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HomeMy WebLinkAboutNB 1 MTG CREDIT CTFS 08-16-93AGENDA ~ATE' AUGUST 16, 1993 NEW BUSINESS NO. 8-16-93 Inter-Com · ~ ' TO: WILLIAM A. HUSTON, CITY MANAGER AND EXECUTIVE DIRECTOR FROId: COMMUNITY DEVELOPMENT DEPARTMENT SUBJECT: APPLICATION FOR ALLOCATION OF MORTGAGE CREDIT CERTIFICATES RECOMMENDATION It is recommended that the City Council: . Authorize the Community Development Department to prepare and submit to the County an application to the California Debt Limit Advisory Committee; · Adopt the attached Resolution No. 93-92 adopting a Mortgage Credit Certificate Program in cooperation with the County of Orange; and · Authorize the execution of a cooperative agreement between the County of Orange and the City of Tustin to undertake the Mortgage Credit Certificate Program, which is an Exhibit to Resolution No. 93-92. · Adopt Resolution No. 93-94 finding that the Mortgage Credit 'Certificate Program will benefit both the Town Center and South Central Project Areas; It is recommended that the Redevelopment Agency: · Adopt Resolution No. RDA 93-11 finding that the Mortgage Credit Certificate Program will benefit both the Town Center and South Central Project Areas; and o Appropriate the following Town Center Project Area and South Central Project Area Housing Set-aside funds as part of the 1993-94 budget: a o $3,000 in administrative costs for the Mortgage Credit Certificate Program to be assigned to the Town Center Project and $3,000 to be assigned to the South Central Project Area; b o $30,000 in potential penalty charges to be assigned to the Town Center Project Area and $30,000 to be assigned to the South Central Project Area. Pursuant to the requirements of the California Debt City Council Report Application for Allocation of Mortgage Credit Certificates August 16, 1993 Page 2 Limit Advisory Committee (CDLAC), the Finance Director shall deposit said amounts in a trust/security account. FISCAL IMPACT Cost to the Community Redevelopment Agency for the administration of the two-year program through the County of Orange is estimated at'S6,000. The Redevelopment Agency also is required to encumber 1% of the requested allocation, or $60,000, as a potential penalty if the entire allocation is not used. Ail costs will be allocated from accumulated Housing Set-aside Funds for the Town Center and South Central Project Areas. BACKGROUND The Mortgage Credit Certificate Program was originally authorized by Congress in the Tax Reform Act of 1984. The Congress intended the program to assist first time homebuyers is qualifying for the purchase of their home. Cities in Orange County, along with the County, first participated in the program in 1990. Tustin was not among those who participated. The citieSwhich did participate were Anaheim, Buena Park, Garden Grove and Santa Ana, along with the County itself representing the unincorporated areas. The County is now preparing an application for a new allocation. Under the Mortgage Credit Certificate, first time homebuyers who qualify by income and by the price of the unit they purchase, receive a certificate authorizing them to receive a tax credit of 20% of their annual principal and interest payment. This is in addition to the standard deduction for home mortgage interest rates. They receive this 20% tax credit each year that they have the original mortgage and live in the unit they purchased. The Federal Government allocates a set amount of mortgage amounts for each state. The States, in turn, sub-allocate this authority to local jurisdictions. The application, which the County is filing, is to the California Debt Limit Advisory Committee (CDLAC), who has the authority iniCalifornia to allocate this State's share of mortgage amounts to local agencies. City Council Report Application for Allocation of Mortgage Credit Certificates August 16, 1993 Page 3 The application is a combined application submitted by the County on behalf Of itself and the participating cities. The City of Tustin does not submit a separate application. The other cities whose Councils have approved participation in this round of allocation are Anaheim, Brea, Buena Park, Fullerton, Garden Grove, Santa Ana, Yorba Linda and the County of Orange. There are many first time homebuyers in the Tustin market. While it is difficult to determine the number of first time homebuyers in the resale market, the Staff has talked to the developers in East Tustin to determine the extent of first time buyers. A & M Homes indicate that 30% of the homes they have sold are to first time buyers. RGC Development has sold 56% of their homes to first time buyers, and Akins Development has sold 95% of their homes to first time buyers. AMOUNT OF ALLOCATION The City Staff is proposing an application for an allocation of $6,000,000 from the California Debt Limit Advisory Committee (CDLAC) . This represents the value of the mortgages, not the amounn of tax credit. The County states the previous history with the program indicates that an average of 1.75 appliCations a month can be expected per jurisdiction. Over a two year period, this represents 42 applications. The County also states the average mortgage that was processed in the past was $131,666. This would represent a request for Tustin of $5,529,972. The Staff has rounded this up to $6,000,000 to offset any upturn in the market which· may occur in the next two years. PROGRAM ADMINISTRATION The program is administered entirely by the County of Orange. The City's participation is minimal, and outlined below. The County has contracted with Urban Futures Inc. to process the applications, qualify lending institutions and certify the applicants for the program. The underwriting of the applicants is done by lending institutions. These institutions are certified by the County for participation in the program. There are currently twelve lending institutions who City Council Repo~'t Application for Allocation of Mortgage Credit Certificates August 16, 1993 Page 4 have been certified. The County will be issuing a request for qualifications for additional lending institutions in the next few weeks. The applicant for the mortgage credit certificate is not required to use these lending institutions for their mortgages. They may receive a mortgage from any source they desire. Mortgage Credit Certificates, however, can only be used with fixed rate mortgages and cannot be used for mortgages financed through tax exempt mortgage revenue bonds. The program has a maximum income level of between $56,500 for a one person household and $64,975 for a household of three or more persons. The maximum allowable home purchase price is approximately $240,000. During the past three years, the average mortgage the County has issued certificates for is $131,666. This is approximately a $165,000 purchase price for a home, assuming as 20% down payment. The following is an outline of the application process: 1. The applicant receives a preapplication from the City, -~ completes it and returns it to the City. . The City Staff makes a preliminary review of the pre- application. If based on the information provided, it appears the applicant meets the basic qualifying criteria, the staff refers the applicant to the list of participating lending institutions. The staff does not have to verify the information. , The lending institution works with the applicant to complete the formal application for the MCC and then forwards it to Urban Futures, the County's contractor for the program. . o Urban Futures reserves a credit certi= ~icate for the applicant. Urban Futures reviews and approves the application and then issues an MCC commitment. ~ The primary mortgage lender submits the escrow closing documents to Urban Futures. City Council Report Application for Allocation of Mortgage Credit Certificates August 16, 1993 Page 5 7. Urban Futures gives final approval for the MCC. o The escrow is closed on the home and the necessary documents are recorded. o Urban Futures issues the Mortgage Credit Certificate to the homebuyer. Since there is a limited allocation in the County, the County wants to ensure that all of the allocation is used over the two year period. To accomplish this, they reserve each city's allocation to that city for the first year. At the beginning of the second year, all of the unused allocations from all of the cities are pooled. The MCC's'are then issued to applicants from any participating city on a first come, first served basis. In this way, a city that has a greater need than anticipated can use the allocation from a city where the demand is less than expected; ensuring that the total allocation is used. CITY OBLIGATIONS Financial As part of the overall County Program, the City is responsible for its proportionate share of the administrative costs. The County estimates the City's share will be $6,000. The actual amount will be based on the percentage of actual mortgages processed in the City of Tustin to the total amount processed through the County and other participating cities. The County does not request payment of these funds until after the program term ends, in approximately two years. The CDLAC has, in the past, been faced with issuing allocations and then finding that the city which received the allocation does not use it. Sinre there is a limited statewide allocation, a city that could have used the allocation may not have a chance to do so, because the allocation was issued to a city that did not use it. To forestall this, CDLAC requires applicants to set aside, in an account with a financial institution, an amount equal to 1% of the allocation requested. If CDLAC determines that the allocation has not been used, it can require ~.~he forfeiture of all or a portion of these funds to the State. Historically, CDLAC has not sought a forfeiture if there has been a good faith effort to utilize the allocation. Further, because of the method the County uses to City Council Report Application for Allocation of Mortgage Credit Certificates August 16, 1993 Page 6 reallocate allocations after the first of the year, the total allocation for Tustin will likely be used somewhere in the County, if this City is unable to use it. Therefore, the possibility of these funds being forfeited is significantly reduced. The funds are "recaptured" by the City when CDLAC authorizes their release. Finally, the City needs to provide staffing to process the initial applications and to do the initial pre-screening of the pre- applications. The City currently has a consultant providing processing assistance for the housing rehabilitation program. The Staff believes he will be able to handle this program also at no additional cost. Proqrammatic In order to participate in the program, the City is required to take the following actions: Preparation and submittal to the County its portion of the application to CDLAC. , Approval by the City Council of a resolution adopting a Mortgage Credit Certificate Program in cooperation with the County of Orange, attached, with this report. . Execution of a cooperation agreement with the County of Orange, attached as an eXhibit to the resolution. As noted above, appropriate adequate administrative costs ($6,000) and deposit $60,000 into an account with a financial institution. Redevelopment housing set-aside funds can be used for this purpose since the MCC income requirements are within the limits of low to moderate income households as defined in State Redevelopment Law. In addition, the City must make the pre-screening application available to prospective participants. -- - Neither the City nor the Agency is required to market the program. But, staff will market the program by mnforming residential real estate brokers and agents as well as the residential developers in the City about the availability of the program. Already, after discussing the program with some of the developers in East Tustin City Council Report Application for Allocation of Mortgage Credit Certificates August 16, 1993 Page 7 to determine the number of first time home buyers, these developers have expressed a great deal of interest in participating. RECOMMENDATION The staff believes that participation in this program will help promote home ownership in the City, and within each Project Area, which has been a goal of the City Council. Therefore, it is recommended the City Council authorize the submittal of an application for a $6,000,000 allocation of Mortgage Credit Certificate authority, approve the attached Resolution No. 93-92 and authorize the execution of the cooperation agreement with the County of Orange. It is also recommended that the City Council and Redevel'opment Agency adopt a resolution finding that the use of housing set-aside funds outside of the Town Center and South Central Project Area for the Mortgage Credit Certificate Program is a benefit to the two project areas, appropriate $6,000 for administrative costs for the program and authorize the deposit of $60,000 in housing set-aside funds into an account pursuant to the requirements of the CDLAC. Re~eveR~ha~o~~ogram Manager Christine A. Shingl~ton Assistant City Manager rz immer ~mcccounc. rep RESOLUTION NO. 93-94 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, FINDING THAT THE USE OF TAXES ALLOCATED FROM THE SOUTH CENTRAL PROJECT AREA AND FROM THE TOWN CENTER PROJECT AREA FOR THE MORTGAGE CREDIT CERTIFICATE PROGRAM oUTSIDE THE PROJECT AREAS WILL BE OF BENEFIT TO BOTH PROJECT AREAS The City Council of the City of Tustin does hereby resolve as follows: WHEREAS, the Community Redevelopment Agency of the City of Tustin (the "Agency") has adopted a Redevelopment Plan (the "Redevelopment Plan") for the South Central Project Area and has also adopted a Redevelopment Plan for the Town Center Project Area; and WHEREAS, both Redevelopment Plans provide for the allocation of taxes from their respective Project Areas; and WHEREAS, Section 33334.2 of the California Community Redevelopment Law (Health and Safety Code Section 33000 et seq.) requires that not less than twenty percent (20%) of all taxes so allocated be used for the purpose of increasing, improving and preserving the community's supply of low and moderate income housing available at affordable housing cost; and WHEREAS, Section 33334.2(g) of the Health and Safety Code provides that such funds may be used outside of a project area if a finding is made by resolution of the Agency and the City Council that such use will be of benefit to the Project; and WHEREAS, the Project Areas comprise only a limited portion of the low to moderate income housing supply in the City of Tustin and the overall low to moderate income housing supply is dispersed throughout the City; and WHEREAS, City of Tustin is proposing to establish a Mortgage Credit Certificate Program to assist low to moderate income first time homebuyers throughout the City; and WHEREAS, the use of tax increment funds for implementation of the City's Mortgage Credit Certificate Program outside of the Project Area will directly promote the increase, improvement and preservation of the community's supply of low to moderate income housing available at affordable prices both inside and outside the South Central and Town Center Project Areas. Resolution No. 93-94 Page 2 NOW, THEREFORE, the City Council of the City of Tustin does hereby find and resolve as follows: 'Section 1: T. he City Council hereby finds that the use of taxes allocated from the South Central Project Area and from the Town Center Project Area for the purpose of increasing, improving and preserving the community's supply of low and moderate income housing available at affordable housing cost outside the Project Areas and within the City of Tustin will be of benefit to both the South Central and Town Center Project Areas. Section 2: The City Council finds that the use of these funds is of primary benefit to both the South Central and Town Center Project Areas, and constitutes redevelopment activity as described in Sections 33020 and 33021 of the Health and Safety Code. JIM POTTS MAYOR Mary E. Wynn, City Clerk STATE OF CALIFORNIA ) COUNTY OF ORANGE ) CITY OF TUSTIN ) SS CERTIFICATION FOR RESOLUTION NO. 93-94 MARY E. WYNN, City Clerk and ex-officio Clerk of the city Council of the City of Tustin, California, does hereby certify that the whole number of the members of the City Council of the City of Tustin is five; that the above and foregoing Resolution No. 93-94 was duly and regularly introduced, passed and adopted at a regular meeting of the City Council held on the 16th day of August, 1993, by the following vote~w - RESOLUTION NO. 93-92 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN ADOPTING A MORTGAGE CREDIT CERTIFICATE.PROGRAM IN COOPERATION WITH THE COUNTY OF ORANGE WHEREAS, there is a shortage in the County of Orange (the "County") and in the City of Tustin (the "City") of decent, safe and sanitary housing, particularly of housing affordable by first-tim~ home buyers, and a consequent need to encourage the availability of homes affordable by such persons and otherwise to increase the housing supply in the City and in the County for such persons; and Wh~.REAS, the Board of Supervisors ~f the County has declared its intent to engage in a mortgage credit certificate program (the "Program") pursuant to Part 5 of Division 31 of the Health ah'd Safety Code of the State of California (the "Act") and to issue mortgage credit certificates pursuant to the Act to provide funds for the Program; and W~REAS, the City hereby finds and determines that it is in the best interest of the City to participate in the Program and to consent to the operation of the Program by the County within the geographic boundaries of the City pursuant to the Act; and WHEREAS, the City desires to enter into a Cooperative Agreement with the County to permit the operation of the Program within the boundaries of the City; and ~q{EREAS, Section 146 of the Internal Revenue Code of 1986, as amended (the "Code"), limits the amount of mortgage credit certificates that may be issued in any calendar year by entities within a state and authorizes the governor or the legislature of such state to provide the method of allocation within such state; and WHEREAS, Chapter 11.8 of Division 1 of Title 2 of the Government Code of the State of California (the "Government Code") governs the allocation of the state ceiling (as that term is defined in the Code) among governmental units in the State of.California (the "State") having the authority to issue mortgage credit certificates; and WHEREAS, Section 8869.85 of the Government Code requires a local agency to file an application for a portion of the state ceiling with or upon the direction of the California Debt Limit Allocation Committee ("CDLAC") prior to the issuance of mortgage credit certificates; and WHEREAS, the City desires that the County file an application with CDLAC on behalf of the City for an allocation of authority to issue mortgage credit certificates and elects to transfer to the County pursuant to Section 8869.85(d) of the Government Code, the total amount, if any, of such authority allocated to the City; and ' WHEREAS, one percent of the ~mo%Lr~t of the allocation to be requested on behalf of the City is to be held in an account __ established by the City pursuant to section 8869.84 of the Government Code and the Regulations of CDLAC; 07/24/92 -2- 1842Q/2197/146 NOW, THEREFORE, the City Council of The City of Tustin resolves as follows: Section 1. Each of the foregoing recitals is true and correct. Section 2. The City hereby adopts the Program for the purpose of increasing the housing supply in the County and in the City and consents to the operation of the Program by the County with respect to all property located within the geographic boundaries of the City, including the payment to the County of the City's proportionate share (based upon the number of participants in the Program) of administration costs applicable to the allocation received ~rom CDLAC, which share $6,000 is estimated not to exceed Section 3. The Cooperative Agreement between the County and the City..(the "Agreement"), a copy of which is attached hereto as Exhibit A, is hereby approved, and the Mayor is hereby authorized and directed to execute and deliver the Agreement, for and in the name and on behalf of the City. The Mayor, with the advice and consent of the City Attorney, is authorized to approve any additions to or changes in the form of the Agreement deemed necessary or advisable, approval of~ such additions or changes to be conclusively evidenced by execution by the Mayor of the Agreement as so added to or changed. The Mayor, with the adv~i~e and ~onsent of the City Attorney, is further authorized to enter into such additional agreements with the County, execute such other doc'cv, ents or 07/24/92 -3- 1842Q/2197/146 take such other actions as they may deem necessary or appropriate to carry out the purpose and intent of the Agreement or to cooperate in the implementation of the Program. Section 4~ The City Manager, or his designee, is authorized, on behalf of the City, to take such steps and execute such documents as are necessary for the submission of an application to CDLAC on behalf of the City for an allocation in the amount of $6,000,000 for application to the issuance of mortgage credit certificates by the County. The City Manager, or his designee, is also authorized to certify to CDLAC that an amount equal to 1% of the allocation requested is on deposit in an account established by the City. - Section 5. The City hereby authorizes the transfer to the County of the total principal amount, if any, of the authority to issue mortgage credit certificates allocated to the City by CDLAC. The City Manager, or his designee, on behalf of the City, is authorized and directed to take such steps and execute such documents as are necessary to effect the transfer of such allocation to the County solely for application to the issuance of mortgage credit certificates, which are to be used to induce the origination of home mortgage loans to qualifying person's. Section 6. The officers and employees of the City are authorized and directed, jointly and severally, to do any and all things necessary or advisable in order to effedt~uate th% purposes of this resolution or the issuance of the mortgage 07/24/92 1842Q/2197/146 -4- credit certificates by the County, and all actions previously taken by such officers and employees in connection with the application for the allocation authorized to be requested are ratified and approved'. Section 7. This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting this resolution. PASSED AND ADOPTED at a regular meeting of the Tustin City Council, held on the 16th day of August, 1993. JIM POTTS Mayor MARY E. WYNN City Clerk STATE OF CALIFORNIA ) COUNTY OF ORA_NGE ) CITY OF TUSTiN ) ¸SS CERTIFICATION FOR RESOLUTION NO. 93-92 MARY E. WYNA-, City Clerk and ex-officio Clerk of the City Council of the City of Tustin, California, does hereby certify that the whole number of the members of the City Council of the City of Tustin is 5; that the above and foregoing Resolution No. 93-92 was duly and regularly introduced, passed, and adopted at a regular meeting of the Tustin City Council, held on the 16th day of August, 1993. COUNCILMEMBER AYES: COUNCILMEMBER NOES: COUNCiLMEMBER ABSTAINED: COUNCILMEMBER:ABSENT: MuXRY E. WYNN City Clerk 07/24/92 1842Q/2197/146 -5- 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 , 19 by and between the County of Orange, a legal subdivision and body corporate and politic of the State of California (the "County"), and the City of Tustin , a political subdivision of the State of California (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 t° 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_~ssue m~rtgage credit certificates therefor 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 5o 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 65000 et seq.), (ii) said general plan includes a land use element as required by Government Code Section 65302, and (iii) the Program complies with said land use elemenu 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 power~ 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. At the expiration of. one year from the date funds become available to the City from an allocation under the Program, the COunty may review the City's progress in committing funds from such allocation and, following consultation with the City, may reallocate to another city or public agency agreeing to participate in the Program or already participating in the Program any unused portion of such allocation. 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 the Counly its proportionatg, share (based upon the number of participants in the Program) of administration costs applicable to each allocation received from CDLAC, which share is estimated not to exceed $~-,-~90. $6,000 SECTION 6. The City agrees to undertake such further proceedings.or actions as may be necessary in order -o 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 bv the . County. SECTION 8. This Cooperative Agreement may be amended by one or more supplemental agreements executed by the County and the City at any time, except that no such amendment cr supplement shall be made which shaf~ adversely affec~ the rights of the owners of any mortgage credit certificaues issued by the County in connection with the Program. SECTION 9. This Cooperative Agreement shall exDire and be of no further force and effect upon termination of The Progr~n or the sooner agreement of the parties hereto. 07/~_4/92 1841Q/2197/146 IN WITNESS WHEREOF, the parties hereto have caused this Cooperative Agreement to be executed and attested by their proper officers thereunto duly authorized, and their official seals to be hereto affixed, all as of the date first above written. COUNTY OF OPJtNGE By SIGNED AND CERTIFIED THAT A COPY OF THIS DOCUMENT HAS BEEN DELIVERED TO THE CHAIRMAN OF THE BOARD'OF SUPERVISORS Chairman of the Board of Supervisors Clerk of the Board of Supervisors APPROVED AS TO FORM: County Counsel CITY OF TUSTIN (SEAL) ATTEST: By ~4~y~- James Potts Mayor City Clerk APPROVED AS TO FORM City Attorney 87/24/92 1841Q/2197/146