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HomeMy WebLinkAbout08 COOP AGMNT W/OC MORT CREDIT CERT PROGRAM 05-19-09_.:,,,,r Agenda Item $ r' ~~ ~ AGENDA REPORT Reviewed: ~~ ~ City Manager <~~ ~ Finance Director ~~ MEETING DATE: May 19, 2009 TO: WILLIAM A. HUSTON, CITY MANAGER FROM: REDEVELOPMENT AGENCY STAFF SUBJECT: PARTICIPATION UNDER THE COUNTY OF ORANGE APPLICATION FOR ALLOCATION OF 2009 MORTGAGE CREDIT CERTIFICATES SUMMARY: Approval is requested for the City of Tustin's participation in the Mortgage Credit Certificate (MCC) Program administered by the County of Orange under the County's application for a federal allocation of $20,507,852 for the 2009 MCC Program. RECOMMENDATION 1. It is recommended that the City Council: a. Authorize the City Manager to enter into a Cooperative Agreement with the County of Orange for participation in the 2009 Mortgage Credit Certificate Program, subject to City Attorney approval of the Cooperative Agreement as to form, and; b. Authorize the City Manager, or his designee on behalf of the City to take such steps and execute such additional documents as may be necessary to support the County's submission to the California Debt Limit Allocation Committee (CDLAC) on behalf of participating cities and unincorporated areas in the County fora $20,507,852 allocation for the County's issuance of mortgage credit certificates; and 2. It recommended that the Tustin Community Redevelopment Agency include $15,000 in the FY 2009-2010 RDA Budget to cover administrative costs associated with the City's participation in the MCC program. Given income limits for the MCC Program which are higher than permitted under California Redevelopment Law for use of Housing Set Aside Funds, costs would need to be allocated to the Agency's 80% tax increment accounts as follows: $5,000 to 52- 600-6990; $5,000 to 55-600-6990, and; $5,000 to 58-600-6990. FISCAL IMPACT: The County has estimated that the maximum cost to the City for the administration of the Agenda Report Participation under the County of Orange Mortgage Credit Certificate Program May 19, 2009 Page 2 MCC Program through the County of Orange would be $15,000. It is recommended that these program costs be borne by the Redevelopment Agency rather than the General Fund with City's marketing of the MCC Program consequentially needing to occur in RDA Project Areas. BACKGROUND: The Mortgage Credit Certificate ("MCC") Program was originally authorized by Congress in the Tax Reform Act of 1984. It provides assistance to first-time homebuyers in the purchase of owner-occupied single family homes, duplexes, townhomes, and condominiums. The 2009 MCC Program would provide income eligible buyers with an opportunity to reduce the amount of federal income tax otherwise due by an amount equal to 20% of the mortgage interest payments as a dollar for dollar credit. The remaining 80% may be taken as the usual allowable deduction on Schedule A of the Federal Tax return. The result increases the household's overall income and ability to qualify for a mortgage loan. Certificate holders receive the tax credit each year that they reside in the property. The County is proposing to make the 2009 allocation available to homebuyers countywide on a first-come, first-served basis rather than appropriating the allocation among the 29 participating cities and unincorporated areas, to the extent that the County receives allocations for the program from CDLAC. Administration costs would only apply to the number of actual program participants. The Agency will be billed by the County based upon the Agency's pro-rata share of total administrative costs. The pro-rata share is based on the amount of the MCC allocation used by the City to the total amount used by the County and other cities participating in the MCC Program countywide as a whole. The County projects that the estimated administrative costs allocated to the City would not exceed $15,000. The Certificates can be used by purchasers of both existing and new homes, at maximum purchase price limits of $864,177 in Non-Target Areas and up to $1,056,216 in Target Areas with Maximum Income Limits not to exceed $111,600 for a One or Two Person Household and $130,200 for a Three or More Person Household. Target Areas are designated by the U.S. Department of Housing and Urban Development ("HUD") and the U.S. Treasury Department to encourage economic growth. They will be defined by census tract as well as other criteria. At this preliminary point, the Target Areas have not yet been specifically identified for Tustin. Individuals who purchase a home under the MCC Program in a Target Area benefit in a number of ways: Their annual income can be higher than purchasers of homes in Non-Target Areas; Agenda Report Participation under the County of Orange Mortgage Credit Certificate Program May 19, 2009 Page 3 They can purchase a home under the program at a higher price within the Target Area than MCC Program homebuyers purchasing homes outside a Target Area; and • They do not have to meet the definition of a first-time homebuyer, someone who has not had ownership interest in a principal residence at any time within the last three years. The primary responsibility for program administration is the County of Orange. The County's contractor, Urban Futures, Inc. will process all allocation requests by individual homebuyers and each city will be credited accordingly. The primary responsibility of the Agency is to market the program and direct applicants to Urban Futures, Inc. for pre- qualifying and processing. The Agency will have no other administrative obligations under this program. Christine Shingle on Assistant City Mana berly Manager Jerry Ci Redeve Manager Attachments COUNTY OF ORANGE MORTGAGE CREDIT CERTIFICATE PROGRAM COOPERATIVE AGREEMENT BETWEEN THE COUNTY OF ORANGE AND THE CITY OF TUSTIN THIS COOPERATIVE AGREEMENT (the "Cooperative Agreement") is hereby made and entered into as of this day of 2009, by and between the County of Orange, California, (the "County") and the City of (the "City"). WITNESSETH WHEREAS, the County has determined to engage in a mortgage credit certificate program (the "Program") pursuant to Part 5 of Division 31 of the Health and Safety Code of the State of California (the "Act") in connection with the construction and acquisition of homes in the County, all as provided for in said Act; and WHEREAS, the County has determined to finance the Program by the issuance of mortgage credit certificates as authorized by the Internal Revenue Code of 1986 (the "Code"); and WHEREAS, the County, pursuant to the Act, has established the Program, and has determined to cooperate with the City pursuant to the Act and in the exercise of its powers under the Act for purposes of the Program; and WHEREAS, the City has adopted the Program and determined to cooperate with the County pursuant to the Act in the exercise of their powers under the Act for the purposes of the Program; NOW, THEREFORE, in consideration of the mutual covenants hereinafter provided, the parties hereto agree as follows: SECTION 1. The words and phrases of this Cooperative Agreement shall, for all purposes hereof unless otherwise defined herein, have the same meanings assigned to such words and phrases in the Act. SECTION 2. The County agrees to use its best efforts to undertake the Program and to issue mortgage credit certificates therefore pursuant to the Act and the Code from time to time to the extent that the County receives allocations from the California Debt Limit Allocation Committee ("CDLAC"). SECTION 3. The City represents and warrants to the County that: (i) the City has heretofore adopted a general plan for the City in conformance with the provisions of the Planning Zoning Law of the State of California (Government Code Sections 6500 et sec .), (ii) said general plan includes a land use element and a housing element as required by Government Code Section 65302, and (iii) the Program complies with said land use element and housing element. SECTION 4. The City agrees that the County may issue mortgage credit certificates under the Program, as specifically set forth in the Act and the Code, with respect to property located within the geographic boundaries of the City and further agrees that the County may exercise any or all of the City's powers for the purpose of issuing mortgage credit certificates pursuant to the Act and the Code with respect to property located within the geographic boundaries of the City. SECTION 5. The City agrees to make any deposit required by CDLAC for an application for a mortgage credit certificate allocation. The City further agrees to pay within 45 days after invoiced by the County its proportionate share (based upon the number of County wide participants in the Program) of administration costs applicable to any allocation received from CDLAC, which total City share is estimated not to exceed $15,000. SECTION 6. The City agrees to undertake such further proceedings or actions as may be necessary in order to carry out the terms and the intent of this Cooperative Agreement. SECTION 7. Nothing in this Cooperative Agreement shall prevent the County from entering into one or more agreements with other public bodies and political subdivisions within the County, if deemed necessary and advisable to do so by the County. SECTION 8. This Cooperative Agreement maybe amended by one or more supplemental agreements executed by the County and the City at any time, except that no such amendment or supplement shall be made which shall adversely affect the rights of the owners of any mortgage credit certificates issued by the County in connection with the Program. SECTION 9. This Cooperative Agreement shall expire and be of no further force and effect upon the written agreement of the parties hereto, provided that termination of this Cooperative Agreement shall not adversely affect the rights of the owners of any mortgage credit certificates issued by the County in connection with the Program. 2 IN WITNESSS WHREOF, the parties hereto have caused this Cooperative Agreement to be executed and attested by their proper officers duly authorized, and their official seals to be hereto affixed, all as of the date first above written. APPROVED AS TO FORM: NICHOLAS CHRISOS COUNTY COUNSEL By: Dated: Deputy County Counsel COUNTY OF ORANGE By: Public Finance Manager APPROVED AS TO FORM: CITY OF TUSTIN By: City Attorney (SEAL) ATTEST: City Clerk By: 3 William Huston City Manager