Authorize Sale of 576 W. Parr Ave #23table pF MEETING DATE: 08/19/14
ITEM NO. '1
1
tps spps COUNCIL AGENDA REPORT
DATE: AUGUST 7, 2014
TO: MAYOR AND TOWN COUNCIL
FROM: GREG LARSON, TOWN MANAGER
SUBJECT: PROPERTY LOCATION: 576 W. PARR AVENUE #23. APN 406 -43 -057.
PROPERTY OWNER: TOWN OF LOS GATOS.
ADOPT A RESOLUTION AUTHORIZING THE SALE OF A BELOW
MARKET PRICE (BMP) RENTAL UNIT UNDER THE TERMS AND
CONDITIONS OF THE TOWN'S BMP HOUSING PROGRAM GUIDELINES.
RECOMMENDATION:
Adopt a resolution authorizing the sale of a Below Market Price (BMP) rental unit, located at 576 W.
Parr Avenue #23, Los Gatos, CA, APN 406 -43 -057 under the terms and conditions of the Town's
BMP Housing Program Guidelines.
BACKGROUND:
In 1983, the Town approved the Villa Capri senior age restricted development at 576 West Parr
Avenue and required that four of the 35 units would be provided as BMP units for qualified seniors
(age 60 or older).
The Town acquired four units at below market prices from the developer on August 15, 2006 and
planned to sell the units as affordable for -sale condominium units as part of the BMP Housing
Program. One of the four units (unit #23) was occupied by an elderly low income tenant when the
Town took ownership of the four designated units. The Town allowed the tenant to continue to rent
the unit as a BMP rental for approximately eight years until her departure in June 2014 for personal
reasons. The other three BMP units were sold to qualified BMP buyers in 2007, 2008, and 2014,
respectively.
By adopting the attached resolution, Council will be affirming the authorization for staff to sell the
vacant condominium unit as part of the BMP Housing rogramyllev
PREPARED BY: LAUREL R. PREVETTI Housing
� i
Assistant Town Manager / Director of Community Development
Reviewed by: N/A Assistant Town Manager own Attorney —;c finance
N:\DEV\TC REPORTS\2014\576 W Parr Av No23 Sale Authorization.doc Reformatted: 5/30/02
PAGE
MAYOR AND TOWN COUNCIL
SUBJECT: 576 W. PARR AVENUE 423
August 19, 2014
DISCUSSION:
This condominium unit is the only BMP rental unit owned by the Town and managed directly by
staff. Currently, the property management of the condominium unit requires the partial involvement
of at least four employees from three departments (Finance, Park and Public Works, and Community
Development) to manage the unit.
The 1- bedroom/1 -bath unit was originally purchased for $250,000 in 2006 and has an approximate
market value of $395,000. The Town pays approximately $4,800 in Home Owners Association
(HOA) dues annually as a landlord but only collects $10,848 annually in restricted rent ($904 per
month). As a landlord, the Town is also responsible for all upgrades, maintenance, and repair costs
not covered by the HOA (e.g., smoke and carbon monoxide detectors, appliances, etc.). Currently,
the Town is also absorbing the additional expense of the electric utility costs ($10 per month) while
the unit is vacant.
The Town is not currently maintaining a separate operating or maintenance reserve fund for this unit
since the net operating income after staffing costs would be very minimal. The insurance for the unit
is provided through the Town's participation with the Association of Bay Area Governments
(ABAG) self - insurance risk pool. Only possessory interest taxes are collected by the County Tax
Assessor for the unit because the Town is a governmental agency and not subject to property tax
assessment. The possessory interest taxes are paid by the renter as required by the Town's lease
terms.
If Council authorizes the sale of the condominium unit to an eligible Low Income BMP buyer, the
unit could be sold for approximately $170,000. The home would continue to remain in the Town's
BMP Housing Program inventory in perpetuity as a low income affordable unit with a deed
restriction. The proceeds from the sale to a BMP buyer would be returned to the Housing In -lieu Fee
Fund less approximately $5,100 in transaction fees for the Town's BMP contract administrator,
Neighborhood Housing Services Silicon Valley (NHSSV). The BMP unit would have a deed
restriction recorded on title providing the Town a First Right of Purchase for a designated affordable
sale price in the event the buyer elects to sell the home in the future. Additionally, if the home is
sold to a private buyer, the Tax Assessor will return the property to the active tax roll and the new
BMP homeowner would be responsible for paying approximately $2,500 annually in property taxes
in addition to the HOA dues and utility costs.
ALTERNATIVES:
There are two alternatives for Council consideration. As an alternative to selling the unit as a BMP
unit, the Town could sell the unit to a market rate buyer (i.e. for the estimated market value of
$395,000). The sale would result in an addition $225,000 in sales proceeds for the Housing In -lieu
Fee Fund and approximately $6,000 in property taxes but the unit would be permanently lost from
the Town's affordable housing stock. The loss of the low- income unit would also need to be
accounted for during the Housing Element Update process since it would incrementally increase the
need for low- income units to replace the lost unit.
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT: 576 W. PARR AVENUE #23
August 19, 2014
Second, if Council does not authorize the sale of the unit for either a market rate or BMP sale, staff
will continue to rent the unit out to another income qualified senior household.
CONCLUSION:
Adoption of the resolution will allow the Town to achieve the objectives of: 1) preserving the home
in the Town's affordable housing inventory and 2) reducing on -going costs to the Town.
FISCAL IMPACT:
The Town expended $250,000 from the BMP Housing In -lieu Fee Fund in 2006 to purchase this unit
and preserve it in the Town's affordable housing inventory. The annual property management of this
unit by staff results in a minimal net operating income if the employee staffing costs are considered
(less than $2,000). Upon sale of the unit to another income qualified BMP buyer, the Town will
recoup $164,900 after paying $5,100 in BMP transaction costs to NHSSV.
Attachments:
1. Draft Resolution
LRP:EO:cg
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INTENTIONALLY
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RESOLUTION 2014-
RESOLUTION OF THE TOWN COUNCIL
OF THE TOWN OF LOS GATOS
AUTHORIZING THE SALE OF A BELOW MARKET PRICE (BMP)
RENTAL UNIT LOCATED AT 576 W. PARR AVENUE,
LOS GATOS, CA, APN 406 -43 -057,
UNDER THE TERMS AND CONDITIONS OF THE
TOWN'S BMP HOUSING PROGRAM,
WHEREAS, the Town of Los Gatos Zoning Ordinance Sections 29.10.3000 through
29.10.2040 establishes a Below Market Price (BMP) Housing Program to assist low and moderate
income Los Gatos citizens purchase homes at prices below market value; and
WHEREAS, the residential condominium unit located at 576 W. Parr Avenue #23 was
purchased on August 15, 2006 for less than market value by the Town of Los Gatos and intended
for inclusion in the BMP Housing Program for eventual sale at a reduced sales price that is
affordable to lower income senior households; and
WHEREAS, the Town of Los Gatos maintained the unit as an affordable rental unit for a
low income senior tenant since the unit was acquired in 2006; and
WHEREAS, the residential unit is now vacant; and
WHEREAS, the need for homes that are affordable to lower income households in Los
Gatos continues to exist; and
WHEREAS, the Town has a desire to maintain its affordable housing stock in the BMP
inventory by selling this unit as a BMP unit that is affordable to lower income senior households.
NOW, THEREFORE, BE IT RESOLVED, that Town Council of the Town of Los
Gatos authorizes the sale of the BMP unit located at 576 W. Parr Avenue #23 under the terms and
conditions of the Town's BMP Housing Program Guidelines.
ATTACHMENT i
PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los
Gatos, California, held on the 19th day of August, 2014, by the following vote:
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED:
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK ADMINISTRATOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
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