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HomeMy WebLinkAbout05-Community Development C1Tt, OF SAN BI!RNARDleP - REQU~T FOR COUNCIL AC~N From: KENNETH J. HENDERSON, DIRECTOR Subject: VETERAN I S ALCOHOL REHA8ILITATION PROGRAM (VARP) Dept: COMMUNITY DEVELOPMENT:EC'O.-ADMIN. OFF.' Date: March 12, 1987 J967 MAR 12 PM 2: 23 pft7)- Synopsis of Previous Council ection: In June 1986. the Mayor and Common Council approved $50,000 in CDBG funds as a rehabilitation loan. Recommendld motion: That the Mayor and Common Council approve a change in the purpose of the VARP CDBG loan from rehabilitation to acquisition, direct the City Attorney to prepare an appropriate loan agreement and direct that loan proceeds not be disbursed until VARP has been issued a Certificate of Occupancy by the Department of Building and Safety, ~ G.~"'1 Contect pinon: Ken Henderson/Nestor Nazari 0 Phonal 5065 2 Supportl", dati atteched: Staff Report Ward: FUNDING REQUIREMENTS: Amount: N/A Source: (ACCT. NO.) (ACCT. DESCRIPTION) Finance: CouncH NoIII: n.al.' Agenda Item No. ~ · 'CICt OF SAN BERNARDOO - REQUIIOT FOR COUNCIL AC:ION STAFF REPORT In June, 1986, the Mayor and Common Council approved a CDBG rehabili- tation loan to the Veteran's Alcohol Rehabilitation Program, Inc., (VARP) for a term of twenty (20) years and at an interest rate of not less than five percent (5%). For a number of reasons it was not until the latter part of November 1986 that VARP staff began to submit appropriate documentation allowing loan processing to go forward. Over the last several months staff has been meeting with VARP representatives in order to resolve issues relating to an appraisal of the Gibson House, property taxes, title problems, the applicability of Davis-Bacon wages and the scope of work to be performed, On March 6, 1987, Community Development staff and Senior Assistant City Attorney Allen R, Briggs met with David McKenna, Public Defender and VARP board member, Brian Simpson, Attorney and VARP legal counsel and Ted McMorran, VARP Executive Director (a letter summarizing the meeting and a subsequent conversation is attached hereto), The purpose of the meeting was to discuss those items of concern noted above and expedite, to the extent possible, the processing and closing of the CDBG rehabilitation loan. Prior to the conclusion of the meeting, staff and VARP representa- tives discussed the feasibility of changing the purpose of the loan from rehabilitation to acquisition. Such a change would avoid problems associated with rehabilitation of a building where privately financed construction activities are ongoing, the payment of prevailing wage rates, and the scope of work, The VARP representa- tives agreed to contact staff early the week of March 9, 1987, On March 10, 1987, I received a call from Brian Simpson, VARP legal counsel, regarding the above. Based upon that conversation, we agreed that staff would recommend to the Mayor and Common Council a change in the purpose of the loan from rehabilitation to acquisition, The proposed loan agreement would be developed as follows: 1. Mr. Mel Harris would have a first deed of trust on the property with the City in second position, The sum of the first and second trust deeds would not exceed eighty percent (80%) of the appraised value of $320,000 or $256,000, This means Mr, Harris' first deed of trust could not exceed $206,000, given the fact the City loan is for $50,000 (Mr. Harris would also have a third trust deed on the property) , 2. The acquisition loan proceeds would not be disbursed until such time as the Department of Building and Safety issued to VARP a Certificate of Occupancy, 3. The term of the loan would be twenty (20) years with interest assessed at not less than five percent (5%) per annum. 3/12/87 75-02&4 o. o o o Staff recommends adoption of the form motion which would change the purpose of the loan from rehabilitation to acquisition, direct the City Attorney to prepare a loan agreement and direct that loan proceeds not be disbursed until VARP has been issued a Certificate of Occupancy by the Department of Building and Safety. L~G.~ Kenneth J. Henderson Director of Community Development KJH/lab/01l8 3/12/87 o. o o o ~ - ERN ARDIN 0 3llO NORTH HD" STREET. SAN BERNARDINO. CAUFORNIA 82418 RAYMOND D. SCHWEITZER ACT'''' CITY ADMINtaTIIATOII March 10, 1987 Mr. Ted McMorran Veterans Alcohol Rehabilitation Program (VARP) 907 Mest Rialto Avenue Ban Bernardino, California 92410 Rea STATUS FOR OF CDBG LOAN APPLICATION RELATIVE TO THE GIBSON HOUSE LOCATED AT 1100 .NORTH -D- STREET Dear Mr. McMorrana This letter is pursuant to the meeting held with David McKenna, VARP board member, Brian Simpson, VARP legal counsel, yourself and Community Development staff on March 6, 1987. The purpose of the meeting was to clarify the status of the above referenced project and address the issues pertaining to Davis-Bacon, property taxes, appraisal and Description of Work to be Performed. The following brief explanations, on the items of concern, should assist VARP staff in determining what direction to take in going forward with the project: a) Davis Bacon Act -- As previously stated, it is the opinion of the Department of Housing and Urban Development (HUD) that Prevailing Wage regulations will be applicable to the proposed rehabilitation loan of $50,000. However, subject to Council's approval, should the loan request be processed as acquisition and/or purchase of materials, Davis-Bacon ~ not be applicable. b) Prooertv Taxes -- Delinquent taxes (as described in staff's letter dated January 19, 1987) for fiscal years 1985/1986 and 1986/1987 still have not been satisfied in accordance with First American Preliminary Title Report. Evidence of payment should be submitted as soon as possible. o o o o c) Aooraisal -- The appraisal fee of $500.00 is currently outstanding, The invoice was forwarded on February 12, 1987 and should be paid as soon as possible. It should also be noted that the appraiser, Gerald O. Stafford, has expressed concern -by the lack of detailed specifications for the completion of the remodeling work. The property's resale value will be substantially lower than that estimated as if complete, i.e., three-hundred, twenty thousand dollars ($320,000).- d) Descriotion of Work to be Performed -- Please be advised that staff will be available when you meet with Building and Safety and Fire Departments in order to identify specific requirements, such as panic hardware doors, fire extinquishers and alarm systems~ According to staff's rough estimate, the doors alone are valued at seventeen thousand dollars ($17,000) e) Nature of CDBG Assistance -- At our March 6, 1987 meeting, there was considerable discussion regarding whether the CDBG assistance should be for rehabilitation of the Gibson House, as originally approved by the Mayor and Common Council, or for acauisition of the property in question. Today, I received a call from Brian Simpson, VARP legal counsel, requesting that the rehabilitation loan be changed to an acquisition loan as followsl Mel Harris would be in first position and the City would be in second position. The total of the first and second trust deeds would not exceed eighty percent (80') of the appraised value ($320,000) of the property. Mr. Harris would also have a third deed of trust on the property. An item will be placed on the March 23, 1987 Mayor and Common Council agenda requesting a change in the nature of the assistance as described above and directing the City Attorney to prepare a loan agreement. The loan agreement would be placed on the agenda of the Mayor and Common Council for its April 6, 1987 meeting. Pinally, please note that staff will proceed with the project as described in item (e) above. Please provide this office with official correspondence confirming Mr. simpons's request. Please call me or Nestor Nazario at 714/383-5065 if you require additional information or clarification. St:::;.lY, Kenneth ~: ~n Director of Community Development CCI VARP Board of Directors Mayor Wilcox Ray Schweitzer, City Administrator Allen Briggs, Sr. Assistant City Attorney Nestor Nazario, Rehabilitation Coordinator Chron Pile Client File lUlI/BN/lab/0115 I' I I I I I I I I t I I I I , , I I o. o o GrOSS Income: .3,225 x 12 Less 5~ Vacancy and collection Allowance Effective Gross Income Less Expenses Estimated . 25~ of Gross Net Annusl Income Indicated Property Value = '27,090 divided by an Overall Capitalization Rate of 9~ = . 301,000.00 CORRBLATION AND VALUE CONCLUSION: The fore,oin, analyses indicate a value ran,e for the subject property, as if the proposed remodel in, were complete, of '301,000 to '358,000, The Cost Approach directly measures the specific attributes of the property and would tend to be a reliable indicator to a potential purchaser who could fully utilize the property as desi,ned, The Market Data and Income Approaches tend to more accurately reflect the economic conditions in the area and also reco,nize thst the specific attributes and desi,n of the sub- Ject improvements may not appeal to buyers in ,eneral, Speoi- fically, the swimmin, pool and cabana area would tend to con- tribute little, if any, value to an alternate user of the prop- erty. My opinion of the Fair Market Value of the subject if the proposed remodel in, project were complete, of: property, as is the sum THREE HUNDRED TWENTY THOUSAND ('320,000) DOLLARS This value opinion is for the unencumbered fee simple interest in the property as if in a completed state as of my January 20, 1187 inspeotion date. It should be noted that this report does not constitute a full and complete appraisal of the subject property and should not be construed as a formal appraisal. The estimated market value is based on the knowled,e of the undersi,ned and a limited review of market indicators in the ,eneral area. The information and analyses contained in this report would not meet the requirements of a conventional lender under Re,ulation R41C, recently issued by the Federal HOlle Loan Bank Board, Such a report, however, could not be completed without a lIore detailed set of plans and specifications. In addition, such a report would be very tille consumin, and costly. ~~..--.-~. .,' .... ".. .' o. ~ t , I j I I I I I I I I . ....... -. ..... - JI ~ o o o This repor~ waa reques~ed aa a seneral review of marke~ . ca~ora ~o de~ermine an approxima~e value level for ~he prop~ as securi~y for a loan ~o comple~e ~he propoaed remodel ins pro jec~. Althoush I am comfor~able with the value level' estimatee. I am atill bothered by the lack of detailed specifications for completion of the remodelins work. If I were in the poai~ion of a lender I would alao be very concerned about ~he remainins coat of completion. If foreclosure became necessary and the property were atill in an incomplete state, its resale value would tend to be aubstantially lower than that eatimated as if complete. The market tends to penalize properties in need of repairs at an amount substantially .reater than the coat of performin. such repair work. I truet the information, analyses and conclusions contained in this report will meet your current needs in makin. a decision concernin. this matter, Specific sales and lease data relied on has not been cited in this report but is available in my files should you wish to review that information. Respectfully submitted, ~ ~5t?P Gerald 0, Stafford Real Estate Appraiser GOS/dms t'