10 Staff Report - Below Market Price Housing Program
DATE: TO: FROM: COUNCIL AGENDA REPORT September 24, 2004 DEBRA J. FIGONE, TOWN MANAGER MEETING DATE: 10/4/04 ITEM NO. ) 0 SUBJECT: ADOPT A RESOLUTION
AUTHORIZING THE TOWN MANAGER TO EXECUTE PURCHASE AGREEMENTS FOR BELOW MARKET PRICE HOUSING PROGRAM UNITS IN URGENCY CIRCUMSTANCES, AND RESCIND RESOLUTION 2002-177 RECOMMENDATION: Adopt
a resolution (Attachment 1) authorizing the Town Manager to execute purchase agreements for Below Market Price Housing Program units in urgency circumstances, and rescind Resolution
2002-177. 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, in their new housing projects. In some instances, developers may pay fees in lieu of providing affordable units. All units developed under the ordinance are managed
under the Town's Below Market Price (BMP) Housing Program. One of the BMP Program's challenges is to keep owner-occupied units affordable. Los Gatos requires that units remain in the
Program at resale, and be resold to income-eligible owners. This affordability requirement is accomplished through a deed restriction recorded on the property. The Town also retains
a first right ofrefusal to purchase each unit. DISCUSSION: Under Resolution 2002-177, the Town Council authorized the Town Manager to execute purchase agreements for BMP units that were
in bankruptcy or foreclosure proceedings. This authority is PREPARED BY: Community Services Director N:\CSD\TCRPTS\BMP Reviewed by:
Town Manager =oYL=Town Attorney __Clerk S'c Finance __Community Development Revised: 9/28/04 3:25 pm Reformatted: 5/30/02
PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT A RESOLUTION AUTHORIZING THE TOWN MANAGER TO EXECUTE PURCHASE AGREEMENTS FOR BELOW MARKET PRICE HOUSING PROGRAM UNITS September 24,2004 limited
to those circumstances in which adequate time to request purchase authority for a specific unit from Council is not available. Units purchased under this authority would then be sold
to income-eligible owners through the standard BMP unit purchase process. The Town Council gave this authority to the Town Manager in recognition that, as the Town does not hold the
mortgage on any BMP unit, occasionally a unit becomes subject to bankruptcy or foreclosure proceedings and is therefore in danger ofreverting to market price should the Town not act
quickly to exercise its right offirst refusal. The Housing Element ofthe Town's General Plan emphasizes the importance ofaffordable housing opportunities, and the need to preserve existing
affordable housing inTown. Implementing Strategy H.I.1.9.A of the General Plan states: Ifnecessary, the Town will exercise its "right offirstrefusal" to purchase BMP units which may
have resale prices that exceed low or moderate income affordability limits...The Town will utilize funds from all available sources, including the Affordable Housing Fund, to subsidize
the unit in orderto make it affordable to the . appropriate low/moderate income group and to ensure that it remains a BMP unit in perpetuity. Staff believes that it would be appropriate
to extend the Town Manager's authority to execute purchase agreements for BMP units, to cover any urgency circumstances in which adequate time to request purchase authority for a specific
unit from Council is not available; not limited to units in bankruptcy or foreclosure proceedings. As noted above, the Town retains a first right ofrefusal to purchase each unit, which
it generally delegates to an income-eligible buyer. However, there is a time limit on this first right of refusal; if it is not exercised in time, a unit may be sold at market price.
This possibility, though it does not frequently occur, might happen in a variety of circumstances. For example, it is possible that a unit owner could extend the resale process, intentionally
or unintentionally, and the time limit could elapse. Staff suggests that, in such a case, the Town Manager could sign a purchase agreement on behalf ofthe Town, effectively saving the
unit from reverting to market price. Theunit would thenbe sold to an income-eligible buyer through the standard BMP unit purchase process. The Town Manager would request purchase authority
from Council of such a purchase as time allowed; the authority provided under the draft resolution (Attachment 1) would be a contingency in the case that a purchase decision must be
made before the issue could be heard by Council. If a purchase decision were made under the Town Manager's authority before the issue could be heard by Council, it would be brought to
Council to be ratified.
PAGE 3 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT A RESOLUTION AUTHORIZING THE TOWN MANAGER TO EXECUTE PURCHASE AGREEMENTS FOR BELOW MARKET PRICE HOUSING PROGRAM UNITS September 24,2004 CONCLUSION:
Staff recommends that Council adopt a resolution expanding the Town Manager's authority to execute purchase agreements for BMP units, in urgency circumstances only. Staff further recommends
that theTownManagerbe authorized to useBMP In-Lieu funds to finance the purchase ofthese units, and that budget adjustments maybe made accordingly. This resolution would replace . Resolution
2002-177. ENVIRONMENTAL ASSESSMENT: The recommended action is not a project defined under CEQA, and no further action is required. FISCAL IMPACT: As noted above, in some instances developers
may pay fees in lieu ofproviding affordable units. These funds, referred to as "BMP In-Lieu funds," are held in a deposit account, and may be used to finance BMP-related or other affordable
housing projects. Resolution 2002-177 authorized the Town Manager to use BMP In-Lieu funds to purchase BMP units in foreclosure or bankruptcy proceedings. Staffrecommends that this authoritybe
extended to the purchase ofBMP units in any urgency circumstances. When a Town-owned BMP unit was resold to an income-eligible owner, the purchase price would be refunded to the BMP
In-Lieu fund. The balance oftheBMP In-Lieu fund (account 100-26216) as ofJuly 1, 2003 is $1,441,839.98. The purchase price paid for a BMP unit would vary. Attachments: 1. Draft Resolution
of the Town Council of the Town of Los Gatos authorizing the Town Manager to execute purchase agreements for Below Market Price Housing Program units in urgency circumstances, and rescinding
Resolution 2002-177. Distribution: Richard Warren, Housing Authority of the County of Santa Clara RAF:JLM/jlm
Attachment 1 RESOLUTION 2004-RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS AUTHORIZING THE TOWN MANAGER TO EXECUTE PURCHASE AGREEMENTS FOR BELOW MARKET PRICE HOUSING PROGRAM
UNITS IN URGENCY CIRCUMSTANCES, AUTHORIZING RELATED BUDGET ADJUSTMENTS, AND RESCINDING RESOLUTION 2002-177 WHEREAS, the TownofLos Gatos Zoning Ordinance Sections 29.10.3000 through 29.10.3040
establish a Below Market Price (BMP) Housing Program to assist low and moderate incomeLos Gatos citizens to purchase homes; and WHEREAS, the BMP Program requires construction ofdwellings
that persons and families of low and moderate income can afford to buy, and assures to the extent possible that the resale prices of those dwellings will be within the means of persons
and families of low and moderate income; and WHEREAS, the Housing Element ofthe Town's General Plan states, "Ifnecessary, the Town will exercise its 'right offirst refusal' to purchase
BMP units which may have resale prices that exceed low or moderate income affordability limits."; and WHEREAS, occasionally BMP units come in danger of losing their affordability, through
a variety of circumstances; and WHEREAS, the Town wishes to ensure that all BMP units remain in the BMP Program, and retain their affordability to persons and families of low and moderate
income. NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS GATOS DOES HEREBY RESOLVE: l
1) The Town Manager is authorized to execute purchase agreements for Below Market Price (BMP) Housing Program units. This authority shall be limited to those circumstances in which adequate
time to request purchase authority for a specific unit from Council is not available. 2) The Town Manager is authorized to make budget adjustments related to the execution of such purchase
agreements. Funds for purchases made under the authority ofthis Resolution shall be taken from the BMP In-Lieu Fund. 3) Resolution 2002-177 is hereby rescinded. PASSED AND ADOPTED at
a regular meeting ofthe Town Council ofthe Town of Los Gatos, California, held on the __day of October, 2004, by the following vote. COUNCIL MEMBERS: AYES: NAYS: ABSENT: ABSTAIN: SIGNED:
MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA ATTEST: CLERK OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA N:\CSD\TCRPTS\Resolutions\BMP purchase.wpd 2