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Attachment 14 - Milpitas City Council Meeting Agenda Pages 9-11School District will pay $20,770,000 (6.7 acres at $3.1 million/acre). • Close of escrow and transfer of School Site on or before October 21, 2015 to allow School District time to conduct soil testing, complete California Environmental Quality Act requirements and design, and obtain approval from the state. Deed restriction to be recorded on School Site requiring the School Site to be used as a public school in the future with re- vesting rights to the City. If the District is in default within forty years from the opening of the school, the District will be in default of the agreement and property will revert back to the City at no cost. After forty years, the deed restriction will remain in place with enforcement rights of the City but if MUSD defaults, the price of the land will be negotiated. • City and School District evenly share all closing costs, transfer fees, and title insurance cost. • School Board was scheduled to consider the Proposed Purchase and Sale Agreement at a School Board meeting on October 15, 2014, with City Council consideration at its meeting on October 21, 2014. • Joint use agreement to be negotiated will include 1.2 acres portion of School Site for a soccer field, additional joint use of outdoor basketball courts, parking lot, and other areas to be negotiated. Fiscal Impact: Cost recovery in the amount of $20.77 million of the $42 million paid by the city for the land inclusive of the Santa Clara County and State of California "claw- back" of the funds as a result of the Redevelopment Agency dissolution law. City general fund loss as part of the transaction totals $21.2 million. Recommendation: Approve a Purchase and Sale Agreement with the Milpitas Unified School District for 6.7 acres of City owned property on McCandless Drive for construction of a new elementary school. Will. JOINT MEETING OF THE MILPITAS CITY COUNCIL, SUCCESSOR AGENCY AND MILPITAS HOUSING AUTHORITY xHA3. Adopt a Joint Resolution of the City Council, Successor Agency of the Redevelopment Agency, and Milpitas Housing Authority to Approve the Transfer of Extremely Low - Income Single Family Properties at 751 Vasona Street and 1170 N. Park Victoria Drive from Senior Housing Solutions to Milpitas Senior Homes LLC (Charities Housing) and Approve a 15 Year Grant of $459,000 from the Milpitas Housing Authority Fund for Operating and Ongoing Maintenance Costs (Staff Contact: Felix Reliford, 408 -586 -3071) Backeround: In 2006 and 2009, the City Council and former Milpitas Redevelopment Agency allocated the use of CDBG and 20% Low- Income Housing Set -Aside Funds (loans and grants) for the purchase of two single family homes at 751 Vasona Street and 1170 North Park Victoria Drive for 10 extremely low- income Milpitas seniors. The loans and grants totaled over $1 million for the 1170 North Park Victoria property and over $550,000 for the 751 Vasona Street property. These amounts were allocated to Senior Housing Solutions (SHS) to allow the non- profit to leverage its other County funding for property acquisition and upgrades required to accommodate five seniors living in each of the homes. Each senior resident over age 60 rents a bedroom and shares the rest of the home. At the time of the approved funds, SHS owned 11 single family homes located in six cities within Santa Clara County. Of the 11 homes, eight were awarded Project Based Section 8 subsidies from the Housing Authority of the County of Santa Clara. This subsidy, combined with minimal rents paid by the seniors between $200 to $400 per month, enabled the properties to 4 1, `v'" Milpitas City Council Agenda ATTACHMENT 1 operate with a small positive cash flow. The two homes in Milpitas and one home in Cupertino unfortunately never received Project Based Section 8 subsidies, in which the Housing and Urban Development (HUD) Section 8 Program would require tenants to pay 30% of their income on rent and the federal government pays the balance. In the past, staff had requested that SHS apply for the Section 8 program for the Milpitas homes but because the properties were relatively new compared to the other properties owned by SHS and the waiting list was substantially long (19,000 Santa Clara County residents on the Section 8 waiting list), no Section 8 subsidies have been awarded. Furthermore, since the federal government sequestration several years ago and a substantial reduction in HUD budget, the City was informed by the County Housing Authority that HUD substantially reduced the number of vouchers issued for the Section 8 Program. As a result, these three properties (two in Milpitas and one in Cupertino) have been operating at a substantial deficit. Under the SHS model, these deficit properties were subsidized with the positive cash flow from the other eight homes. The eight cities where the Section 8 subsidies are located have decided that they no longer want the positive cash flow generated by their homes to subsidize the three deficit properties. SHS has experienced financial hardship for the past few years and thus decided to dissolve its organization and Board of Directors. SHS requested that Charities Housing assume ownership of the properties and, in the interim, manage the eleven properties, which Charities has been doing for more than a year. Charities Housing approached all cities in regards to taking over ownership of the properties, maintaining long -term affordability and property management. All other cities have agreed including the City of Cupertino. The City of Cupertino has approved a grant in the amount of $251,635 to be disbursed over two years for Charities Housing for the property transfer and to subsidize the operation for 15 years. The transfer of the single property was completed on August 21, 2014. Charities Housing has requested that the Milpitas Housing Authority consider authorizing the transfer of the two properties located in Milpitas from Senior Housing Solutions to Milpitas Senior Homes LLC, legal entity created by Charities Housing, and provide a grant to assist in operating costs (including $20,000 legal and transfer of properties cost) in the amount of $459,000 over the next 15 years to maintain long -term affordable housing for 10 extremely low - income Milpitas seniors. The funding will be allocated annually $30,600 per year, with the first year funding of $50,600 ($30,600 and $20,000 legal and transfer properties one time costs). The final year of the agreement would be $10,600. Additionally, the age restriction will be changed from a minimum of 60 years to 62 years to be consistent with federal requirements and other County loan requirements on the two properties. Staff reviewed the non - profit's request and recommends that the Housing Authority approve the transfer of properties and $459,000 in operating funds for the following reasons: • The approval would allow ten extremely low- income Milpitas senior residents whose rents range $200 -$400 to maintain affordable housing and a stable living environment; • Charities Housing would be willing to take over all future debt and obligations of both homes and demonstrated itself to be a stable financial nonprofit based on its portfolio; • If the homes were transferred back to the Housing Authority, that agency would be required to take on the future financial debts and obligations which would be more costly in the long term (including repayment of loans, ongoing maintenance, operating, and administration costs); and • Finding replacement housing would be particularly challenging for the extremely low - income households. Charities Housing is also requesting $97,400 in additional costs associated with future rehabilitation repairs, improvements and property deficiencies. Staff recommends Charities Housing apply for future CDBG funding for these costs. October 21, 2014 Milpitas City Council Agenda,, rxe�c tea; Page 10 There are sufficient funds in the Housing Authority budget to support this request. Included in the agenda packet is a letter from Charities Housing explaining its request along with background information. Representatives from Charities Housing will be present at the meeting if there are any questions. As part of the recommendation, staff is requesting authority for the City Manager, Successor Agency Executive Director, and Milpitas Housing Authority President to execute all necessary documents to implement the transfer of the properties from Senior Housing Solutions to Milpitas Senior Homes, LLC including assignment of all existing grant and regulatory agreements and other related documents. There are additional loans on the two Milpitas properties from Santa Clara County. Charities Housing is currently working with the County to assign those loans to them and the Santa Clara County Board of Supervisor is tentatively scheduled to consider such request at its meeting on November 18, 2014. Fiscal Impact: None. There are sufficient funds in the Milpitas Housing Authority Recommendation: Adopt a joint resolution of the City Council, Successor Agency of the Redevelopment Agency, and Milpitas Housing Authority approving the transfer of properties at 751 Vasona Street and 1170 North Park Victoria Drive from Senior Housing Solutions to Milpitas Senior Homes LLC (Charities Housing) and authorizing the City Manager, Successor Agency Executor Director, and Milpitas Housing Authority, or their respective designees, to execute all documents necessary to effectuate the transfer including the operating 15 year grant agreement in the amount of $459,000. XIX. ADJOURNMENT NEXT REGULARLY SCHEDULED COUNCIL MEETING TUESDAY, NOVEMBER 4, 2014 vuooer Lt, zu14 Milpitas City Council Agenda Page 11 Ais Page Intentionally Left Blank