PURPOSE

The purpose of this memorandum is to provide information to the Burbank Redevelopment Agency Board and the City Council to consider approval of the Second Amendment to the Disposition and Development Agreement (DDA) with the United Cerebral Palsy/Spastic Children�s Foundation of Los Angeles and Ventura Counties (UCP) that would amend the Schedule of Performance and increase funding by the Agency to allow UCP to acquire and develop an independent living facility for very low-income persons with disabilities (Project) at the Agency owned site at 600 South San Fernando Boulevard.  This action would amend the City�s Fiscal 2003-04 Consolidated Plan Annual Update.

BACKGROUND

This Project responds to an unmet housing need in the community, one that is most pressing to a specific segment of the population.  According to the 2000 Census, approximately 17 percent (17,200 persons) of Burbank residents have a disability.  Within this special needs population, the City�s 2003-2008 Consolidated Plan further finds that, �Many persons with disabilities have lower incomes since the disability may affect their ability to work.  Thus, persons with disabilities have a greater need for affordable housing as well as supportive services.�     It is this under met community need that makes this project so compelling; it addresses the affordable housing needs of very low-income disabled persons and provides an array of supportive services to those with developmental or physical disabilities.

Further, the proposed second amendment is consistent with the City and Agency affordable housing strategy outlined at the July 29, 2003 study session, as well as the recommendation by the Blue Ribbon Task Force on Affordable Housing regarding the importance of promoting affordable and accessible housing to special needs populations.  The housing strategy specifically quotes a Task Force finding by stating that:

The City is looking to encourage new construction of special needs housing � through Agency financial assistance and site assembly. Integration of community-serving uses with housing (e.g., the Burbank Accessible Apartments Project) that also provides needed support services to allow special needs populations to live independently.  

Tonight�s action follows a protracted history associated with development of an independent living facility at 600 South San Fernando Boulevard, a site that presaged a recommendation posed from the Task Force encouraging residential development along corridors.  

Developer and Site Selection

On September 8, 1998, the Housing Authority Board, in considering options to assist disabled tenants living in the Promenade Apartments, instructed staff to develop a federally funded project for non-senior, disabled persons. Staff began exploring several funding mechanisms to develop a residential project for the disabled, including federal HOME funds, as well as Agency Low and Moderate-Income funds.  Staff also researched the federal Supportive Housing for Persons with Disabilities Program (Section 811) and was informed by U.S. Housing and Urban Development (HUD) staff that funding was extremely competitive, and that non-profit developers with previous Section 811 funding had a decided competitive advantage.    Staff also met with the Burbank Advisory Council on Disabilities to ascertain their opinion about the need for and type of housing most beneficial to disabled persons.  A member from this board later participated on a developer selection panel and staff along with the UCP have routinely met and conferred with the Burbank Advisory Council on Disabilities.  

At the March 23, 1999 joint meeting of the City Council and Agency Board, staff was directed to distribute a Request for Qualifications (RFQ) to qualified developers (gleaned from a HUD provided list of nonprofit developers previously selected for Section 811 funding) and to return with an analysis of potential sites for a disabled housing project funded with Section 811 proceeds.   An interview panel composed of Agency staff, Kathe Head from Keyser Marston Associates and the late Eric Levinson from the Burbank Advisory Council on Disabilities recommended that the UCP be selected as the developer and the City Council subsequently approved a HOME Fund Reservation Agreement for negotiating a DDA to develop a housing project for disabled persons.

In April and July 1999, staff was authorized to, respectively, appraise and afterwards tender a purchase offer on a site at Bethany Road and Glenoaks Boulevard.  Failing owner acceptance of the Agency offer, staff was instructed to rescind the offer and locate another site.  Agency staff and the developer investigated several optional development sites predicated upon market availability and Section 811 site selection criteria. e.g., proximity to necessary services and facilities, such as shopping and recreational activities and near a residential neighborhood having an appearance consistent with the type of project proposed.

On August 30, 1999, the owner of the 600 South San Fernando Boulevard site submitted an offer to sale and upon conferring with the UCP, it was concluded that this location would be an acceptable site for Section 811 funding and would support the maximum number of units allowable under this federal grant.   The site is within the South San Fernando Redevelopment Project Area located on a critical corridor intended for mixed-use (including residential) and compatible with the surrounding commercial and residential uses.

Project Funding

On May 9, 2000, the Agency and City approved entitlements and executed a DDA for the construction of a proposed 18-unit independent living facility restricted to very low-income (annual household income not exceeding 50 percent of median income for Los Angeles County), disabled households.   The Project was designed as two and three-story multifamily apartment buildings comprised of four two-bedroom (inclusive of one manager�s unit) and 14 one-bedroom units.   Prior to project approval, the Agency acquired a .4-acre development site at 600 South San Fernando Boulevard.   The Project was competitively positioned to receive an allocation during the next U.S. Housing and Urban Development (HUD) funding cycle for federal Section 811 funds.

UCP submitted its Section 811 application on May 18, 2000 for technical processing.  However, an oversight by HUD Los Angeles Field Office staff (HUD reviewers inadvertently ignored the site control documents in the UCP�s application) led to UCP�s Burbank Accessible Apartments Project not being selected for this round of Section 811 funding.

Although UCP was not awarded Fiscal 2000-01 funds, it was concluded that the Section 811 allocation remained as the preferred way of financing construction of the Project and subsidizing rents.  Under the Section 811 Program, HUD advances funds to nonprofit organizations to develop and construct rental housing with supportive services (typically off-site) for very low-income persons with disabilities achieved through a double subsidy from HUD.  From a development standpoint, the nonprofit sponsor receives a capital advance to finance new construction of rental housing, funds that are interest-free and not repaid if the housing remains available to these special needs households for at least 40 years.  In addition, the Program provides annual operating subsidies to bridge the gap between the rental income and a project�s operating expenses.  In doing so, this allows the UCP to accept very low-income households without affecting the financial feasibility of the Project.

Accordingly, the Council and Agency Board approved, on May 8, 2001, the First Amendment to the DDA.  The amendment specifically authorized UCP to apply for another round of Section 811 funding by submitting a new (second) application and revised the Schedule of Performance in conformance with the timeline imposed by Section 811 application guidelines. 

ANALYSIS AND CONCLUSIONS

a shortfall was discovered that would delay start-up of the Project.   UCP has offered several explanations for the funding gap:

q       The gross building area for the approved plans [12,883 square feet (sf)] exceeded HUD standards of 10,700 sf;

q       The Project required tuck-under parking and the Plans included three stairwells;

q       The Agency design requirements exceeded allowable Section 811 standards, such as landscaping, roof materials, a freestanding elevator shaft, window treatments, perimeter block walls, cantilevered and curved second floor walkways.

It is important to note, as a condition to closing escrow (Section 205.1 (e) of the DDA), that the UCP is obliged to demonstrate that it has a Section 811 funding commitment from HUD (or alternative construction and take-out financing) in an amount that, when combined with HOME Investment Partnerships Act (HOME) funds and other sources, is adequate to construct the 18-unit Project.  However, if mutually agreed upon by the Agency and UCP deadlines identified in the Schedule of Performance could be extended.

Absent further Agency financial participation, UCP and Agency staffs have over the ensuing months continued reviewing options to bridge the funding gap.  As a starting point, UCP�s attorney has indicated that the UCP �received from HUD notification that the project�s fund reservation of $2.14 million has been extended through October 30, 2003�, and that UCP has been �exploring additional funding sources for the project as well as reviewing project soft and hard costs to see if there are any further savings that may be recognized.�  An additional $100,000 in new funding sources has been secured from an Ahmundson Foundation grant and the UCP has committed $250,000 of its funds to the Project.  The UCP is also applying for an Affordable Housing Program (AHP) grant from the Federal Reserve Bank. However, the AHP program is competitive and there is no assurance the Project will be funded.

In addition to these new sources, the DDA stipulates that the Agency is to convey the Site, previously purchased with $560,000 in the Agency�s Low Moderate-Income Housing Funds, at no cost to the UCP, which constitutes the reuse value.  In turn, the City will provide $750,000 in HOME funds to defray Agency assemblage (e.g., relocation payments, abatement and demolition) and UCP�s construction costs, making the total warranted assistance $1,310,000. 

From an expenditure standpoint, certain construction items have been value engineered in an effort to reduce costs.  For example, unit sizes were reduced to be more compatible with HUD standards, the community center was reduced from 1,200 square feet to less than 1,000 square feet and one of the three stairwells was removed.[1]      The Project design after these alterations, though, remains in substantial conformance to the approved plans and the choice of building materials, building and the Agency approved landscape plan remains intact.  As a surprising benefit to the value engineering exercise, was the addition of a balcony railing along Providencia Street to improve the building�s articulation. 

On July 9, 2003, UCP and Agency staff again met in an effort to address the remaining gap of $151,544.  The following recommendations stemmed from that meeting:

�      UCP is to fund $90,000 of the $151,544 shortfall and the City is to provide the balance of $61,544 using City HOME funds.

�      Should the UCP not be awarded an AHP grant, the City is to contribute an additional $90,000.  In any event, the UCP is to use its best efforts in attracting other funds that are to reimburse the City up to the $90,000 additional commitment should AHP monies not be granted.

On June 19, 2003, staff met with the Burbank Advisory Council on Disabilities to describe the proposed plan revisions as set forth herein.  This body had been frequently approached during initial plan preparation for their recommendations during the design phase and now was elicited about the proposed plan revisions.   It was the Advisory Council�s position to continue its support for the Project, recognizing the need to develop an affordable rental project for disabled persons.    

While the Agency could terminate the DDA because the Developer is in default for not closing escrow by the outside date, the need for special housing warrants providing the UCP with another time extension.  The UCP was selected because of its unique qualifications in developing and operating disabled housing primarily financed with Section 811 funds that would allow the Project to be affordable to very low-income disabled households. 

As noted, the amended DDA provides for additional infusion of the City�s HOME funds and does alter several salient milestones to the document�s Schedule of Performance.  Most notably, the Outside Date, which constitutes the date of closing, is to be moved from October 31, 2002 to November 15, 2003, and construction is to be completed no later than November 30, 2004. 

AMENDMENT TO THE CITY CONSOLIDATED PLAN

Though arguably not requiring a substantial amendment to the City�s Consolidated Plan, staff opted nonetheless to publish a notice indicating that infusing additional HOME funds of potentially up to $901,544 ($750,000 plus up to an additional $151,544 by tonight�s action) to the Project represents an amendment to the City�s fiscal year 2003-04 Annual Action Plan to the federal Consolidated Plan. 

ENVIRONMENTAL REVIEW

This action does not trigger a further environmental review.  At the time of the adoption of the DDA, the Agency, acting as the lead agency has determined that, pursuant to the California Environmental Quality Act (CEQA), State Guidelines Section 15280 this project is Statutorily Exempt as a lower-income housing project.   A reevaluation of the environmental review prepared under the National Environmental Policy Act (NEPA) was conducted and found that further assessment set forth under 24 CFR 58.47 was not triggered.  The findings set forth in the original environmental review remain valid and, consequently, do not impose the need for preparation of a new Finding of No Significant Impact (FONSI) notice published on February 16, 2000.

33433 REPORT

Section 33433 of the California Redevelopment Law requires the Agency to prepare a report whenever property purchased with Agency tax increment funds is to be sold or leased for development.  Insofar as only federal funds have been proposed for an amendment action to the DDA, a revision to the previously prepared 33433 or Summary Report is not required.

FISCAL IMPACT

The Project�s delay poses no direct fiscal impact upon the Agency or the City. The City, though, is to contribute an additional $61,644 in HOME funds that would increase to $151,644 should the UCP fail to be awarded an AHP grant.  Funds are available in the City�s HOME account 128.CD25A.70005.0000.13057 for transfer into HOME account 128.CD25A.70001.0000.12199 should the City agree to the amendment of up to $151,644.

RECOMMENDATION

Staff recommends that the Redevelopment Agency Board and City Council adopt a resolution approving the Second Amendment to the Disposition and Development Agreement with United Cerebral Palsy to contribute up to $151,644 in HOME funds, to extend the outside date until November 15, 2003 as well as to revise the DDA Schedule of Performance.

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