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Home My WebLink AboutR27- Economic Development Agency CITY OF SAN BERNARDINO ORIGINAL ECONOMIC DEVELOPMENT AGENCY FROM: Emil A.Marzullo SUBJECT: Agency Covenant Monitoring Quarterly Status Interim Executive Director Report for the Period Ending September 30, 2010 DATE: November 23,2010 ----------------------------------------------------- ---------------------------------- Synopsis of Previous Commission/Council/Committee Action(s): On November 4, 2010, Redevelopment Committee Members Johnson, Brinker and Alternate Shorett unanimously voted to recommend that the Community Development Commission consider this action for approval. ---R- c-Cmm ------ -- ----- --- --- ---------------------— ecommended Motion(s): (Community Development Commission) MOTION: That the Community Development Commission of the City of San Bernardino receive and file the Redevelopment Agency of the City of San Bernardino's Covenant Monitoring Quarterly Status Report for the Period Ending September 30,2010 Contact Person(s): Carey K.Jenkins Phone: (909)663-1044 Project Area(s): Ward(s): All Supporting Data Attached: Rl Staff Report❑Resolution(s)❑Agreement(s)/Connut(s) ❑Map(s)❑ Letter(s) FUNDING REQUIREMENTS: Amount: $ -0- Source: N/A Budget Authority: N/A Signature: 6K Fiscal Review: Emil A. arzu o, nterim Executive Director Lori Pan mo- ' ery,Int n Cl]i Financial Officer Commission/Council Notes: C� P:V,ge Ton Dev Commission\CDC 201M12-0 10RSG Cow=tMonitoringQ Cly Report SR.dW COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: ka 7 4014agautf'e ECONOMIC DEVELOPMENT AGENCY STAFF REPORT AGENCY COVENANT MONITORING QUARTERLY STATUS REPORT FOR THE PERIOD ENDING SEPTEMBER 30,2010 BACKGROUND: On January 4, 2010, the Community Development Commission of the City of San Bernardino ("Commission") approved a professional services agreement ("Agreement") by and between the Redevelopment Agency of the City of San Bernardino ("Agency") and Rosenow Spevacek Group, Inc. ("RSG"), in support of key program and compliance monitoring functions under the Agency's Neighborhood Stabilization Program ("NSP") and other Agency financed housing projects. Such an agreement would serve as a means to ensure proper administration of the Agency's existing and future housing covenant agreements. RSG was ultimately awarded the contract through a competitive request for proposals("RFP")process. Their contract award was based on RSG's demonstrated history of effectively providing these services, their competitive cost proposal, and their clear understanding of the monitoring requirements associated with NSP and the various housing programs included in the Agency's current Integrated Housing Strategy. The scope of services included within the RSG agreement includes: 1. Screening applicants in accordance with the Agency's various housing programs to ensure compliance with the applicable funding source and other U.S. Department of Housing and Urban Development("HUD") and/or Housing Set-aside Fund eligibility requirements. 2. Determining the status of project compliance with resident income limits pursuant to the program/regulatory agreement requirements. 3. Providing on-going monitoring of income eligibility on an annual basis for residents participating in the Agency's various housing programs. 4. Verifying compliance with owner occupancy requirements. 5. Preparing affidavits that require owners to affirm continued compliance with provisions of the promissory note and applicable covenant agreement. 6. Reporting any findings of non-compliance to the program participants and the Agency. 7. Researching property ownership when ownership changes and determine how this affects Agency programmatic and security interests. 8. Providing detailed recommendations to the Agency to remedy any programmatic and/or monetary events of default incurred by program participants and executing those recommendations. P:\ VMas\Comm Dev Commission\CDC 2010\12 10RSG Cov nt Monitoring Qo ffly Report SR.doc COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: t2� Economic Development Agency Staff Report RSG Covenant Monitoring Quarterly Report Page 2 9. Reviewing owner income determinations to ensure compliance pursuant to the program/regulatory agreement requirements. 10. Gathering documents, maintaining project information electronically and transmitting information in the form of a comprehensive report to the Agency on a quarterly basis. Based on an initial review by RSG, the Agency housing covenants can be generally grouped into three (3) separate categories and include: inclusionary housing units, non-inclusionary housing units and NSP funded housing units which are considered a subset of the inclusionary housing units. Inclusionary units, as it relates to California Redevelopment Law ("CRL"), are linked to redevelopment project areas adopted or amended after 1975. Under CRL,there is a requirement that at least 15% of all new and substantially rehabilitated dwelling units built within the project area must be available at an affordable housing cost to, and occupied by, persons and families of low or moderate income (Health & Safety Code Section 33413). Additionally, at least 40% of these dwelling units are required to be available at an affordable housing cost and occupied by persons and families who are considered very low-income. Projects developed under the 15% requirement are to remain at an affordable housing cost and must continue to be occupied by very low(50% of Area Medium Income ("AMI")), low income (80% AMI) and moderate-income (120% AMI) persons and families for at least 55 years for rental units and 45 years for owner-occupied units. In order to meet this requirement of CRL, the Agency implements the inclusionary housing requirement through a covenant agreement that is entered into by the Agency and the property owner which is recorded against the land. Depending on the housing type — multifamily rental or single family homeownership—the covenants remain in effect for a period of 45 years or 55 years. Certain examples of Agency programs that utilize covenants that meet the inclusionary requirement include all of the dwelling units rehabilitated under the NSP, large scale senior and multifamily properties developed through the Agency's Notice of Funding Availability ("NOFA") and certain single family residential down payment assistance loans. In addition to the portfolio of inclusionary housing covenants, the Agency also maintains non- inclusionary covenants. These are typically covenants that do not meet 45-year or 55-year time commitments of inclusionary covenants and/or only address specific maintenance issues of the property in question as is the case with the Agency's single family beautification grant and rehabilitation loan programs. CURRENT ISSUE: For the period ending September 30, 2010, the Agency identified up to 202 inclusionary housing units, 35 NSP inclusionary housing units and 995 non-inclusionary housing units. The following highlights the specific status of each of these categories of covenants. P.\Agendas\Comm De Commi"ion\CDC 2010\12-0610 RSG Covenant Monitoring Qu erly Report SRdoc COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: �� Economic Development Agency Staff Report RSG Covenant Monitoring Quarterly Report Page 3 Inclusionary Units: Thus far, 64 covenants have been retrieved, scanned and placed under active monitoring with RSG. The remaining 138 covenants still need to be retrieved from Agency files or obtained through a public records search through a title company. As they become available these covenants will be scanned and forwarded to RSG for monitoring purposes. Based on an initial review of the 202 inclusionary covenants, 12 have expired and 1 will expired in 2011. In addition to identifying, documenting and maintaining the active covenants, the Agency and RSG will need to coordinate efforts to confirm authenticity of home ownership and compliance with all covenant terms and conditions. This will constitute the main focus of the monitoring effort that will take place during the remainder of the fiscal year(through June 30, 2011). Inventory of Inclusionary t, ovenants Through September 30, Total Covenants Covenants Expired Covenants Retrieved TBD To Expire In 2011 202 64 138 12 1 NSP Inclusionary Units: For the reporting period ending September 30, 2010, the Agency has recorded 35 separate covenants under the NSP Program which constitutes the single family residential component of the Program. From this total, 33 of the properties were funded by NSP with the remaining 2 funded by redevelopment agency low and moderate income housing set aside funds (Low-Mod Housing Funds). The decision to use Low-Mod Housing Funds within the context of the overall NSP Program was due to the fact that though these 2 properties were previously foreclosed, they fell outside of the NSP target zone approved by HUD. From the perspective of the Agency, NSP activities are considered city-wide in scope. Those properties that fall outside of the HUD designated target zone but otherwise follow the NSP criteria for acquisition and disposition will be acquired utilizing Low-Mod Housing Funds. As NSP activities evolve, the Agency anticipates acquiring more properties utilizing Low-Mod Housing Funds. Under the Agency's NSP component that addresses households at 50% of the area median income (AMI), there are 10 separate properties that have recorded covenants against them. However, these covenants were recorded after the reporting period and will show up on the Agency's list of covenants for the period ending December 31, 2010. Total NSP SFR Low-Mod SFR NSP Low-Mod 50% Covenants Funded Funded 50%AMI AMI 35 33 2 0 0 --------------------------------------------------------------------------------- -- -- --- PW,,ndu\CommNeCommieeioTM 2010\12- 10 MGC..MM..it.ngQ=m JyR.,ASKd COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: a27 Economic Development Agency Staff Report RSG Covenant Monitoring Quarterly Report Page 4 Non-Inclusionary Units: The total number of non-inclusionary housing units identified thus far is 995. Further analysis shows that 296 of these units have verified and recorded covenants against them, all of which have expired. The remaining 699 covenants are in the process of being retrieved and forwarded to RSG for monitoring purposes. It is anticipated the data transfer process to RSG will be completed by the December 31,2010 reporting period. Inventory of Non-Inclusionag. 4 wants Through Sep tember 30,2010 Total Covenants Expired Covenants Covenants Retrieved TBD 995 296 699 296 Please note this report constitutes the first attempt to identify, categorize and manage the Agency's portfolio of housing covenants. As more covenants are identified or new ones placed into service, this list will expand. Conversely, as the Agency, working in conjunction with RSG, determines that existing covenants are no longer in effect they will be removed and not counted towards the overall portfolio. Through the end of the calendar year, the Agency and RSG will work on the following monitoring activities: • Continue to retrieve and forward active covenants to RSG for reporting and management purposes. • Identify those covenants that are no longer in effect, purge them from the Agency's system and remove them as a lien against the property in question. • Initiate verification of owner compliance with the Agency covenants through mailings and spot site visits. • Update the Agency's list of inclusionary housing covenants and post them on the Agency's website as required pursuant to Section 33418 of the California Health& Safety Code. ENVIRONMENTAL IMPACT: This does not meet the definition of a "project" under Section 15378 of the California Environmental Quality Act ("CEQA"), which states that a "Project" means the whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. PAAgendu\Comm Dev Commission\CDC 2010\12A 10 RSG C..t Monitoring Quarterly Report SR Mc COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: _027 Economic Development Agency Staff Report RSG Covenant Monitoring Quarterly Report Page 5 FISCAL IMPACT: None. RECOMMENDATION: That the Community Development Commission adopt the attached Motion. Emil A. Marzullo, Interim Kirecutivie Director I P:WgendasTomm De Commission\CDC 201012-06-10 RSG Co MMonitoring Quwt yReport SR.dm COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: 21