Item 8 Staff Report Approve Purchase and Resale of Below Market Price Housing Unit at 203 Palmer DriveCOUNCIL AGENDA REPORT
DATE: October 16, 1997
TO: MAYOR AND TO 'i •O ►CIL
FROM: TOWN MANAGER
SUBJECT:
RECOMMENDATION:
MEETING DATE: 10/20/97
ITEM NO.
APPROVE PURCHASE AND RESALE OF BELOW MARKET PRICE HOUSING UNIT AT 203
PALMER DRIVE
I. Approve purchase of Below Market Price Housing Unit at 203 Palmer Drive at $143,200.
2. Authorize budget adjustments in the fiscal impact related to both the purchase of a fixed asset and the resale of that asset
at a loss not -to -exceed $38,305.
3. Approve resolution authorizing the Town Manager to execute all documents required to purchase and sell the property.
BACKGROUND:
At its September 15 meeting, Council conceptually approved "writing down" the resale price of Below Market Price (BMP)
Housing units through a double escrow process (see Attachment 1).
DISCUSSION:
The BMP unit at 203 Palmer Drive is in probate; the owner recently died. The BMP unit was built in 1985 and purchased for
$80,000. Deed restrictions adopted in 1981 dictate the resale price of the unit at $143,200 (the lower of the following two prices
prevails):
Method
Calculation
Resulting Resale Price
Affordable to Households w/ Incomes:*
1
Appraised value
$235,000
Above 120% of CMI
2
The same percentage as the increase in the
CMI. Since 1985, the median income has
increased 79% from $39,200 to $70,200.
$143,200
Between 80% and 120% of CMI
CMI: County Median Income
Since 203 Palmer became a BMP unit, new deed restrictions have been adopted. If the new deed restrictions were applicable,
the resale price of 203 Palmer would be $105,270 (the lower of the following two prices prevails):
Method
Calculation
Resulting Resale Price
Affordable to Households w/ Incomes:
3
The percent increase in the housing component
of the CPI applied to purchase price
$ 117,600
Between 80% and 100% of CMI
4
The price is not to exceed the maximum price
calculated as affordable to low and moderate
income households.
$ 105,270
At 80% of CMI
PREPARED BY: Regina A. Falkner, Community Services Director
Reviewed by: DX Attorneyjnance Revised: 10/16/97 4:40 pm
Reformatted: 10/23/95
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: APPROVE PURCHASE AND RESALE OF BELOW MARKET PRICE HOUSING UNIT AT 203
PALMER DRIVE
October 16, 1997
In accordance with the applicable 1981 Deed Restrictions, the Town will buy 203 Palmer for $143,200. However, in order to
resell the unit at a price affordable to a household with an income at 80% of the County Medium Income, the sales price must
be set at $105,270. This requires that Town Council authorize a write down of $37,930 ($143,200 minus $105,270). If the
Town were to resell 203 Palmer for more than $105,270 in order to decrease the amount of its write down, the unit becomes
less affordable to low and median income households. While a unit selling for $143,200 may be considered affordable to
households with incomes between 80% and 100% of the CMI (per Attachment 4), a $50,000 down payment would be required
to make the monthly mortgage payments affordable. Low and moderate income households are not likely to have such funds
available. Once resold, the new deed restrictions (1988) will apply to the unit.
The BMP Program is funded from in -lieu fees paid by developers. It is not funded by tax or grant dollars. Funds may only be
spent in three ways:
1. To write down the cost of a unit to keep it in the BMP Program (i.e., to keep it affordable to low and moderate income
households).
2. To subsidize mortgages so units are affordable to low and moderate income households.
3. To fund the construction of new units.
4. To cover program administration costs.
Using BMP Program funds to fmance the proposed $37,930 write -down conforms to Item 1 above.
CONCLUSION
The recommended actions authorize the Town to purchase the BMP unit at 203 Palmer Drive for $143,200, then resell it at a
price not requiring a write down in excess of $38,305. The double escrow process will ensure that the purchase by the Town
will not be finalized until a concurrent sale to a new owner is also finalized.
ENVIRONMENTAL ASSESSMENTS:
Writing down the BMP unit resale price is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT:
1. Authorize the purchase of 203 Palmer by the Town for $143,200 (216-16200).
2. Authorize the costs associated with the purchase (an increase of $375 in the value of the asset, 216-16200):
$135 for County Transfer Tax, $240 for miscellaneous fees.
3. Establish the following budgets:
a. Sale of Town owned property (216-48607): $105,270
b. Costs associated with the sale of Town owned property (2216-85800): $1,425
($135 County Transfer Tax, $670 Title Fee, $380 Escrow Fee, $240 Miscellaneous Fees)
c. Loss on sale of Town owned property (2216-85800): $38,305
(Asset value $143,575 less sales price of $105,270)
Attachments: 1. Draft Resolution Authorizing Town to Execute Documents
2. Council Agenda Report: Conceptually Approve Expenditure of Below Market Price Housing in -Lieu
Funds to Reduce Re -Sale Prices
3. Re -Sale Calculations, Example
4. Sales Prices Affordable to Very Low through Moderate Income Households
Distribution: Gail C. Moser, Attorney At Law, 599 N. Mathilda Avenue, Suite 245, Sunnyvale, CA 94086
Ray Tovar, Community Housing Developers, Inc., 255 N. Market St., Ste. 290, San Jose, CA 95110
csd38: A:1Cnclrpts\Palm.203
RESOLUTION 1997
RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
AUTHORIZING THE TOWN MANAGER TO EXECUTE DOCUMENTS
REQUIRED TO PURCHASE AND SELL A BELOW MARKET PRICE
HOUSING UNIT AT 203 PALMER DRIVE
WHEREAS, the Town of Los Gatos Zoning Ordinance Sections 3.90.100 through 3.90.135
establishes a Below Market Price (BMP) Housing Program to assist low and moderate income Los
Gatos citizens purchase homes at prices below market value.
WHEREAS, the Program requires construction of dwellings that persons and families of
moderate income can afford to buy or rent, and assures to the extent possible that the resale prices
of those dwellings and rents, if they are rented, will be within the means of persons and families of
low and moderate income.
WHEREAS, the Program helps the Town meet State mandated housing goals and is
governed by rules, procedures, and criteria outlined within Resolution 1992-88; and
WHEREAS, Town Council has authorized the purchase and resale of a BMP unit at 203
Palmer Drive in accordance with Program procedures; and
NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
DOES HEREBY RESOLVE THAT THE TOWN MANAGER IS AUTHORIZED TO
EXECUTE:
1) all documents required to purchase and sell the BMP housing unit at 203 Palmer Drive.
PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los
Gatos, California, held on the 20th day of October, 1997, by the following vote.
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED:
ATTEST:
CLERK OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
CSD39:a:\palmeres.bmp
COUNCIL AGENDA REPORT
DATE: September 10, 1997
TO: MAYOR AND TOWN COUNC
FROM: TOWN MANAGER
SUBJECT: CONCEPTUALLY APPROVE EXPENDITURE OF BELOW MARKET PRICE HOUSING
IN -LIEU FUNDS TO REDUCE RE -SALE PRICES.
ATTACHMENT 2
MEETING DATE: 9-15-97
ITEM NO. /
RECOMMENDATION:
Conceptually approve expenditure of Below Market Price housing in -lieu funds to reduce re -sale prices.
BACKGROUND:
The Town's Inclusionary Zoning Ordinance was adopted in 1979. The ordinance requires developers to provide a
specified number of affordable owner -occupied or rental units, as appropriate. Fees can be paid in -lieu of constructing
units in some instances. In the case of rental developments, units must be made available for below market rents. Units
are managed in accordance with Council adopted guidelines.
The program includes 22 owner -occupied units; four more units are expected to be ready for occupancy within the next
year. An additional 33 BMP units are rented at below market rents.
One of the Program's primary challenges is to keep owner -occupied units affordable. In contrast to many cities
throughout the State, Los Gatos requires that the units remain within the Program at resale. Despite corrections to the
deed restrictions, the resale prices sometimes move out of the range of affordability for the income targeted families.
This report presents Council with an option for keeping the units affordable.
DISCUSSION:
The BMP Housing Program is one of several programs adopted by the Town to meet mandated housing goals. The
Program is generally successful:
35 households have been able to purchase housing through the program;
At 22 owner -occupied units, the Town compares favorably with other communities of our size;
5 households have been able to stay or move to Los Gatos through the rental portion of the Program; and,
Another 29 households will be able to live in a continuing care facility at reduced rates as a result of the Town's
inclusionary zoning ordinance.
The Town was one of the first municipalities in the State to adopt an inclusionary zoning ordinance. Sixteen BMP units
were constructed during or prior to 1985. The deed restrictions recorded with these units coupled with flattened housing
prices resulted in resale prices reaching market price. As a result, two BMP units were lost from the pool. To remedy
this problem, Council adopted improved deed restrictions in 1988. (See attachment 1 for more background.)
PREPARED BY: Regina A. Fa
Community :yam;_' irector
Reviewed by:
Attorney ce
Revised: 9/10/97 10:30 am
Reformatted: 10/23/95
,,witeleA-cal
1981 DEED RESTRICTIONS
Method 1
The price determined by an outside appraisal.
Method 2
The percent increase in the median income
applied to the purchase price.
ATTACHMENT 3
1988 DEED RESTRICTIONS
Method 1
The price determined by an outside appraisal.
Method 2
The percent increase in the median income
applied to the purchase price.
Method 3
The percent increase in the housing component of the
CPI applied to purchase price.
Method 4
The price is not to exceed the maximum price
calculated as affordable to low and moderate income
households.
The improved deed restrictions effect can be shown with the following example:
Method 1. Appraised value: $235,000
Method 2. Increase in Median Income
Purchase Price (9/85)
Median Income (9/85)
Median Income (8/97)
Difference/ Median Income Index
Sales Price ($80,000 x 1.79)
Method 3. Increase in CPI Housing Component
Purchase Price (9/85 )
(*)Consumer Price Index (8/85))
(*)Consumer Price Index (8/97)
Difference/Percent Increase
Sales Price ($80,000 x 1.47)
$80,000
$39,200
$70,200
$31,000/.79
$143,200
$80,000
113.4
167
53.6/47%
$117,600
(*) Housing Component/All Urban Consumers
Method 4. The maximum affordable to a family of four at 80% of the county median income is $105,270.
The above example shows that the resale price is $143,200 (Method 2) under the 1981 deed restrictions. Had the
revised deed restrictions been in place, the resale price would have been $105,270.
es d38A:1cncIrptslspendl.bmp
INITIAL SALES PRICE RANGES Attachment 4
The following chart reflects the sales prices affordable to households at 50, 80, 100, and 120
percent of County Median Income (CMI). County Median Income x 2.42 = Sales Price.
Sales Prices
% OF MEDIAN 50 80 100 120
Persons in Household Very Low Income Lower Income Median Income Moderate Income
1 59,410 73,690 118,940 142,780
2 68,000 84,220 135,880 163,110
3 76,470 94,740 152,940 183,560
4 84,940 105,270 169,880 203,890
5 91,720 113,740 183,440 220,220
6 98,490 122,090 197,110 236,560
7 105,270 130,560 210,660 252,770
8 112,170 138,910 224,210 269,100
c s d3 8 : A:1B MP V nc mguid. wp d
October 15, 1997
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ORDINANCES & RESOLUTIONS
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COUNCIL MEMBERS NAMES:
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ZONE CHANGE:
Randy Attaway, Steven Blanton, Jan Hutchins, Linda Lubeck,
Mayor(or Chairman) JOANNE BENJAMIN
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TC: 07: RESO-ORD
RESOLUTION 1997-120
RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
AUTHORIZING THE TOWN MANAGER TO EXECUTE DOCUMENTS
REQUIRED TO PURCHASE AND SELL A BELOW MARKET PRICE
HOUSING UNIT AT 203 PALMER DRIVE
WHEREAS, the Town of Los Gatos Zoning Ordinance Sections 3.90.100 through 3.90.135
establishes a Below Market Price (BMP) Housing Program to assist low and moderate income Los
Gatos citizens purchase homes at prices below market value.
WHEREAS, the Program requires construction of dwellings that persons and families of
moderate income can afford to buy or rent, and assures to the extent possible that the resale prices
of those dwellings and rents, if they are rented, will be within the means of persons and families of
low and moderate income.
WHEREAS, the Program helps the Town meet State mandated housing goals and is
governed by rules, procedures, and criteria outlined within Resolution 1992-88; and
WHEREAS, Town Council has authorized the purchase and resale of a BMP unit at 203
Palmer Drive in accordance with Program procedures; and
NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
DOES HEREBY RESOLVE THAT THE TOWN MANAGER IS AUTHORIZED TO
EXECUTE:
1) all documents required to purchase and sell the BMP housing unit at 203 Palmer Drive.
PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los
Gatos, California, held on the 20th day of October, 1997, by the following vote.
COUNCIL MEMBERS:
AYES: Randy Attaway, Steven Blanton, Jan Hutchins, Linda Lubeck,
Mayor Joanne Benjamin.
NAYS: None
ABSENT: None
ABSTAIN: None
SIGNED:
/s/ Joanne Benjamin
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
/s/ Marian V. Cosgrove
CLERK OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
Town Council Minutes October 20, 1997
Los Gatos, California
LARK AND WINCHESTER/TOWN PROPERTY/MAINTENANCE/CONT.
Council Comments continued:
Mrs. Lubeck has wanted the Town to sell this lot for some time. She does not think a park
could function well on that corner, and this area is not an entranceway to Los Gatos so a
Gateway seems inappropriate there.
Mr. Attaway would like the perimeter landscaped and used as it has been over time; the other
option would be to sell. He asked for community input on these alternatives before staff
devotes time and resources to formulating a direction. He does not think a park is practical.
Outreach should be done now while the subject is fresh in the neighborhood's mind.
Mr. Hutchins first believed it would be a decorative asset for entering the Town from the Lark
Avenue freeway exit. He does not think it should be a park.
Council Consensus:
That a park will not work at this location.
That the sale of the lot seems most appropriate.
That some limited perimeter landscaping be done to enhance the lot if sale is not imminent.
That first community input be solicited concerning the use of this lot.
That this is an asset of the whole Town and community input on its use should be sought.
BELOW MARKET PRICE HOUSING/PALMER DRIVE 203/RESOLUTION 1997-120 (08.19)
Mayor Benjamin stated that this was the time and place duly noted to consider the resale of
a BMP unit.
Council Consensus:
* Be very clear about selling to Los Gatos residents and employees who have lived,
worked and attended schools here.
* Devise points for the number of years in Town.
* Look at the whole program and see how it can benefit the people of Los Gatos.
* Put the subject on the agenda for the January Workshop.
Motion by Mrs. Lubeck, seconded by Mr. Hutchins, that council approve purchase of Below
Market Price housing Unit at 203 Palmer at $143,200; authorize budget adjustments in the
fiscal impact related to both the purchase of a fixed asset and the resale of that asset at a loss
not -to -exceed $38,305; and that Council adopt Resolution 1997-120 entitled, RESOLUTION
OF THE TOWN OF LOS GATOS AUTHORIZING THE TOWN MANAGER TO EXECUTE
Documents REOUIRED TO PURCHASE AND SELL A_BELOW MARKET PRICE HOUSING
UNIT AT 203 PALMER DRIVE, and that a priority be set to search for Los Gatos residents
who could benefit from this program and the purchase of this unit. Carried unanimously.
634 N. SANTA CRUZ DEMOLITION/OFFICE BUILDINGS/RESOLUTION 1997-118 (14.09)
Mayor Benjamin had requested reconsideration of Item 14 which was agreed to unanimously
by Council.
Proposal for Mitigation of Demolition of Pre-1941 Structure:
At the meeting of October 6, 1997, Mrs. Benjamin had asked that certain historic elements of
the structure be recorded in writing, photograph or actuality, and be made available for others'
information and use, preferably but not necessarily, at the project site. This was not included
in the resolution and she asked Council to add the following section at this time:
TC: D9: MM102097
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