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HomeMy WebLinkAbout13 SALE OF 14741 & 14751 NEWPORT AVENUE APARTMENTS TO ORANGE COUNTY RESCUE MISSION .%tY O Agenda Item •1.3 G= _4 Reviewed: AGENDA REPORT City Manager e„ Finance Director k GS IS MEETING DATE: DECEMBER 16, 2014 TO: JEFFREY C. PARKER, CITY MANAGER FROM: CITY MANAGER'S OFFICE SUBJECT: CONVEY CITY-OWNED PROPERTIES AT 14741 AND 14751 NEWPORT AVENUE TO THE ORANGE COUNTY RESCUE MISSION FOR HOMELESS VETERANS' HOUSING SUMMARY Approval is requested to convey two (2) City-owned fourplexes at 14741 and 14751 Newport Avenue to the Orange County Rescue Mission ("OCRM") for homeless Veterans' housing. RECOMMENDATION It is recommended the City Council take the following actions: 1. Direct the City Manager to finalize and execute a Purchase and Sale Agreement, Deed Restrictions, Easement, Promissory Note and any other documents consistent with the Terms of Conveyance outlined in Exhibit A; 2. Direct the City Manager to prepare all documents and take all actions necessary to implement this transaction with OCRM; and 3. Determine that the conveyance of the property and facilities for use as Veterans housing is exempt from the California Environmental Quality Act pursuant to Categorical Exemption Class 1. FISCAL IMPACT The City will convey the property to OCRM for $533,000. The City currently receives approximately $113,000 in rent while expending approximately $35,000 in utilities, repairs and staff time. ALIGNMENT WITH STRATEGIC PLAN The conveyance of the properties to the OCRM contributes to "Goal D: Strong Community and Regional Relationships" of the City's Strategic Plan, by fostering strong relationships within the community and providing leadership within the region in the area of transitional housing and services for homeless Veterans. Agenda Report December 16, 2014 Page 2 BACKGROUND/DISCUSSION In 2000, the two (4) fourplexes at 14741 and 14751 Newport Avenue were purchased with Low and Moderate Income Housing Funds by the former Tustin Community Redevelopment Agency. They were purchased for required right-of-way as part of the proposed Newport Avenue Extension. In accordance with California Health and Safety Code Section 33334.16, the Agency sold the fourplexes to the City in January'2010 for $533,000. Each fourplex has two (2) three bedroom units, one (1) two bedroom unit, one (1) one bedroom unit, a laundry room and four garage spaces. During this time, staff have worked with property management firms off and on in managing the units. All units are currently occupied and have been for the last two years. In seeking to accomplish one of the 2014 Mayor's goals set by former Mayor Al Murray, staff entered into discussions with OCRM about providing services to Veterans, specifically transitional housing for homeless Veterans. OCRM is proposing to purchase the fourplexes for the purpose of providing transitional housing to homeless Veterans. All other services necessary in transitioning Veterans from homelessness will be provided by OCRM at their Village of Hope location. A property manager will live on- • site at the fourplexes. In order to facilitate transitional housing services for homeless Veterans, the City will sell the property to OCRM for the same purchase price, $533,000, that the City purchased the property from the former Redevelopment Agency. The City will completely finance the purchase by issuing OCRM a 30-year Note for $533,000 at three percent interest. The Note will be due at the end of 30 years. The Note will be reduced by 1/30th for each year OCRM provides housing to Veterans, leaving a zero balance at the end of 30 years. Since the original reason the Agency and City purchased the property still exists, the transaction documents will contain a reverter clause in the event the City needs the property for the Newport Avenue Extension right-of-way or OCRM no longer provides housing to Veterans. Upon completion of the Sale, the current Tenants will receive a six month notice to vacate. St. Anton, developer of the new affordable housing development at Anton Legacy, has set aside eight units for the current Tenants, provided they qualify. Upon City Council approval to convey the property to OCRM, staff will assist St. Anton with determining Tenants' eligibility. In addition, OCRM will reimburse the Tenants their last month's rent upon the tenant moving out and leaving the unit in good condition. On December 9, 2014, the Planning Commission determined the conveyance of the eight (8) residential units to OCRM was in conformance with the Tustin General Plan. In order to operate the transitional housing program, OCRM will need a Conditional Use Permit, requiring either Planning Commission or Zoning Administrator approval. OCRM has estimated $250,000, an amount donors have already pledged, will be necessary to rehab the units prior to Veterans moving in. In order to assuage donor Agenda Report December 16, 2014 Page 3 concerns regarding investing in a property that could revert to the City within the first five years, the City proposes to reimburse OCRM a proportionate amount of the $250,000 in the event the property is reverted during the first five years. If it becomes necessary for OCRM to invest more than $250,000 towards rehabbing the units, the City will only reimburse OCRM at a 'not to exceed amount' of$250,000. After OCRM has provided transitional services to homeless Veterans for 30 years, the Promissory Note will be completely forgiven and the property will belong free and clear to OCRM. At that point, OCRM can determine how they want to utilize the property in light of their mission. In order to insure the City still has access to that portion of the property needed for the Newport Avenue Extension right-of-way after 30 years, an easement will be recorded against the property at the time of initial conveyance. If the City proceeds with the Newport Avenue extension during the first 30 years, the entire property will revert to the City. If the Newport Avenue extension project proceeds after year 30, the City will utilize the easement area and OCRM will retain use of the remainder of the parcel. The City Attorney's Office is currently preparing all documents necessary to effectuate the transaction. The documents will be in accordance with the Terms of Conveyance outlined in Exhibit A. City Council authorization is being sought to direct the City Manager to complete negotiations with OCRM and execute all documents. If it becomes necessary to make modifications to the Terms, staff will come back to City Council for further consideration and approval. Staff will be available to answer questions the City Council may have. CEQA The California Environmental Quality Act Guidelines identify several categories of projects that are exempt from CEQA. The Class 1 categorical exemption applies to projects for "the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, ... involving negligible or no expansion of use beyond that existing at the time of the lead agency's determination." The property and facility subject to this conveyance are currently being used for housing. Conveyance of the property and facilities to the Orange County Rescue Mission will continue the existing housing uses, and will involve negligible or no expansion of the use beyond that now existing. As a result, the project is subject to the Class 1 exemption from the California Environmental Quality Act. .a Jerry Craig 7 Economic D-velo'm-nt z Housing Manager Tustin Hosing uth• ' y A achment: Exhibit A —Terms of Conveyance Exhibit A TERMS OF CONVEYANCE Sales Price - $533,000 Down Payment - $0 Promissory Note • Amount - $533,000 • Interest Rate — 3% • Term — 30 years • Value — reduced by 1130th plus interest for each year OCRM provides transitional housing for homeless Veterans. Reversion Clause • In the first 30 years, the property will revert back to the City under the following two conditions: 1) The property is needed for the Newport Avenue Extension right-of-way; or 2) OCRM no longer provides housing to homeless Veterans • If reversion is necessary in the first 30 years, the City will give OCRM a "One Year Notice of Reversion" Rehabilitation • OCRM has estimated a $250,000 investment in rehabbing the units. • If reversion becomes necessary in the first five years, the City commits to reimbursing OCRM a proportionate amount of the $250,000 and at a `not to exceed amount' of$250,000. After 30 Years • The Promissory Note is completely forgiven. • The property belongs free and clear to OCRM. • OCRM is free to choose how they want to utilize the property. • An easement will be recorded against the property upon conveyance to OCRM. The purpose of the easement is to insure the City can utilize that portion of the property needed for the Newport Avenue Extension right-of-way after 30 years.