North Niagara Street, four units located at 2329 North Niagara Street, and eight units located at 261 West Verdugo Avenue.

Over the past ten years, the City of Burbank (City) and the Burbank Redevelopment Agency (Agency) have taken a proactive approach to neighborhood revitalization through its partnership with the Burbank Housing Corporation and with making broader neighborhood enhancement investments including infrastructure improvements, reducing crime and heightened code enforcement. By investing resources through the Burbank Housing Corporation to improve the housing stock, provide affordable housing opportunities, develop neighborhood-based Family Resource Centers, and provide enriched living environments, the City and Agency have improved the living conditions of residents in the Elmwood, Verdugo-Lake, Golden State, Peyton-Grismer and Lake-Alameda 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 on April 9, 2002. These goals, objectives and programs have been reiterated at subsequent study sessions on the City and Agency�s affordable housing strategy. The two specific objectives that the City, Agency, and Burbank Housing Corporation have been implementing are as follow:

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]

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.

To continue affordable housing efforts in the City�s Focus Neighborhoods, in March 2006, the City Council and Agency Board approved the implementation of the Housing Acquisition Strategy, which allocates resources to acquisition and rehabilitation activities in the City�s Focus Neighborhoods. As part of the housing acquisition strategy, a goal of acquiring 20 units per fiscal year was established. To date, the Agency has assisted the Burbank Housing Corporation in acquiring three units for fiscal year 2006-07. There is an opportunity to acquire an additional 14 units in the Golden State and Verdugo-Lake Focus Neighborhoods as described below.

The Burbank Housing Corporation has entered into two separate purchase agreements with the owners of three individual properties located in the two Focus Neighborhoods. The first two properties (owned by the same party) are located in the Golden State Focus Neighborhood at 2219 and 2329 North Niagara Street and consist of a total of six rental units. The other property is located in the Verdugo-Lake Focus Neighborhood at 261 West Verdugo Avenue and contains eight rental units. On December 29, 2006, the Burbank Housing Corporation submitted a proposal requesting the City Council and Agency provide financing to acquire and rehabilitate all three properties. These agreements are contingent upon City and Agency Board approval of financing and an Affordable Housing Agreement with the Burbank Housing Corporation for the acquisition and rehabilitation. The purchase and rehabilitation of these three properties meet the objectives and programs outlined in the City�s affordable housing strategy and contributes 14 additional units towards the housing acquisition strategy goal of 20 units for this fiscal year.

In November 2006, the Burbank Housing Corporation entered into a purchase agreement with the owner of the properties located at 2219 and 2329 North Niagara Street in the Golden State Focus Neighborhood (Exhibit A). The properties consist of two separate parcels on North Niagara Street (north of Empire Avenue and south of Thornton Avenue). The property located at 2219 North Niagara Street contains a one-story duplex constructed in 1940 and includes two, one-bedroom units, and a detached two car garage on a 6,795 square foot lot. The property was listed for $630,000 and the property owner accepted Burbank Housing Corporation�s offer of $540,000.

The property located at 2329 North Niagara Street contains a one-story duplex in the front constructed in 1953 and includes two, one-bedroom units. The property also contains a two-story structure in the back constructed in 1948 and includes two, two-bedroom units with a laundry facility attached to the bottom unit. Both structures are situated on a 6,795 square foot lot. The asking price for this property was $925,000 and the property owner accepted Burbank Housing Corporation�s offer of $875,000. The combined properties encompass six rental units: two, two-bedroom units and four, one-bedroom units.

As mentioned earlier, both properties are owned by the same proprietor and both buildings show signs of physical deterioration, deferred property maintenance, and substandard conditions within the units. The Burbank Housing Corporation owns and operates affordable units on Fairview Street and Catalina Street which is adjacent to Niagara Street, and these properties as identified, will be the first acquisition opportunity on Niagara Street, thereby introducing Burbank Housing Corporation�s presence and efforts onto the street and also provide a total of six affordable housing units to the Focus Neighborhood. In addition, the property located at 2219 Niagara provides an opportunity to expand the one-bedroom unit into a two-bedroom unit providing an affordable family dwelling unit.

As mentioned, the Burbank Housing Corporation entered into two separate purchase agreements with the property owner for a combined purchase price of $1.415 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 the properties and determined the purchase price for each property to be at the fair market value.[2]

The Affordable Housing Agreement for the proposed acquisition and rehabilitation of 2219 and 2329 North Niagara, is an agreement between the Agency and the Burbank Housing Corporation, which describes the terms and conditions for the acquisition, rehabilitation and operation of the properties (including affordability covenants). The Affordable Housing Agreement also defines the financial assistance for the project, and establishes the conditions for disbursement of these funds. In addition, the Affordable Housing Agreement outlines the use of the Agency�s Low and Moderate-Income Housing Funds. The following section summarizes the terms of the Affordable Housing Agreement.

Scope of Rehabilitation Both of the Niagara Street properties will require a significant amount of rehabilitation work. The scope of rehabilitation work, however, will slightly vary for each property. The Burbank Housing Corporation estimates a total rehabilitation budget of $332,403, or $55,401 per unit, for both properties.

Generally, rehabilitation of all six rental units will consist of the following improvements:

2219 North Niagara Street The duplex at this property has a large backyard that is currently being underutilized. Therefore, the Burbank Housing Corporation is proposing to construct an additional 190 square feet onto the back unit in order to create a two-bedroom, larger unit to accommodate a larger family, and a community laundry facility for residents of the property.

2329 North Niagara Street At this property, there is an existing laundry room which will require minimal rehabilitation. In addition, work will include the demolition and reconstruction of concrete steps and repairs to the staircase.

Income and Affordability Requirements The proposed properties will be structured as a mixed-income project restricted at affordable rents to very-low, low-, and moderate- income households.[3] The Burbank Housing Corporation is to restrict units according to the following criteria: two units rented to very low-income households, two units rented to low-income households; and two units rented to moderate-income households. The following is a summary of the affordability requirements:

Developer Fee In order to sustain the Burbank Housing Corporation�s operations, including operation of the Family Resource Centers, Childcare Centers, Agency staff is proposing a 15% developer fee (equal to $262,110) to be disbursed over a six year period.[4]

Agency Assistance and Loan Terms The total development cost for the proposed affordable housing project located at 2219 and 2329 North Niagara Street is $2,134,414 as summarized below:

The Burbank Housing Corporation is proposing to contribute $35,375 in equity towards this project.[6] Under the terms of the Affordable Housing Agreement, staff is proposing to provide the Burbank Housing Corporation Low and Moderate-Income Housing Funds $2,009,039 for the remaining property acquisition, rehabilitation and indirect costs.

Financial assistance for the acquisition and rehabilitation of 2219 and 2329 North Niagara Street is proposed to be provided through an Agency loan in the amount of $1,836,929 (not including the developer fee of $262,110). The Agency loan will be amortized over a 55 year period, at three percent simple interest and repaid annually through residual receipts generated by the properties.

The Burbank Housing Corporation and Agency staff have been actively seeking opportunity purchases within the Verdugo-Lake Focus Neighborhood. The acquisition of this property is adjacent to other Burbank Housing Corporation owned properties continuing the variety of housing available within the neighborhood. This acquisition will add a fourth property within this Focus Neighborhood and also provide eight large one-bedroom units to the affordable housing stock.

In November 2006, the Burbank Housing Corporation entered into a purchase agreement with the owner of the property located at 261 West Verdugo Avenue in the Verdugo-Lake Focus Neighborhood (Exhibit B). The property contains a two-story apartment complex constructed in 1959 and includes eight, one-bedroom units with a laundry room. The asking price for this property was $1,500,000. The owner accepted Burbank Housing Corporation�s offer of $1,400,000.

The following section summarizes the terms of the Affordable Housing Agreement for this property between the City, Agency and Burbank Housing Corporation.

Scope of Rehabilitation The Burbank Housing Corporation estimates a total rehabilitation budget of $225,494, or $28,187 per unit. Generally, rehabilitation of all eight rental units, will consist of the following improvements:

Income and Affordability Requirements The proposed property will be structured as a mixed-income project restricted at affordable rents to very-low, low-, and moderate-income households. The Burbank Housing Corporation is to restrict units according to the following criteria: two units rented to very low-income households; four units rented to low-income households; and two units rented to moderate-income households. As federal HOME funds are a proposed funding source, the units will be rented at the lesser of HOME or Agency affordable housing requirements. The two units rented to moderate-income households will be rented at the Agency requirements. The following is a summary of the affordability requirements:

Developer Fee As mentioned earlier, in order to sustain the Burbank Housing Corporation�s operations, a 15% developer fee is also being proposed for this project. The $243,824 fee will be disbursed over a five year period.[7]

City/Agency Assistance and Loan Terms The development cost for the proposed affordable housing project located at 261 West Verdugo Avenue is $1,956,191 as summarized below:

Under the terms of the Affordable Housing Agreement, staff is proposing to provide the Burbank Housing Corporation $848,653 from HOME Funds and Low and Moderate-Income Housing Funds for the remaining property acquisition, rehabilitation and indirect costs.

Financial assistance for the acquisition and rehabilitation of 261 West Verdugo Avenue is proposed to be provided through two loans. The loan from the City�s HOME Funds in the amount of $848,653 will be forgiven at the end of 55 years if all loan terms are met as outlined in the agreement. An Agency loan for $863,714 (developer fee of $243,824 excluded) will be amortized over a 55 year period, at three percent simple interest and repaid annually through residual receipts generated by the properties.

The loan terms for the proposed acquisition and rehabilitation of 261 West Verdugo Avenue 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.

Master Loan Agreement In March 2006, the City/Agency approved the Burbank Housing Corporation debt restructuring agreements. As part of the restructuring, the master Loan Agreement must be amended to incorporate new loans when the City and/or Agency provide funding to the Burbank Housing Corporation for affordable housing projects (Exhibit C). Therefore, staff is proposing the City/Agency amend the master Loan Agreement to incorporate the loans with Burbank Housing Corporation for the acquisition and rehabilitation of 2219 and 2329 North Niagara Street, and 261 West Verdugo Avenue.

It will be necessary to relocate the current residents of these properties to perform the rehabilitation. Agency staff has contracted Overland Pacific Cutler, Inc. an experienced acquisition and relocation firm, to prepare a relocation plan for both projects 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 both plans; the Niagara Street General Relocation Plan and the Verdugo Avenue General Relocation Plan (Relocation Plans).

The Relocation Plans establish 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:

Generally, relocation assistance for displaced households is determined based upon monthly housing needs 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 Plans, 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 fourteen households will be determined as relocation occurs. However, the relocation budget for both proposed affordable housing projects is estimated to be $245,000 for replacement housing payments, moving allowances and last resort housing payments, if necessary, as previously described.[10]

In conformance with state relocation guidelines, both Relocation Plans have been made available for 30 days public review and comments, 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 Relocation Plans (Exhibit D and E).

The City/Agency, acting as the lead agency, has determined that pursuant to the California Environmental Quality Act (CEQA), both of the proposed affordable housing projects, 2219 and 2329 North Niagara Street and 261 West Verdugo Avenue, are 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 proposed affordable housing project located at 261 West Verdugo Avenue, 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 February 7, 2007.

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. Agency staff and the Burbank Housing Corporation have identified an opportunity to acquire properties for the purpose of providing affordable housing in the Verdugo-Lake and Golden State Focus Neighborhoods. The properties identified for this purpose are located at 2219 and 2329 North Niagara Street, and 261 West Verdugo Avenue. If approved, the acquisition will increase the affordable housing stock in the community by adding 14 units available to very low, low, and moderate-income households. In addition, the purchase and rehabilitation of these three properties meet the objectives and programs outlined in the City�s affordable housing strategy and contribute 14 additional units towards the housing acquisition strategy goal of 20 units for this fiscal year.

The total fiscal impact to the Agency is estimated to be $4,300,230. The specific costs associated with each property are summarized in the table below for the proposed project. There is $1,508,502 available within the Focus Neighborhood Account (305.CD23A.70005.0000.13057). In addition, an appropriation of $2,791,728 is required. Sufficient funds are available in the un-appropriated housing fund balance (305.ND000.30004.0000.000000). Staff recommends that $2,791,728 be appropriated from the un-appropriated fund balance to the Focus Neighborhood Account. Furthermore, in the event the City is authorized to commit HOME Funds to the project, funds are available in account number 128.CD25A.70005.0000.13057.

	2219 Niagara	2329 Niagara	261 Verdugo
Acquisition	$540,000	$875,000	$1,400,000
Rehabilitation	$719,414		$556,191
Relocation	$85,000		$160,000
BHC equity	(35,375)		-
Totals	$2,184,039		$2,116,191

As previously described, of the total cost for the acquisition and rehabilitation of the three properties, $3.55 Million of the $4.3 million is structured as residual receipts and forgivable loans from the City/Agency to the Burbank Housing Corporation. The remaining amount is in connection with the developer fee and relocation cost associated with any acquisition/rehabilitation project undertaken by the Agency.

[1] Sixty-five (65) units in the Elmwood Focus Neighborhood, twenty-nine (29) units in the Golden State Focus Neighborhood, thirty (30) in the Verdugo-Lake Focus Neighborhood, seventy-eight (78) units (after rehabilitation) in the Peyton-Grismer Focus Neighborhood, and nine (9) units (after rehabilitation) in the Lake-Alameda Focus Neighborhood.

[2] The appraisal value for 2219 North Niagara Street was determined to be $550,000 and the appraisal value for 2329 North Niagara Street was determined to be $875,000.

[3] Income standards are revised annually and are based on the area median income (AMI) of Los Angeles County and are defined as: Very low-income can not exceed 50 % AMI, Low-income can not exceed 80% AMI, Moderate-income can not exceed 120% AMI; adjusted for household size.

[4] The Agency�s economic consultant, Keyser Marston and Associates (KMA) recommended that the amount distributed annually equal the amount needed for the Burbank Housing Corporation to fund operations. It is estimated that the Burbank Housing Corporation will require approximately $45,000 per year from this project for their operations. The total developer fee for this project is $262,110 therefore it will take six years for disbursement of the total developer fee to the Burbank Housing Corporation. This is consistent with the Burbank Housing Corporation Debt Restructuring Plan approved by City Council and Agency Board on March 21, 2006.

[5] This amount includes a 15% developer fee that will be deferred over a six year period and other project related costs and fees; including closing costs, taxes and insurance, construction management, and 15% contingency.

[6] As available, the Burbank Housing Corporation customarily will contribute any commission from the acquisition of properties.

[7] It is estimated that the Burbank Housing Corporation will require approximately $60,000 per year from this project for their operations. Therefore, it will take five years for disbursement of the total developer fee to the Burbank Housing Corporation.

[8] Per Labor Code Section 1720(6)(E) this project is exempt from prevailing wages because the funding provided is a below-market interest rate loan, and at least 40% of the units are restricted to moderate income families for a minimum of 20 years.

[9] This amount includes a 15% developer fee that will be deferred over a five year period and other project related costs and fees; including closing costs, taxes and insurance, construction management, and 15% contingency.

[10] The relocation budget for 2219 and 2329 Niagara Street is estimated to be $85,000 and $160,000 for 261 Verdugo Avenue.

BURBANK REDEVELOPMENT AGENCY

Tuesday, January 23, 2007

Greg Herrmann, Chief Assistant Community Development Director/City Planner

By: Julianne Venturo, Administrative Assistant