BURBANK REDEVELOPMENT AGENCY

Tuesday, May 4, 2004

AGENDA

CITY COUNCIL CHAMBER - 275 EAST OLIVE AVENUE

 

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5:00 CLOSED SESSION IN CITY HALL BASEMENT LUNCH ROOM/CONFERENCE ROOM:

 

a.   Conference with Real Property Negotiator:

Pursuant to Govt. Code �54956.8

Agency Negotiator:  Assistant Community Development Director/Housing and Redevelopment/Ruth Davidson-Guerra.

Property:  2321 North Fairview Street and 2321-2323 North Catalina Street.

Parties with Whom City is Negotiating:  David J. and Mary P. Augustine (2321 North Fairview Street); David J. and Mary P. Augustine, Christopher D. and Natalie Augustine.

Name of Contact Person:  Duane Solomon, Housing Development Manager.

Terms Under Negotiation:  Sale of property.  Owners have indicated to Agency, via the Burbank Housing Corporation, that they do not wish to sell to the Agency.  The owners have a signed purchase agreement with the Burbank Housing Corporation that would be the basis of negotiations between the Agency and the Burbank Housing Corporation should the Agency not wish to pursue acquisition.

 

b.   Conference with Legal Counsel � Anticipated Litigation:

Initiation of litigation Pursuant to Govt. Code �54956.9(c)

Number of potential case(s):  1

 

When the Agency reconvenes in open session, the Agency may make any required disclosures regarding actions taken in Closed Session or adopt any appropriate resolutions concerning these matters.

 

 

6:30 P.M.

 

                                                                             

INVOCATION:                       Reverend Roby Correa, Magnolia Park United Methodist.

                                                The Courts have concluded that sectarian prayer as part of City Council

                                                meetings is not permitted under the Constitution.

 

FLAG SALUTE:

 

ROLL CALL:

 

 

CONSENT CALENDAR: (Item 1)

 

The following item may be enacted by one motion.  There will be no separate discussion on this item unless a Council Member so requests, in which event the item will be removed from the consent calendar and considered in its normal sequence on the agenda. A roll call vote is required for the consent calendar.

 

1.      AGREEMENTS BETWEEN THE CITY COUNCIL, REDEVELOPMENT AGENCY AND THE BURBANK HOUSING CORPORATION TO RESTRUCTURE DEBT FOR THE BURBANK HOUSING CORPORATION:

 

Staff is requesting that the Council and the Redevelopment Agency (Agency) authorize several actions to restructure debt on properties owned by Burbank Housing Corporation (BHC) in the Lake-Verdugo Focus Neighborhood. 

 

The City and Agency have extended funding to the BHC to assist in the acquisition and rehabilitation of troubled properties as a strategy for upgrading neighborhoods in decline.   In several instances, the BHC secured primary financing from a private lender, Washington Mutual Bank, and turned to the City for gap financing to reduce mortgage costs and offset rehabilitation costs.  City funding was predicated upon the minimum amount of public assistance warranted to ensure that the revenues from each project, reduced when providing affordable rents, were sufficient to operate the project and fund reserves.  However, this approach to funding projects could not, given the small scale of projects, support BHC�s growing operational needs as it continued to take on new projects or its operation of the Activity Center in the Lake-Verdugo area.

 

Staff recommends that the Council consider several steps that restructure BHC�s debt on properties it owns in the Lake-Verdugo Focus Neighborhood.  This action is consistent with housing objectives and programs adopted by the Agency and Council as recommended by the Blue Ribbon Task Force on Affordable Housing and as later reiterated at the July 2003 Study Session on an affordable housing strategy as follows: 

 

�        Objective: Sustain and Strengthen Neighborhoods

�        Program:  Continue acquisition/rehabilitation activities in focus neighborhoods

 

Increasing the BHC�s operational budget is intended to support staff growth to continue acquiring and operating more projects.  To this end, Agency staff is currently working with the BHC in drafting a five-year work plan.

 

�        Objective: Create community in conjunction with housing

�        Program:  Integrate community-serving uses with housing development

 

Whenever possible, the Agency is to seek to incorporate community-serving uses within new and existing residential development that address the needs of the larger neighborhood.  The revenue from the Verdugo and Tujunga properties is insufficient to adequately fund the Lake-Verdugo Activity Center. Increasing BHC�s operational budget by reducing debt on these properties will fully fund the Activity Center�s operations. 

 

The Agency received a proposal from the BHC requesting assistance in restructuring debt on several properties in the Lake-Verdugo area. The purpose is to reduce BHC�s annual debt payments and thereby generate sufficient cash flow to pay the Corporation�s administrative expenses and the operating costs of the Activity Center. Cash flow from the 30 units is adequate for the BHC to meet its debt service obligations, but insufficient to fund the Lake-Verdugo Activity Center or the Corporation�s ongoing administrative costs. 

 

Consequently, the Agency and City are asked to take the following actions affecting 237, 257 and 241-243 West Verdugo Avenue, and 220 West Tujunga Avenue:

  1. The Agency, using its Low and Moderate-Income Housing Funds, is to enter into a loan agreement with the BHC extending Agency financing to the BHC to retire several Washington Mutual loans in the form of a note secured by a trust deed recorded against the properties that would be used; 

  2. The City and the Agency are to amend several promissory notes with the BHC for the purpose of rewriting repayment terms and conditions of operation; and,

  3. The City and the Agency will replace the regulatory agreements for each property with a master regulatory agreement recorded on the four Lake-Verdugo properties.

Each of the conventional loans includes a prepayment penalty clause that nullifies most means to reduce these annual mortgage payments; buying down a portion of the loan principal, for instance, is precluded because the prepayment penalty would still occur. Consequently, it is staff�s recommendation that the Agency (a) pay off the three conventional loans, then (b) have the BHC take out new primary financing at a market rate 30-year fixed loan at 6.82 percent, with the remaining balance carried back by the Agency in a new loan agreement  repaid through residual receipts.   

 

The net cost to the Agency would be $732,200, which is the amount of the Agency payoff of the conventional loans of $1,255,200 minus the new conventional loan incurred by the BHC of $523,000.  The new Agency loan would be repaid through residual receipts.

 

The Agency bridged the gap between the achievable conventional loan on each property using the City�s HOME or Community Development Block Grant funds subordinate to the bank loan.  Certain loan terms were revised as properties were purchased over time, creating different standards recorded on the properties.   Since entering into the agreements for the properties, new terms have emerged, such as fees for property management and capital replacement reserves.  As amended, the City�s promissory notes (and the Agency�s promissory note) on 241-243 West Verdugo Avenue would be altered so that the notes would be consistent.

 

Staff also proposes supplanting the individual regulatory agreements on each of the four projects and recording a regulatory agreement tying the properties under one set of terms, conditions and covenants. Housing operations of the properties will extend into perpetuity, that is, the useful life of the land use controls, but not less than 55 years.

 

Recommendation:

 

Adoption of proposed resolutions entitled:

 

1.  A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF BURBANK AMENDING THE FISCAL YEAR 2003-2004 BUDGET TO APPROPRIATE FUNDS FOR RESTRUCTURING DEBT ON BURBANK HOUSING CORPORATION OWNED SITES IN THE LAKE-VERDUGO FOCUS NEIGHBORHOOD.

 

2.  A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF BURBANK APPROVING A LOAN AGREEMENT BETWEEN THE AGENCY AND BURBANK HOUSING CORPORATION (BHC), AND A REGULATORY AGREEMENT AND AN AMENDMENT TO AFFORDABLE HOUSING AGREEMENTS AND PROMISSORY NOTES AMONG THE AGENCY, THE CITY OF BURBANK, AND BHC (237, 241-243, & 257 W. VERDUGO AND 220 TUJUNGA).

 

RECESS to conclude the City Council meeting.

 

 

ADJOURNMENT. 

 

 
 
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