1995-09-27 (Report)
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~ CITY OF ENCINITAS
AGENDA REPORT
HUUSING AUTHORITY
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Meeting Date: September 27, 1995
TO: Board of Commissioners
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VIA: Lauren M. Wusserman -,w,~
Secretary of the Boar ecutpve Director
FROIVi: Gommunity Development Department
Sandra L. Holder, Community Development IJ►irector dr"+
Lynn Brown, Housing and Grants Coordinator
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SITBdEC'Y':
Approval of James D. Wilfiams as the financial consultant for properry acquisition program that
includes 162 etcierly and family units and authorization foc Executive Directar to execute a contract
in an amount not ta exceed $33,394.
ISSil'E:
a
Whether to approve James D. VJilliacn , as the financial consultant for property acquisition program
that includes 162 elderly and family units and to authorize the Executive Director to execute a
contract in an amount not to exceed $33,390.
RACKGRUUND:
At the Housing Authority Board workshop on August 29, 1995, the Board authorized staff to
proceed with existing housing acquisition program. There was Board consensus that:
• the Housing Authority would not contract with a real estate broker, but staff would contact
brokers, nanprofits, and property owners advising them that the Encinitas Housing Authority
was interested in gurchasing existing property for rehabilitation to assist the City in meeting
the goals for low income housing;
• the Housing Authority would contract with a consultant to assist tt►e Housing Authority in
analyzing peoperties and securing financing;
• the Housing Authority vvould not manage an}r properties owned, but would contract for
management services; and
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• the Board would detercrrine project ownership and the financing mechanism on s project-bye
p.-aject basis. ANLYSISt .
, The next step in the property acquisition program is the sElection of the develaprnent team.
(Attachment A Flow Chart) Staff is recornrnending contracting with Jim Wiltiams as the financiai
consultant to assist the sta.ff with canducting the iautiat feasibilixy analysis for acquisitions, obtaining
financing, preparing funding schedules, and conducting acquisition negotiations. (Attachment B,
Duties 1,2, and 3) Staffwili contact realtors to put together several packages of properties to be
con5idered.
Over the past year, staff has receivec's proposals from a variety of persons with whom the Authority
could cantracti for various duties necessary to complete the acquisition program. Attachment C
outlines the sluties and the persons or companies who submitted proposals. Only Jim Williams,
Rolazad Camfield, Munihome, and David Rosen have the experience for the financial consuiting dutiss
thai the Authority is seekang. Staff is recnmmending 3im Williams because he has worked with the
Housing Subcommittee an the project and is na more expensive than the others.
The Consolidated P1an and the Fave Year Housing Authority Flan indicate a goal o.f acquiring and
rehabilitating 162 units. -Of these, the goal would be 100 elderly units, 60 family units, and 2 houses
• for shared housing for the rural hameless. Staff will proceed to put together packages that reflect
these goals. If possible, the family units would be two, three, and four bedroam units. As £ew three
and four bedroam units exist in the City, the possibility of rehabilitation of sr.ialler units to larger, will
be consinered, The units could be located anywhere within the City. However, consideration will
be given to neighborhoods where rehabilitation of units would have a positive impact on the
nE,iEhbortiood.
The i:ousing Authority has $513,716 from Community Development Block Grant for the acquisition
program. The ititial Uudget (Attactiment D) estimated $55,000 for the development team. To
accomplish the remaining duties (property acquisitioq legal, and financing), a building contractor and
the Board attorney will also have to be paid &om the budget. The original estimated $55,000 should
be sufficii:nt for persons to carry out these duties.
FYSCAL AND STAFF IMPACTSs Aftes paying the consuitant, $21,610 will remain in the development team budget and $480,326 ire
the total buclget. Stafftime will be required to meet with realtors to identify units and put together
the property packages.
RECOMMENDATION:
Staff recommends that the Board approve Jarnes D. Wiiliams as the financial consultant for the
properly acquisition program that includes 162 eldedly anii family units and authorize the Executive
~ Director to execute a contract in an amount not to exceed $33,390.
~
Housiwo AuTNORiTr ATTA,CHMENT A
STEPS IN A.CGU181TiON PRC9GliAM Chola andW;" Gn~y ' CanalBon's
611111- EHA EHA Nonpmflt Pmgram
Yei
s~ laaua 9onds
T~ ~~K (paupN opUOn)
~
Id~nn Pro ~etf
SoIat Ptolect
Fundfnq OpSkm
Owrnrth'sp .
onprofit a EH
Gqnduet Appraisats
ES gotlats Piopery
Ownars
' Hire Bond Proposal :o p~.{p, €nd aEnt
tru c4uro Bondo Counxl • TRlIFHA NO- dUK Urtderwriter ~p~ E~~hsYes
~ luua Bands
. , Hks
. . . Ren.e Project
Mwyx
Mx
Ownership SNI to
~ Document NonProTit Yes- NonProlk
~ w ENA
Process
'EHA
OWN$
Deeision Aseet Mqmt
E~ Yea Ei1A a Vq-a ConGae4
Datermine . Nonprofit
, StaM
~ Orpanization
~ Propsrry Nonptofit
TOmllnal EHA Ye~ ManEHA ent Yea Conttact
Oet~rtninn or NonproNt
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ATTACHIMENT A
STEPS IN THE ACQUISITION PROGRA►IVI
9. Hire consultant to wore with Housing Authority to ciarify undsrstanding of policy options
far ownership, asset management, and property managennent- housing authority vs.
private nonprofit agency. (CompPefed)
•
2. Hire development team to assist Housing staff.
A Financing
• Legal
• Rehabifitation contractor 1n later steps, the Author9ty will contrac4 for other functions, such as bond counsel,
underwriter, rehabilitation contractor, asset management and maryagement of units.
3. Contact San Dieguito Realtors Association and/or advertise for projects.
4. Identify projects and determine suitability. Fiealtors, with Housing .Authority staff
assistance, identifies well designed, quality projects to be acquired. Goal is 100 units for
elderly (one and finio bedroom units), 60 unifis for family (finro and three bedrooms), and two
houses for shared housing for the rural homeless. I
5. Prep°are several project packages for consideration of the Board. Each package will
be analyzed for financial feasibility, including cash flow projection§, rehabilitation costs,
potential relocation costs, rent structures and funding options with related costs. As part
of package, informatian will be provided nn management options, including asset
management and proRerty management so costs can be figured into project costs.
Ownership optior~s (housing authority vs private nanprofit agency) will also be. considered.
6. Hire appraisers/ other consultants.
7. Negotiate with owners. Determine acquisition terms. The acquisition deals are .
dependent on mortgage insurance or ofher financing restrictions. ~
8. Structure band financing. Hire remaining consul#ants for bond issuance, such as
underwriters and bond counsel. Staff will work with underwriter and bond counsel to
identify funding sources, rating of bonds, and term of bonds. Take package to TRI to
determine kind of FNA mortgage insurance. With firm FHa commitment, decide when to
isstie bonds.
9. 9ssue bonds, purchase propsrties. ,
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_ 10, Hire prajecfi manager to assis# staff with rehabiiitation.
~ 11. DatermiRe who will be resPonsible for asset mana9ement and ProPertY mana9ement
, ,
ifi not previously determined. Contract with asset nnanagers who would contract weth
' property managers.
A7TACWMENT B
DUTlES OF ACt1UISITION TEAM „
1. Propeety acquisitiAn services.
• Identify properties putting together several packages, (Rea/tor/stafo
r Conduct iniltiai feasibility studies, purchase and rehabilitatian budgets, property
management projections for each properky within package. (Financia/ Cansultant)
' • Negotiate for prQpert6es. .
• Examine properties for rehabilitation costs. (Building contracfor)
2. Legal services.
• Prepare purchase contract, escrow instructions. Assist in preparation of
necessary documents regarding acquisition, approvai of title insurance policies and
ather matters affecting ti#le. (Board Attorney)
~ d Prepars and provide legal work necessary in connection with preparation of
applications for federal assistance -FHA. (Financia/ Consu/tant
• Prepare and/dr review Gontracts with architects, appraisgrs, and similar,
consultants. (BAard Attorney)
3. Financing services. •
• Work with staff and real estate team to determine financial feasibility as it relates
to bond issuance and other financing aptions. (Financlal Consu/tanf) .
• Identify funding saurces, sucn as low incorne tax credits and FHA mortgage
insurance and assi5t with preparation of necessary application documents.
. (Financial Cansultant)
4. Bond Counsel
• Prepare all original bond issue resolutians.
• Prepare invitation to bidders and advertise notice. !f needed, prepare original
bond issue statement.
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• Prepare documents for settierrtent af the bond issue with bond underwriter.
are contract between Hausing Authoritgt and Pay6ng Agent/TrustQe, Insurers,
~ • PreR.
or Credlt Agencies.
, • Prepare the non-arbitrage bond certificate for original bond issue. -
0 Represent Hausing Authority at a!I meetings and proceedings regarding IegaO
upinions related to the issuanca of bnnds.
• Advise Housing Authority during the financial pianning stage regarding legal
matters related to the issuances of debt, including fiees to be collected, cost
reimbursements, agreements and au#hc+rizatiorrs to be requestad of Stafie and local
government.
5. Underwriter for bonds.
0 Sells bonds and prepares all related documents.
6. Rehabili#a4ion project manager.
• Oversee rehabilitation working with City an permits, architect on drawings, and
aonstruction contracfior5.
~ 7. Asset manager. • Ovarsee property management staff or contracts.
• Prepare budgets and monitor. Prepare reports for Board.
• Handle tenant complaints not resolved by property management.
8. Property management.
• Leasing, maintenance, and an site management.
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Bif Dt3ET
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Revenue (CPBG) $513,716
Expenses
Development Team 55,000
Band issuance 445,8715 ($7,000,000 bond)
underwrriter discount '
legal fees
underwriter, bond, .issuer
engineer/appraisal
accounta.ng
loan servicer trustee
closi.nq costs
credit enhancement
~ Rehabilitation Project Manager (part of project cost from
bonds)
Asset and property management (project cost)
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Jt111N SIGtYqY
„~CHAEL Da,Is ASSt)Ci:ATES
JAN&5 U. N'fI.L1A11N . . .
Septemaer 14, 1995
Sandra L, Halder Director oF Communiiy Develapment '
City af Encinitas '
SOS S. Vulcan Avenue
Encinitas, Califarnia 92024-3633 .
HO'USING ACQUISITION FaR EI.DERLY AND FAMILIES IN ENCINITAS
Dear Sandy; Based on nur recent discussion which outlined the proposed work program to allow the
~ Cit,y to prtsceed with thc acquisition of 160 existing housing units for the elderly and for
families in Encinitas I would propose the following scope of work to assist in the
acquisition activities with particular focus in the areas of finanoial feasibility analysis and
project 4'unding.
Definition of Acquisition G+uals .
It is critically important before the City begins acquiring housing units to define as
precisely as possible the parameters of what you want to buy. These parameters should
include:
• Location
• Size
• Physieal Condition
• Amenities
• Cost Elemeats •
Purchase Price Range
• Rehabilitation Cost Range j
Relocation Costs
• Required Rental Income Kanges j
;
The anticipated rental income ranges plus income assistance which may be available from j
other sources will control the arnount that the City is able to pay for the properties to be ~
~
I
/0
1601 RF.SC6NSE R0AD, $UITE 390, $ACRAMENTO. CA 95815 916.567.4280 TEL 916.567.1220 Fpx
1,1150 SAHT.YMoNicn P.i.vn. SUITE,2C!J._LOS.ANGELES. CA 90025 310.473,1457 Tei. 310.473.3962 Fpx
acquired. We well assist the Gity in determining rental incame fates and in establistung the
purchase price and rehabilitation Gost ranges prior to beginning pcoperty acqzaisition.
Y.ocateng Properties for Acquisition
Cities use various methods for acquiring properties including working through a single
real estate agency, working with a defined group of real estate a~gencies, or using city staff.
The dec'rsion is a cornbination of policy consideratians for each ;it.y aaid economic
considerations for the most effeGtive acquisition program. We will advise the City of
. Encinitas on the ecQnortiic considerations in determining the acquisition program to be
pursued.
Feasibiiity Anllysis for Acquisitions
When properties are presented to ihe City for purchase, an analysis of acquisitinn cost,
rehabilitation cost, relocation cost, rental income projections and operating costs rnust be
perforrned tcr determine whether the purchase is econnmically feasible. The determination
of rehabilitation cost wiil probably require an examinatian of the property to be acquired
by a qualified building contractor. Relocation costs can be evaluated by the City staff or
through the assistance of a consulting relocation specialist. The anticipated rental income
will be based partly on existing rental rates for the buiiding with adjustment for anticipated
rehabilitation icnprovements and on enarket rates in Encinitas. These cost and incame e9ements must be evaluated in a development and operating pro
forma which considers total acquisition and improvement costs for the property, annual
operating costs, and annual incame projections. From 4his infocmation the level of income
assistance required to allaw the rental ratey to meet the income requirements for the
elderly and for familie5 to be servsd by this program wili be determined. We will prepare
the feasibility analysis for each of the properties to be acquired. Economic models for this
form of analysis will be provided to the City at the beginning af the acquisition process to
insure that the City staff and other „~articipants ►n the acquisition process understand the
economic requirements of the acquisition program. '
Acquisition FinAncing
Borrowing the money necessary to accomplish the acquisition program through bond
issuance or other funding sources will require a preliminary analysis of the borrowing
capacity of the City for this program. The primary source of debt service payment will be
the rental income from the properties purchased with the secondary source being the
outside funding for rental income assistance, We will prepare a funding analysis tA
~
demonstrate the City's borrowing capacity with the pr6jected income sources and will
advise the City as to the best sources :ar acquisitinn financing.
City of Encinitas Housing Acquisition Program
2
~ The possibility of obtain'ng FHA mortgags insurance which cauld provide band coverage
~
requirements was discussed, Thc information developed in tfne project economic feasibiDity
analysis'dvill be used in dbtaining the mortgage insurance. We will prepare the application
ma#eriais for the FHA mortgage insurance with City staff assistance, if req,uired
Funding 5chedule
The acquisition of 160 housing units in Encinitas will prabably extend over rnore than one
year. As with private acquisition or development programs the amount of cash needed will
vara► with time, In other words, cash requirements will vary with the availability of housing
units and the total project funding requirement will be distributed over an extended time
period. A funding scheduie must be prepared to determine cash flow requirements for the
acquisition prngrasn> Based nn prograrn guidelines and acquisition goals we will prepare
that schedule,
Acquisition Negeteations
As you are aware from our wark on the Encinitas Ranch Project we have extensive
experience in negotiating property development and acquisition agreements. We will
provide such assistance as required.
Time AlEocation
At ttais time tbe number of housing units in each acquisition cannot be determined.
There may be a small number of acquisitions of larger hausing projects or a large number
of separate acquis'stions of relatively small projects. With a large nurnber of separate
acquisitions the time required for locating praperties, feasibility analysis and negotiation
increases signif cantly. There is attached a time allocation estimate with the minimum time
required for the project as well as the possible time required for a larger number of
prQperty acquisitians. The time required for acquisition negotiations is especialty difficult
to estimate sinc;e each acquisition varies greatly. If it is determined that the total project
time estimate will be exceed due to a large number of sepasate acquisitions or extended
negotiations the Staff will be advised immediately.
Cost for Services
Based on previous work with property acquisitions and assisted housing projects and the
attached time allocation estimate the estimated cost for the services outlined above would
range from $26,250 to $33,390 based on the foliowing hourly rate schedule:
~y-KT
~ Principal $125,00
City- of Encinitis Housing Acqussition Program
3
~ ~
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~ Associate $95.00
Word Processor $35.00
Clerical $25.00
Reimbursable Expenses Cos4 + 1 0%
SinGe each aaquisition wili require a separate feasibility analysis and negotiation the total
fee vaill depend on rhe number of separate acquisitinns required to reach 160 units. The
wark will be performed on a time and materials basis and no work will be performed
without specific authorization by the City staff.
Housing Project Experience
Shnuld yau wish to contact Cities for whom we have performed similar services the .
following persons are suggested:
Charles Coe
Community Development Director
City of Chino
(909) 591-9811
~ Charles Schaffer
Director of Planning and Development City of San Marcos
(619) 744-1050 ext. 3230 . Dan Joseph
Citu Manager
City of Mission Viejo
(714) 470-3051
We greatly appreciate this opportunity to work once again with the City of Encinitas.
Sincerely,
. James D. Williams
JDW:kb
City of Encinitas Housing Acquisition Program
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CITY OF ENCINITAS
HOUSING ACGIUISITION PROGRAM
TIME ALLOCATOON ESTIMATE
,
TASK LOW HIGH
ESTIMATE ESTlMATE
. (HOlJRS) (HOURS)
PRINCIPAL TIME
GOALS DEFINITION 10 10 .
ACQUISITION. LOCATION 30 40
FEASIBILITY ANALYS{S 70 85
ACQUISITION FINANCINi'a 50 50
FUNDING SCHEDULE 20 20
ACAUISI710N NECOTIATIDNS 20 50
70TAL HOUF#S 200 255
CLERICAL TINfE
CLERICAL FUNCTIOR-S 50 60
.
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