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HomeMy WebLinkAboutRDA Minutes 2008-11-19S ~1 H ~ J O c'~lIFOR~1~ MINUTES REDEVELOPMENT AGENCY CITY OF SOUTH SAN FRANCISCO ~L CITY COUNCIL OF THE CITY OF SOUTH SAN FRANCISCO Meeting held at: CITY HALL CONFERENCE ROOM 400 GRAND AVENUE SOiJrI'H SAN FRANCISCO NOVEMBER 19, 2008 City Council Meeting Called. to Order: 6:32 p.m. Redevelopment Agency Meeting Called to Order: 6:32 p.m. City Council and Redevelopment Agency Roll Call: Present: Councilmen/Boardmembers Addiego and Mullin, Mayor Pro Tem Matsumoto and Mayor Gonzalez. Absent: Councilman/Iioardmember Garbarino * * . * For reporting purposes, participants are referred to by their titles alrliated with the City Council. * * Councilman Garbarino was excused. Public Comments- Comments are limited to items on the Special Meeting Agenda. None. 2. Resolution No. 116-2009 amending the Affordable Housing Agreement between the City of South San Francisco and SummerHill Homes for the development of Park Station. Community Development Consultant Sanchez presented the staff report and explained the urgent need for an amendment to the Affordable Housing Agreement with SummerHill Homes ("SummerHill"). Due to the imploding housing market and concurrent credit crisis, SummerHill was experiencing financial difficulties pursuant to which it could potentially face foreclosure. Relief from the affordable housing obligation set forth in the original agreement could avoid this consequence. After researching the issue and weighing the affordable housing needs of City residents, staff negotiated an agreement with SummerHill that would reduce the risks of foreclosure and litigation, retain as many units as possible and provide a suitable public benefit for any units that might be lost. The proposed amendment would preserve 15 of the 20 affordable units at Park Station and provide $400,000 for Mid- Peninsula's affordable housing development or another affordable housing project. Despite the amendment, SummerHill's project would still lose funds, but it should never-the-less be able to avoid foreclosure. Mayor Gonzalez stated he understood the severity of the crisis in the housing market. He further noted that part of the amendment suggested the units would now be rented as opposed to sold. He questioned whether action on this item would create precedent with respect to dealings with other developers. Joe Hadden, President of SummerHill Homes, explained that although the original project was intended for sale, the current state of the market left rentals as the better option. He further advised that whenever market circumstances changed, SummerHill would revert to the original agreement. City Attorney Mattas advised action in this instance would avoid the establishment of precedent because the amendment included terms stating it was based on the unique state of economic circumstances facing SummerHill. Mayor Pro Tem Matsumoto questioned what would become of the units that were listed as "sale pending." Community Development Consultant Sanchez responded that if the property converted to rental units, potential purchasers with options would have the first crack at renting and would have the option to buy a unit when the property converts for sale. Councilman Mullin requested clarity with respect to how the rental conversion would affect eight (8) potential owners presently interested in the units. Community Development Consultant Sanchez advised the eight (8) families would be impacted, as they were fairly far along in the purchase process. He noted, however, that at least one of the families had indicated that at present it would prefer to rent as opposed to purchase a unit due to the changed economic environment. Councilman Mullin acknowledged that renting might be a better option for some residents given the current state of the economy. Councilman Mullin questioned whether converting the property to rental units was a foregone conclusion for SummerHill. He further questioned whether rental and sale units could be mixed at the site. Mr. Hadden responded the Company strongly preferred to keep the units for sale, but that the market might push it towards converting to rentals. Regarding mixing rental and sale units at the location, Mr. Hadden advised the option was fiscally impossible due to Homeowners Association rules and regulations. SPECIAL REDEVELOPMENT AGENCY & CITY COUNCIL NOVEMBER 19, 2008 MINUTES PAGE 2 Mayor Pro Tem Matsumoto questioned whether the units could be leased with an option to purchase. Mr. Hadden advised he did not see any restraints to such an option. He noted the agreement could be modified accordingly. City Attorney Mattas requested clarification from Mr. Hadden with respect to the type of option to which the Company would agree. Mr. Hadden responded the Company would resist the lease option, but would be open to a straight option. Councilman Addiego observed the agreement was likely necessary to keep the project afloat. Because the rental market remained strong in South San Francisco, he encouraged Council to support the Resolution. Mayor Gonzalez questioned whether SummerHill had experienced similar circumstances in other parts of the State or Country. Mr. Hadden responded the only new condo project presently constructed was the one in South San Francisco. Councilman Mullin questioned what would happen if the income of a renter eligible for the affordable housing program was enhanced during the tenancy. Community Development Coordinator Sanchez advised that some families advance their income as they move up in careers and eventually might not be eligible to purchase at the affordable housing rate. Mayor Gonzalez read a comment that Councilman Garbarino had submitted prior to the meeting as follows: "I have read the staff report and whole heartedly agree with staff conclusion and support adoption of resolution." Motion -Councilman Addiego/Second -Councilman Mullin: to approve Resolution No. 116- 2009 with the addition of language establishing the renter has an option to purchase the unit he or she is currently renting, which would be contingent on the renter meeting the eligibility requirements; and if the renter didn't meet the requirements, the renter would still have the option to purchase at the current market rate. The Motion passed by the following vote: AYES: Councilmen Addiego and Mullion, Mayor Pro Tem Matsumoto and Mayor Gonzalez. NOES: None. ABSTAIN: None. ABSENT: Councilman Garbarino. 3. Closed Session: Conference with Legal Council: Anticipated Litigation (Pursuant to Government Code Section 54956.9 (c).) Initiation of Litigation: One Case. Closed Session opened: 6:59 p.m. SPECIAL REDEVELOPMENT AGENCY & CITY COUNCIL NOVEMBER I9, 2008 MINUTES PAGE 3 Open Session resumed: 7:36 p.m. Mayor Gonzalez: Direction given. 4. Update on 2005 Redevelopment ("RDA") bond proceeds and RDA Financial update. Director of Finance Steele provided an update on 2006 Redevelopment Bond proceeds and a financial update. Regarding bond proceeds, he explained the Agency sold $71 million in tax allocation bonds in April 2006. Of that amount, $56 million was in new money, and another $15 million was to retire older Gateway and Downtown bonds at a more favorable interest rate. Of the initial $56 million in new money, $44 million had been spent to date, and another $18 million was earmarked for several other capital improvement projects. Including the $6 million in interest earned on unspent bond funds since the sale, the total was $62 million. Director of Finance Steele then reviewed Attachment 1 to the staff report which referenced bond funded capital projects. Director of Finance Steele next reviewed the financial update and explained Agency revenues were impacted in several ways. First, State budget action caused a one (1) year ERAF hit of 1.8 million and strong signals indicated this would be an ongoing loss. In addition, a pending property tax appeal and related superior court decision might result in a refund of approximately 7.5 million dollars to a large biotech company. In addition, staff recently learned that new development coming on the tax roll increased the RDA tax increment received by $9.0 million, which amount would offset most of the one-time revenue reductions likely to occur within the year. Mayor Pro Tem Matsumoto questioned whether there was a way for staff to keep track of upcoming development. She also stressed the importance of being vigilant in this regard. Director Steele responded that due to the addition of new staff in the Finance Department, he was now able to track development as it occurred. He further advised that keeping a watchful eye on these numbers was clearly among staff's goals. He then continued with his presentation noting the higher AV would have an impact on when the Agency could sell bonds again. Consistent with California Redevelopment law, the Redevelopment Plan was constrained by several caps set at the time of adoption, including bonded indebtedness and tax increment caps, among others. He noted that if certain procedures were followed, the bond limit was capable of extension and would not require negotiation with taxing entities. He then outlined next steps including getting a better handle on development coming online. At the same time, RDA consultants were helping with an update of the RDA five (5) year plan. Accordingly in six (6) months, staff expected to have more information to present to the Agency. Mayor Pro Tem Matsumoto expressed concern that the bond funds were presently earning a 2.36% interest rate. She questioned the interest the Agency was paying on the bonds. SPECIAL REDEVELOPMENT AGENCY & CITY COUNCIL NOVEMBER 19, 2008 MINUTES PAGE 4 Director of Finance Steele advised the Agency was paying 4.8% interest on the bonds. He further noted the bond proceeds were stationed in a guaranteed investment contract earning 4.8%. Mayor Pro Tem Matsumoto questioned why the Agency would consider taking out bonds in the future when tax increment funds were so rich. Director of Finance Steele advised that pursuant to certain requirements, the Agency was obligated to have bonded indebtedness. 5 . Adjournment. Being no further business, Mayor Gonzalez adjourned the meeting at 8:00 p.m. Submitted bj ~rista~ amine ~- arson, Ciry Clerk Ciry of S San Francisco Clerk, Redevelopment Agency Approved: ~. Karyl atsumoto, Mayor City of South San Francisco Chairwoman, Redevelopment Agency SPECIAL REDEVELOPMENT AGENCY & CITY COUNCIL NOVEMBER 19, 2008 MINUTES PAGE 5