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2010-093-Replacement Housing Plan For Three Residential Units At 20 Dittos LaneRESOLUTION 2010-093 RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF THE TOWN OF LOS GATOS .APPROVING THE REPLACEMENT HOUSING PLAN FOR THREE RESIDENTIAL UNITS AT 20 DITTOS LANE WHEREAS, the Town Council of the Town of Los Gatos adopted the Redevelopment Plan for the Central Los Gatos Redevelopment Project Area on November 25, 1991 by Ordinance No. 1882 consistent with the policies and standards of the General Plan of the Town Council of the Town of Los Gatos (the "Town"); WHEREAS, the goals for the Redevelopment Plan include alleviation of blighting conditions and the stimulation of economic development activities in the Project Area; WHEREAS, using tax increment funds, the Redevelopment Agency of the Town of Los Gatos (the "Agency") has acquired 20 Dittos Lane (the "Property") for the purpose of engaging in redevelopment activities consistent with the Redevelopment Plan, including the elimination of blight, removing substandard and potentially hazardous housing units, and the construction of new affordable residential units; WHEREAS, redevelopment of the Property consistent with the Redevelopment Plan will result in the removal from the community's housing stock of three residential units which were inhabited by very low income and low income households; and WHEREAS, pursuant to Health and Safety Code Section 33413(a), whenever dwelling units housing persons and families of low or moderate income will be removed from the community's housing stock as a result of the redevelopment program, the Agency must cause to be made available within four (4) years of removal of such units, an equal number of replacement dwelling units of same or greater bedroom count at affordable housing cost within the Town; and WHEREAS, pursuant to Health and Safety Code Section 33413.5, the Agency has prepared and made available to the public a replacement housing plan (the "Replacement Housing Plan") setting forth the manner in which the Agency intends to comply with the foregoing replacement housing requirement; and WHEREAS, a copy of the Replacement Housing Plan is on file with the Agency Secretary; and WHEREAS, as fully set forth in the Replacement Housing Plan, the final paragraph of Health and Safety Code Section 33413.5 provided the Agency with authority to demolish the three residentially occupied units on the Properly prior to adoption of the Replacement Housing Plan pursuant to this Resolution in order to remedy an immediate danger to health and safety, and the Agency is now adopting the Replacement Housing Plan as soon as practicable following such demolition; and WHEREAS, notice of the Replacement Housing Plan and this meeting to consider the Replacement Housing Plan has been duly provided by publication in the Agency's newspaper of general circulation. NOW, THEREFORE BE IT RESOLVED by the Redevelopment Agency of the Town of Los Gatos as follows: Section 1. The Agency finds and determines that the above recitals are true and correct and are incorporated herein. Section 2. The Agency finds that the Replacement Housing Plan for 20 Dittos Lane, attached hereto as Exhibit A, provides a suitable method for replacing the dwelling units that will be removed from the community's housing stock as a result of redevelopment of the Property. Section 3. Based on the foregoing and in compliance with Health and Safety Code Section 33413.5, the Agency adopts the Replacement Housing Plan for 20 Dittos Lane as the Agency's replacement housing plan for redevelopment of the Property. Section 4. The Agency Secretary shall certify to the adoption of this Resolution. Section 5. This resolution shall take effect immediately upon adoption. PASSED AND ADOPTED at a regular meeting of the Board of Directors of the Redevelopment Agency of the Town of Los Gatos, California held on the 20th day of September, 2010 by the following vote: DIRECTORS: AYES: Joe Pirzynski, Steve Rice, Barbara Spector, Mike Wasserman, Mayor Diane McNutt NAYS: ABSENT: ABSTAIN: ATTEST: ADMINISTRATOR OF THE TOWN OP LOS GATOS, CALIFORNIA SIGNED• ~1aM~ ~c~c~' CHAIRMAN OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF THE TOWN OF LOS GATOS, CALIFORNIA REPLACEMENT HOUSING PLAN FOR 20 DITTOS LANE LOS GATOS, CALIFORNIA September 2010 Redevelopment Agency of the Town of Los Gatos 110 East Main• Sheet Los Gatos, CA 95030 N:VbIGR\AdminWorkFiles\2010 Council Reports\DittosRepLlcementHsngPlanAtfaclmient2Exlvl.doc REPLACEMENT HOUSING PLAN This Replacement Housing Plan ("Replacement Housing Plan") is being prepared on behalf of the Redevelopment Agency of the Town of Los Gatos ("Agency") in conjunction with the demolition of substandard and unsafe housing units at 20, 24 and 26 Dittos Lane ("Property"), in the Town of Los Gatos ("Town"). As detailed in this Replacement Housing Plan, the Property contained three deteriorated structures recently inhabited by one low income household and two very low income households, as well as two long uninhabitable former residential units that are no longer a part of the community's housing stock. The Town and the Agency have circulated for review and comment a Relocation Plan for the Property, and relocation of the occupants of the units was completed on June 13, 2010. Demolition of the structures on the Property was completed on August 25, 2010. In accordance with the authority granted pursuant to the last paragraph of Health and Safety Code Section 33413.5, the Town and Agency permitted the demolition of the structures on the Property prior to the adoption of this Replacement Housing Plan as the buildings were structurally unsound and susceptible to fire danger, among other blighting conditions. Swift demolition was recommended by the Town's Parks and Public Works Department and Building Division, as well as the Town's Police Department and the Santa Clara County Fire Department as the Property poses a health and safety threat to the community. As also detailed in this Replacement Housing Plan, the Agency envisions working with Dittos Lane Family Housing, LLC, a qualified affordable housing developer ("Developer"), to convey the Property from the Agency to the Developer and to cause the Developer to construct a new affordable housing development consisting ofthirty-one (31) units of affordable housing and one (1) on-site manager's unit ("Dittos Lane Apartments"). Three of the new units are intended to serve as the replacement units for the three recently inhabited residential units that were demolished on the Property. In accordance with the Community Redevelopment Law (Health and Safety Code Section 33000 et sec . ("CRL"), the Agency's obligations with regards to replacement housing are to replace any low and moderate income units destroyed within four years of destruction. The replacement units must have the same or greater number of bedrooms than the demolished units. In addition, Health and Safety Code Section 33413(a) provides that of the replacement housing units built, one hundred percent (100%) must be made available at affordable housing cost to the same or lower income households (very low income, low income, or moderate income) as the households displaced from the destroyed or removed units. Under the CRL, this Replacement Housing Plan must cover the following elements: The general location of the replacement housing (see Section D below); 2. An adequate means of fmancing the replacement housing (see Section E below); 3. A finding that the replacement housing is in compliance with Article XXXIV of the California Constitution (see Section G below);. 4. The number of replacement housing units planned for construction and rehabilitation (see Section D below); and 5. The timetable for meeting the replacement housing objectives (see Section C below). The Agency's goal in preparing this Replacement Housing Plan is to demonstrate that providing replacement housing in accordance with the requirements of the CRL is feasible. A. Replacement Housing Need. The purpose of the demolition of the housing units was to eliminate blight, remove substandard and hazardous housing units, and allow the development of new housing units and other improvements. The demolition resulted in the destruction of one (1) low income housing unit and two (2) very low income housing units located at 20, 24, and 26 Dittos Lane. Additionally, two uninhabitable structures were removed that had been vacant for more than twenty years. Because these uninhabitable structures had long since ceased being a part of the community's affordable housing stock, they did not constitute residential units subject to a replacement requirement pursuant to Health and Safety Code Section 33413(a). All ofthe structures on the Property posed a threat to public safety according to the Los Gatos Building Division, Parks and Public Works Department and Police Department, along with the County's Fire Department. Table 1 summarizes the number of units to be replaced by bedroom mix and incorne category as a result of the demolition. Map 1 shows the location of the Property. TABLE 1 REPLACEMENT HOUSING NEED BY INCOME CATEGORY AND NUMBER OF BEDROOMS Income Studio/One Two Three Four Cate or Bedroom Bedrooms Bedrooms Bedrooms Total Units Moderate Income 0 0 0 0 0 Low Income 0 1 0 0 1 Very Low Income 1 1 0 0 2 Total Units 1 2 0 0 3 Map 1 Location of the Demolished Units and Dittos Lane Aparhnents Project Based on occupant income and unit rent information provided by Associated Right of Way Services Inc. (ARWS), the consultant who prepared the draft Relocation Impact Study and Last Resort Housing Plan for the Project ("Relocation Plan"), one (1) studio replacement unit and one (1)two-bedroom replacement unit must be affordable to very low income households and one two-bedroom replacement unit must be affordable to low income households. Under Health and Safety Code Section 33413(a), replacement units maybe affordable to households at the same or lower level of income than the households displaced. B. Location and Number of Demolished Units. The demolished units were located at the following addresses: 20 Dittos Lane: One (1) Studio unit 24 Dittos Lane: One (1)Two-bedroom unit 26 Dittos Lane: One (1)Two-bedroom unit C. Time Schedule for Dernolifion. The demolition of the units was completed August 25, 2010. D. Location and Number of Units of Replacement Housing. The Agency has initially identified three of the proposed units to be newly constructed on the Property as part of the Dittos Lane Apartments to serve as the replacement housing units for the three residential units that were demolished on the Property. As noted above, Map 1 shows both the location of the demolished units and the location of the Dittos Lane Apartments containing the proposed replacement units. The Agency and the Developer have entered into an Exclusive Right To Negotiate Agreement ("ERNA"), initially entered into as of September 21, 2009, as fully amended and restated as of February 16, 2010. Pursuant to the ERNA, the Agency and the Developer are currently negotiating the terms of a Disposition and Development Agreement ("DDA") whereby the Agency would convey the Property to the Developer by a long term ground lease, and the Developer would construct and operate the proposed Dittos Lane Apartments as an affordable housing development for not less than 55 years. A DDA is expected to be presented for consideration of approval by the Town Council and the Agency Board, each acting in its policy discretion, late in 2010 or early in 2011. If a DDA is not approved by the Town Council and the Agency Board, so that three units in the proposed Dittos Lane Apartments do not become available as the replacement housing units for the three units about demolished on the Property, the Agency will prepare and approve an amendment to this Replacement Housing Plan to indicate an alternative location and financing plan for the units that will instead serve as the required replacement housing units. 4 Table 2 summarizes the total number of expected units in the Dittos Lane Apartments and shows a breakdown of the expected number of units by unit size, type of units and affordability category. TABLE 2 TOTAL HOUSING UNITS IN THE DITTOS LANE APARTMENTS BY INCOME CATEGORY AND NUMBER OF BEDROOMS Income Studio/One Two Three Four Manger's Cate or Bedroom Bedrooms Bedrooms Bedrooms Unit Total Non- restricted 0 0 0 0 1 1 Moderate Income 0 0 0 0 0 0 Low Income 10 10 -0 0 0 20 Very Low Income 6 5 0 0 0 11 Total 16 15 0 0 1 32 As detailed in Table 2, the proposed Dittos Lane Apartments will provide five (5) two-bedroom and six (6) one-bedroom units affordable to very low income households. One of these two-bedroom units will serve as the replacement housing unit for the one (1)two-bedroom very low income unit demolished on the Property, and one of these one-bedroom units will serve as the replacement housing unit for the one (1) studio very low income unit demolished on the Property. Similarly, the Dittos Lane Apartments will provide ten (10) two-bedroom low income units, one of which will serve as the replacement housing unit for the one (1)two-bedroom low income unit demolished on the Property. As described above, these proposed units are anticipated to be provided within the next four years and will remain affordable to the applicable income categories of households for not less than the minimum 55-year affordability period required by the CRL. Thus the proposed Dittos Lane Aparments will provide in a timely manner, three replacement units with the same number of bedrooms and available at affordable rents to income categories comparable (or of lower income) to those of the units demolished on the Property, thereby fully satisfying the replacement housing requirements of Health and Safety Code Section 33413(a). E. Financing Replacement Housine. The Agency anticipates that a variety of funding sources will be used to finance the proposed Dittos Lane Apartments, including Agency fmancial assistance, developer deferred fee, tax credit equity, and tax exempt debt, among others. Financing arrangements for the Dittos Lane Apartments are still under discussion. The sources and amounts of funding listed below are preliminary at this time, and maybe changed as necessary. As currently proposed, the following major sources will likely be used to fund the estimated development cost of the Dittos Lane Apartments of approximately $10,175.000: Low income housing tax credit equity in the approximate amount of $2,400,000; Tax exempt bond fmancing in the approximate amount of $3,500,000; and A combination of Agency housing set aside funds from tax increment, Developer contributions/deferred developer fee and other sources for the balance of development costs in amounts currently being determined by the Agency and that will be set forth in the DDA. The Agency already owns the Property, which is proposed to be conveyed to the Developer bylong-term ground lease at nominal rent, reflecting the fair reuse value of the Property given the extensive affordable housing regulatory controls that will produce a project that is 100% affordable to very low income and low income households. The Agency anticipates that funding from the sources summarized above in these approximate amounts is reasonable fully fund both the acquisition and development costs of a .project of this magnitude. The proposed combination of funds allows for an affordable housing development project that is financially feasible. The Developer's financing plan avoids highly competitive funding sources in favor of less competitive "four percent" Low Income Housing Tax Credits and tax exempt bond financing. In addition, the Developer's financing plan includes Developer participation through deferral of fees and Agency participation through a subsidy from redevelopment housing set-aside funds, in amount to be agreed upon in the DDA. The Agency and the Developer are also currently seeking to identify addifional funding sources to reduce the Agency's subsidy, as available. F. Time Schedule for Construction of the Replacement Housing. The construction of the Dittos Lane Apartments is tentatively scheduled to begin in June 2011 and to be completed by August 2012. The Agency will disclose to the public any changes in the timing of the construction of the Dittos Lane Apartments as that information becomes available. G. Article XXXIV Ap rp oval. Article XXXIV of the California Constitution requires approval of the electorate when a state public body develops, constructs or acquires aloes-rent housing project. The proposed Dittos Lane Apartments may be considered such aloes-rent housing project subject to Article XXXIV because of the Agency's extensive assistance to the Developer contemplated by the proposed DDA. The three replacement units in the Dittos Lane Apartments that are detailed in this Replacement Housing Plan do not require approval of the voters pursuant to Article XXXIV of the California Constitution. Article XXXIV requires approval of the electorate only when a state public body develops, constructs or acquires aloes-rent housing project. The Legislature has 6 enacted the Public Housing Implementation Law (Health & Safety Code Section 37000 et sew.) to interpret and implement Article XXXIV. Health and Safety Code Section 37001(f) states that the term "low-rent housing project" in Article XXXIV does not apply to any development that consists of rehabilitation, reconstruction, improvement, or replacement of dwelling units of a previously existing low-rent housing project, or a project previously or currently occupied by households with incomes at or below 80% of the area median income: The remaining 28 units of low-rent housing proposed to be developed in the Dittos Lane Apartments do require Article XXXIV authority. By election of November 1998, the voters of the County of Santa Clara granted Article XXXIV authority for the annual development, construction or acquisition of 5401ow-rent housing units, including low-rent units in Los Gatos, such as those units proposed for the Dittos Lane Apartments. The Town and Agency intend to allocate up to 31 units of low-rent housing authorized by this election to enable construction of the Dittos Lane Apartments, thus complying with the requirements of Article XXXIV for not only the three replacement units, but also for the entirety of the Dittos Lane Apartments units. This allocation was authorized by the County of Santa Clara, Office of Affordable Housing in a letter dated Apri129, 2010 [attached]. H. Conclusion. Based on the Agency's analysis of the replacement housing need resulting from the demolished units and the Dittos Lane Apartments financing plan, the Agency has determined that it can meet its replacement housing obligations. Assuming the Dittos Lane Apartments develops as proposed, the Agency will have replaced one (1) studio very low income unit, one (1) two-bedroom very low income unit, and one (1)two-bedroom low income unit with one (1) one-bedroom unit and one (1)two-bedroom unit affordable to very income households, and one (1)two-bedroom unit affordable to low income households. The total number of bedrooms in the replacement units equals the number of bedrooms in the destroyed units as permitted under the California Community Redevelopment Law and the affordability of the replacement units is the same as the affordability of the demolished units. If the proposed DDA is not approved and the proposed Dittos Lane Apartments are not developed as foreseen by this Replacement Housing Plan, the Agency will act swiftly to indentify alternative replacement housing units to be developed no more than four (4) years after the demolition of the units at 20, 24 and 26 Dittos Lane.