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HomeMy WebLinkAbout03 MORTGAGE CREDIT 06-19-95NO. 3 6-19-95 DATE: JUNE 19, 1995 Inter-Com TO: WILLIAM A. HUSTON, CITY MANAGER FROM: COMMUNITY DEVELOPMENT DEPARTMENT SUBJEC~ APPLICATION FOR ALLOCATION OF MORTGAGE CREDIT CERTIFICATES RECOMMENDATION It is recommended that the City Council adopt the attached Resolution No. 95-60 adopting a Mortgage Credit Certificate Program in cooperation with the County of Orange. FISCAL IMPACT Cost to the Community Redevelopment Agency for the administration of the. two-year program through the County of Orange is estimated at $6,000. The Redevelopment Agency also is required to encumber 1% of the requested allocation, or $30,000, as a potential penalty if the allocation is not used. These costs are included in the current budgets for the Housing Set-aside Funds for the Town Center and South Central Project Areas. They will also be proposed to be carried over in the 1995-96 budget. BACKGROUND Under the mortgage credit certificate program, 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 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 authorization for each state. California, in turn, sub-allocates 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 in California to allocate this State's share of mortgage amounts to local agencies. In August 1994, the City of Tustin joined other cities and the County in receiving a second program year allocation of $48,500,000 for the program; $2,000,000 of this was allocated to Tustin. The other cities currently involved in this program are Anaheim, Brea, Buena Park, Fullerton, Garden Grove, huntington Beach, Irvine, La City Council Report Application for Allocation of Mortgage Credit Certificates June 19, 1995 Page 2 Buena Park, Fullerton, Garden Grove, huntington Beach, Irvine, La Habra, Lake Forest, Santa Ana and Yorba Linda, along with the County. The County offers the program through their own allocation in the unincorporated areas and in the cities of Cypress, Dana Point, Laguna Niguel, La Palma, Mission Viejo, Placentia, San Clemente, San Juan Capistrano and Seal Beach. The $48,500,000 in allocation is almost totally used and the County is now preparing an application for a new allocation. To date, twenty (20) Tustin residents have used approximately $2,742,526 in MCC allocation. The City continues 'to have $2,250,000 allocation remaining. ~This is released from encumbrance upon the issuance of the first MCC of the new allocation. Based on the City's current rate of usage, the Staff is recommending an additional $3,000,000 be sought. This will be added to the remaining $2,250,000 for a total allocation of $5,250,000. Administrative costs will be billed by the County based upon the city's pro-rata share of total administrative costs. The pro-rata share is based on the amount of MCC allocation used by the City to the total amount used by the County and cities as a whole. Tustin's administrative costs are in the total amount of $6,000. The Certificates can be used by purchasers of both existing homes~ and new homes, providing the value of the home is less than $229,883 for new homes and $217,456 for existing homes. The program has a maximum income level of between $59,100 for a one or two person household and $67,965 for a household of three or more persons. The primary responsibility for program administration is the County's, for which the County is reimbursed by the cities. Other than marketing the program, providing applications with a preapplication and issuing letters referring applicants to the lending institutions, the City has no other administrative oblig~ions under the program. g~ha~d/Zim~r ~edevet/opm~n~ Program Manager. dave\mo~app Christine A. Shin~eton Assistant City Manger 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27 28 RESOLUTION NO. 95-60 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, ADOPTING A MORTGAGE CREDIT CERTIFICATE PROGRAM IN COOPERATION WITH THE COUNTY OF ORANGE The City Council of the City of Tustin does hereby resolve aS follows: 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-timehome 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 WHEREAS, the Board of Supervisors of the County has established 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") for the purpose of issuing mortgage credit certificates pursuant to the Act; and WHEREAS, the City has previously found and determined 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 has previously entered into a Cooperative Agreement with the County to permit the operation of the Program within the boundaries of the City; and WHEREAS, 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 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26' 27 28 Resolution No. 95-60 Page 2 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 amount 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 the CDLAC; '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 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 $3,000,000 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 3. The City agrees to pay to the County the City's proportionate share (based upon the number of participants in the Program) of administration .costs applicable to the allocation received from CDLAC, which share is estimated not to exceed $6,000. Section 4. 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 persons. Section 5. 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 effectuate the purposes of this resolution or the issuance of the mortgage credit certificates by the County, and all actions previously taken by such officers and employees in connection with the 10 11 12 13 14 15 16 17 18 19 20 21 22 123 24 25 ~7 28 Resolution No. 95-60 Page 3 application for the allocation authorized to be requested are ratified and approved. Section 6. 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 19th day of June, 1995. JIM POTTS Mayor Mary E. Wynn, City Clerk STATE OF CALIFORNIA ) COUNTY OF ORANGE ) CITY OF TUSTIN ) SS CERTIFICATION FOR RESOLUTION NO. 95-60 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 5; that the above and foregoing Resolution No. 95-60 was duly and regularly introduced, passed, and adopted at a regular meeting of the Tustin City Council, held on the 19th day of June, 1995. . COUNCILMEMBER AYES: COUNCILMEMBER NOES: COUNCILMEMBER ABSTAINED: COUNCILMEMBER:ABSENT: MARY E. WYNN City Clerk