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HomeMy WebLinkAbout16 AMENDMENT NO. 2 TO REIMBURSEMENT AGMT FOR MCAS TUSTIN REDEVELOPMENT PROJECT AFFORDABLE HOUSING OBLIGATIONSi A enda Item 16 AGENDA REPORT Reviewed: _. Finance Director MEETING DATE: TO: HONORABLE MAYOR AND COUNCIL MEMBERS VIA: DAVID C. BIGGS, AGENCY EXECUTIVE DIRECTOR & CITY MANAGER FROM: CHRISTINE SHINGLETON, ASSISTANT CITY MANAGER SUBJECT: SECOND AMENDMENT TO THE REIMBURSEMENT AGREEMENT FOR MCAS TUSTIN REDEVELOPMENT PROJECT AFFORDABLE HOUSING OBLIGATIONS SUMMARY The proposed Second Amendment to the Reimbursement Agreement will clarify funding assistance for development of affordable housing units within the MCAS Tustin Redevelopment Project Area. RECOMMENDATION It is recommended that the Tustin Community Redevelopment Agency ("Agency") and City Council, by minute motion, each authorize the execution by the Chairman of the Agency and Mayor of a "Second Amendment to the Reimbursement Agreement Between the City of Tustin and Tustin Community Redevelopment Agency Related to Affordable Housing Responsibilities To Be Assumed by the Agency' ("Second Amendment"). FISCAL IMPACT As was the case with the original Reimbursement Agreement and a First Amendment (collectively, the Reimbursement Agreement), funding under the Second Amendment would be made from net tax increment revenues from the MCAS Tustin Project Area and from the Agency's low and moderate income Housing Set-Aside deposits from the Town Center and South Central Project Areas (since there are resolutions adopted for City-wide benefit) as determined by the Agency and Director of Finance through the annual budget process. Any indebtedness of the Agency under the Reimbursement Agreement and Second Amendment shall be subordinate to the rights of the holder or City Council /Agency Report February 1, 2011 Second Amendment to Reimbursement Agreement Page 2 holder of any existing bonds, notes or other instruments of indebtedness (all referred to as "indebtedness") of the Agency incurred or issued to finance the Redevelopment Project Areas. With any payments from the Agency to the City as a result of any City Housing Subsidies, there would be a positive impact on the General Fund. BACKGROUND On June 5, 2007, the Tustin City Council and Tustin Community Redevelopment Agency approved and authorized the execution of a "Reimbursement Agreement Between the City of Tustin and the Tustin Community Redevelopment Agency Related to Affordable Housing Responsibilities To Be Assumed by the Agency on June 5, 2005" (the "Original Reimbursement AgreemenY') to assist the Agency in carrying out its affordable housing obligations under the MCAS Tustin Redevelopment Plan. On January 5, 2010, the Agency approved and authorized the execution of a First Amendment to the Reimbursement Agreement. Required Housing Obligations The City of Tustin approved the MCAS Reuse/Specific Plan on February 3, 2003, as subsequently amended, and the City and Agency approved the MCAS Tustin Redevelopment Plan on June 16, 2003. The Reuse/Specific Plan and the Redevelopment Plan specify the number of affordable housing units to be produced within the Project Area. Under the California Health and Safety Code, Section 33000, et.seq. (California Community Redevelopment Law, the "CRL"), at least 15% of all new and substantially rehabilitated dwelling units developed within a project area are required to be made available at an affordable housing cost to and occupied by person and families of low- or moderate-income with not less than the 40% of the total required dwelling units to be affordable to very-low income households. Affordable dwelling units produced in a project area must remain affordable for a period of at least 45 years for for-sale unit and 55 years for rental units. In addition, the CRL requires not less than 20% of the tax increment revenues in a project area be deposited into aLow- and Moderate-Income Housing Set-Aside Fund, which may only be expended for affordable housing purposes. Both the above requirements under the CRL must be met every 10 years during the period of the Redevelopment Plan. The ten-year production and expenditure requirements under the CRL put a high financial burden on redevelopment agencies such as Tustin which have new project areas that have a high number of new dwelling units being developed during the early years of the Plan. There is insufficient tax increment revenue in the MCAS-Tustin Project Area's early years for the Agency to make subsidies available to developers at the levels that would permit the development of the affordable housing on an City Council /Agency Report February 1, 2011 Second Amendment to Reimbursement Agreement Page 3 economically feasible basis. In order to assist the Agency in meeting its affordable housing obligations in the MCAS Tustin Project Area, the City of Tustin has or will enter into agreements to sell property at a discount sufficient to permit developers to economically develop the required number of affordable housing units and has already encumbered the sale of certain properties and units with covenants, promissory notes and deeds of trust to ensure maintaining the affordability of those units in accordance with the CRL. To date, a total of 118 affordable housing units have been produced on property originally owned by the City and sold to John Laing Homes. The affordable housing units are located at Tustin Fields I & II and are comprised of 33 Very Low-Income, 23 Low-Income, and 62 Moderate-Income units, which are secured by promissory notes and deeds of trusts by the City which reflected a total value associated with production of the affordable housing units of $46,407,736, with interest to the Agency. Approximately Thirty Million ($30,014,559) of this obligation has been paid to the City and the Agency as of the start of Fiscal Year 2011-12, retained a balance owed of $16,393,177. Unfortunately, required Inclusionary Housing Requirements of the MCAS Tustin Redevelopment Project and MCAS Tustin Specific Plan, which originate from California Redevelopment Law and also the allocation to Tustin of required affordable housing units under the Regional Housing Allocation Model, require the future construction of four hundred and fifty three (453) additional affordable housing units within the MCAS Tustin Project. Of the four hundred and fifty three (453) additional affordable housing units, one hundred and twenty six (126) will be restricted under Housing Inclusionary Requirements to Very Low Income Households, ninety five (95) to Very Low Income Households, and two hundred and thirty two (232) to Moderate Income Households. The City's Affordability Subsidy for these additional affordable housing units is estimated at $195,658,760 based on the Affordable Subsidies within the MCAS Tustin project incurred to date (average Housing Subsidy Cost to produce affordable units at $420,568 for a Very Low Income Unit, $374,902 for a Low Income Unit, and $230,693 for a Moderate Income Unit). Given the large anticipated Affordable Housing Inclusionary Requirements, an amendment to the Reimbursement Agreement is critical in order for the City and Agency to meet its affordable housing obligations and will permit the City to be reimbursed for any Housing Subsidy and right-down of land value necessary to carry out the Redevelopment Plan, including the production of affordable housing units. The Agency may reimburse the City from tax increment generated by the Project Area and from its Housing Set-Aside Funds as allowed under the CRL. Since the City and Agency have adopted resolutions finding that the affordable housing units at MCAS Tustin benefit not just the MCAS Tustin Project Area but also the Town Center and City Council /Agency Report February 1, 2011 Second Amendment to Reimbursement Agreement Page 4 South Central Project Area, reimbursement may come from the Housing Set-Aside Fund for all three project areas as was identified in the Original Agreement staff report to City Council dated June 5, 2007. The Original Agreement also included terms of the City's assistance and the Agency's obligations, which allows for flexibility regarding when periodic payments may be made by the Agency to the extent that funds are available to the Agency for such purpose. The Agreement will allow the Agency to reimburse the City to cover both sales of properties occurring prior to approval of the Original Reimbursement Agreement as well as those made afterward and up to the revised estimate for meeting the MCAS Tustin affordable housing obligations. Conclusion Some minor clarifying amendments to the original Reimbursement Agreement and the First Amendment, in the form of a Second Amendment is recommended to make the more explicitly clear the Agency's reimbursement intentions and what the Agency's full financial exposure may be. A copy of the Second Amendment is attached for approval by the Agency and City Council. The proposed action is consistent with the MCAS Tustin Redevelopment Project Area Five Year Implementation Plan as well as the South Central and Town Center Fourth Five Year Implementation Plan, each which considered the housing obligations under the MCAS Tustin Redevelopment Project Area an obligation that would be met from Agency resources available from all Redevelopment Project Areas. The total obligation anticipated to now be secured as future indebtedness of the Project Areas is the current balance owed under the Reimbursement Agreement of $16,393,177, an anticipated additional exposure of $195,658,760, plus interest at five percent (5%) per annum. If the Governor's recently proposed budget is passed, the Agency's ability to receive tax increment including housing set aside funds may be severely limited. It is therefore, important that the Agency and City reinforce the Agency's obligation under the Reimbursement Agreement. The proposed Second Amendment will encumber approximately $212,051,937 in net redevelopment tax increment revenues to support affordable housing activities and pledge this amount to the City for its bearing the cost of any Affordable Housing Subsidies necessary within the MCAS Tustin Redevelopment Project. Staff will be available at the February 1st meeting to answer any questions. City Council /Agency Report February 1, 2011 Second Amendment to Reimbursement Agreement Page 5 ,f' ~ ~ ~ ~-C ~ Christine A. Shingleton j Assistant City Manager~~` Approved for Forwarding By: ,, ~. .. ~ ,i- David C. Biggs City Manager Attachments: Second Amendment SECOND AMENDMENT TO REIMBURSEMENT AGREEMENT BETWEEN THE CITY OF TUSTIN AND TUSTIN COMMUNITY REDEVELOPMENT AGENCY RELATED TO AFFORDABLE HOUSING RESPONSIBILITIES TO BE ASSUMED BY THE AGENCY This SECOND AMENDMENT ("Second Amendment") is entered into as of this 18`" day of January, 2011 ("Effective Date") by and between the CITY OF TUSTIN, a municipal corporation ("City") and the TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a public body corporate and politic ("Agency") RECITALS A. The City has previously acquired from the Department of the Navy certain real property within the Marine Corps Air Station-Tustin Redevelopment Project Area ("MCAS Project") for resale to developers for the development of residential uses including a specified number of affordable housing units pursuant to the MCAS Tustin Reuse Plan/Specific Plan and the MCAS Project Redevelopment Plan. B. On June 5, 2007 the City and Agency entered into an agreement ("Reimbursement Agreement") pursuant to which the Agency agreed to reimburse the City from Tax Increment received by the Agency from the MCAS Project and other available Agency resources, including funds deposited into the Agency's Low and Moderate Income Housing Fund for the MCAS Project, the difference between the market value of the affordable units and the affordable sale price of such affordable housing units. This difference, represented by the gap funding assistance provided to affordable homebuyers with promissory notes secured by trust deeds of trust in favor of the City, was referred to in the Reimbursement Agreement as the "Housing Affordability Subsidy". On January 5, 2010, the City and Agency entered into a First Amendment to the Reimbursement Agreement ("First Amendment"). The Reimbursement Agreement, First Amendment and this Second Amendment shall also be collectively referred to as the Reimbursement Agreement. C. The Reimbursement Agreement and First Amendment make it explicitly clear that the Agency may encumber tax increment deposited into the low and moderate income housing fund of the City's two other redevelopment project areas, Town Center Redevelopment Project ("Town Center Project") and the South Central Project ("South Central Project") to repay the City's obligations under the Reimbursement Agreement and First Amendment. 748403.1 D. Though the limit on incurring indebtedness for both the Town Center Project and South Central Project has seemingly expired and no ordinances eliminating the time limit on incurring indebtedness pursuant to the California Health and Safety Code Section 33333.6 (e)(2)(b) has been adopted, California Health and Safety Code Section 33333.6(e)(4)(A) provides for a suspension of the time limit for incurring indebtedness as follows: "A time limit on establishing of loans, advances, and indebtedness to be paid with proceeds of [tax increment] shall not prevent an agency from incurring debt to be paid from the agency's Low and Moderate Income Housing Fund or establishing debt in order to fulfill the agency's affordable housing obligations, as defined in paragraph (1) of subdivision (a) of Section 33333.8". Section 33333.8 (a) (1) goes onto define an agency's affordable housing obligations as including: (a) the obligation to make deposits to and expenditures from the low and moderate income housing fund; (b) eliminate deficits in the housing fund: (c) expend or transfer an excess surplus; (d) provide relocation assistance; (e) provide replacement housing; (f) provide inclusionary housing." E. The Agency has previously adopted resolutions for all three redevelopment projects finding that the expenditure of monies from the low and moderate income housing fund outside of each project area will be of benefit to each redevelopment project area. Specifically, Resolutions No. 03-10, adopted by the Agency on June 2, 2003 for the MCAS Project, and Resolution Nos. RDA OS-O1 and RDA OS-02, adopted by the Agency on March 21, 2005 for the South Central Redevelopment Project and Town Center Redevelopment Project, respectively, each state that such monies will be used to provide low and moderate income housing at an affordable housing cost to persons of low and moderate income and support findings which have determined that the use of Housing Set Aside Funds outside of designated Redevelopment Project Areas and throughout the City is of direct benefit to the Project Areas. F. As of the date of this Second Amendment, the City anticipates that four hundred and fifty three (453) additional affordable housing units will required to be constructed within the MCAS Project and will be restricted consistent with Inclusionary Housing Requirements, pursuant to an Affordable Housing Covenants and other related affordable housing agreements. Of the four hundred and fifty three (453) additional affordable housing units, one hundred and twenty six (126) will be restricted under Housing Inclusionary Requirements to Very Low Income Households, ninety five (95) to Very Low Income Households, and two hundred and thirty two (232) to Moderate Income Households. G. By approving and entering into the original Reimbursement Agreement, the First Amendment and this Second Amendment, the Agency has approved the pledge of net available tax increment from the Project Areas to the City. H. The housing obligations of the Agency under the Reimbursement Agreement, the First Amendment and this Second Amendment shall constitute an indebtedness of the Agency for purposes of carrying out the Redevelopment Plan for the Project Areas. Now Therefore, the parties agree as follows: 748403.1 1. Amendment of Recital I. The second paragraph of Recital I of the Reimbursement Agreement (as added by the First Amendment) is hereby deleted in its entirety and replaced with the following: "The City anticipates reselling additional property to developers for residential development on which a total of two thousand one hundred and five (2,1 OS) housing units will be constructed, with four hundred fifty three (453) additional affordable units required under the Plan and City's required Inclusionary Housing Requirements. Of the four hundred and fifty three (453) affordable units, one hundred twenty six (126) Very Low Income units, ninety five (95) Low Income units, and two hundred and thirty two (232) Moderate Income units will need to be constructed pursuant to the Inclusionary Housing Requirement. The City's Affordability Subsidy for these additional affordable housing units is estimated at $195,658,760 based on the Affordable Subsidies within the MCAS Tustin incurred to date, and the City shall be reimbursed all costs applicable for this Affordable Subsidy pursuant to Paragraph 4 of the Agreement." 2. Amendment of Para agr ph 1 • Paragraph 1 of the Reimbursement Agreement is hereby deleted in its entirety and replaced with the following: "Agency agrees to reimburse the City for the Affordable Housing Subsidy from (a) net tax increment received by the Agency from the MCAS Project or other available Agency sources, and (b) net tax increment deposited into the low and moderate income housing fund from the MCAS Project, Town Center Project, and South Central Project for use within the territorial jurisdiction of the Agency. The City and Agency agree that, as the date of the First Amendment, the amount of the Affordable Housing Subsidy was Forty Six Million Four Hundred Seven Thousand and Seven Hundred and Thirty Six Dollars ($46,407,736), which amount has partially been repaid to the City. The City and Agency further agree that, as the date of this Second Amendment, in addition to the current unpaid Housing Subsidy owed the City from the Agency an additional amount of to be added to the Affordable Housing Subsidy is One Hundred and Ninety Five Million Six Hundred Fifty Eight Thousand and Seven Hundred Sixty Dollars ($195,658,760) in order to construct four hundred and fifty three additional affordable units to meet the Affordable Inclusionary Requirements within the MCAS Project." 3. Amendment of Para ar~ph 4. Paragraph 4 of the Reimbursement Agreement is hereby deleted in its entirety and replaced with the following: "The Agency agrees to reimburse the City for all costs incurred by the City pursuant to this Agreement from net tax increment revenues, as determined on an annual basis by the City, provided that the Agency shall have the sole and exclusive right to pledge any such sources of funds to repayment of other indebtedness incurred by the Agency in carrying out the MCAS Project, Town Center Project and/or South Central Project. The payments due to be made by the Agency to the City under this Agreement 748403.1 shall be made by the Agency in accordance with a schedule to be updated annually by the City and as otherwise necessary to reimburse the City for the cost to the City of providing the Affordable Housing Subsidy and of performing other obligations hereunder. Net available tax increment is defined as any tax increment, net of existing debt service payments, and existing contractual obligations of the Agency or any lawful successor of the Agency to any of the powers and rights of the Agency pursuant to any applicable constitutional provision statute or other provisions of law now existing or adopted in the future. The indebtedness of Agency under this Agreement shall be subordinate to the rights of the holder or holders of existing bonds, notes or other instruments of indebtedness (all referred to herein as "indebtedness") of the Agency incurred or issued to finance the Redevelopment Project Areas, including without limitation any pledge of tax increment revenues from the Redevelopment Project Areas to pay any portion of the principal (and otherwise comply with the obligations and covenants) of any bond or bonds issued or sold by the agency with respect to the Redevelopment Project Areas. The costs of the City under this Agreement (including, without limitation, the Affordable Housing Subsidy) will be shown on statements submitted to the Agency pursuant to Section 3 above. It is the express intent of the parties that the City will entitled to repayment of expenses incurred by the City under this Agreement, in order to make the City whole as soon as practically possible." 4. Amendment of Paragraph 5. Paragraph 5 of the Reimbursement Agreement is hereby deleted in its entirety and replaced with the following: "The obligations of the Agency to make payments to the City required under this Agreement shall constitute an indebtedness of the Agency for the purpose of carrying out the redevelopment of the MCAS Project, Town Center Project and South Central Project and are obligations to make payments authorized and incurred pursuant to Section 33445 and Section 33670, et. seq. of the Health and Safety Code, and other applicable statutes." 5. Incomoration of Recitals. Each recital set forth in the Reimbursement Agreement and above in this Second Amendment shall be deemed to be part of the Reimbursement Agreement as amended by this Second Amendment. 6. Second Amendment. This Second Amendment constitutes a part of the Reimbursement Agreement and any reference to the Reimbursement Agreement shall be deemed to include a reference to such Reimbursement Agreement as amended hereby. 7. Full Force and Affect. Except as otherwise amended previously and herein, all terms, covenants, conditions and provisions of the Reimbursement Agreement shall remaining full force and effect. 748403.1 IN WITNESS WHEREOF, the parties have executed the Second Amendment as of the Effective Date. ATTEST: By: Pam Stoker City Clerk APPROVED A TO FORM: By: City Attorney and Agency Counsel CITY OF TUSTIN "City" B y: Jerry Amante Mayor TUSTIN COMMUNITY REDEVELOPMENT AGENCY By: Jerry Amante Chairman 748403)