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HomeMy WebLinkAboutMinutes - City Council - 2007-01-22 - Special Meeting 14 City Council, Special Meeting Council Chambers 777 Cypress Avenue Redding, California January 22,20075: 15 p.m. The meeting was called to order by Mayor Dickerson with the following Council Members present: Bosetti, Jones, Murray, and Stegall. Also present were City Manager Starman, Assistant City Manager Bachman, City Attorney Duvernay, Assistant City Attorney Frediani, Housing Manager Buckley, Redevelopment Manager Morgon, City Clerk Strohmayer, and Office Services Supervisor Rudolph. I At the hour of 5:38 p.m., Mayor Dickerson convened the Joint Meeting with the Redding Redevelopment Agency. DEVELOPMENT FUNDING AGREEMENT - Redding Redevelopment Agency, and Kenneth W. Watson for property located at 1805 Grant Street and 1810 Logan Street (R-030-050-100) Redevelopment Manager Morgon provided an overview of the Report to City Council and Redding Redevelopment Agency dated January 8,2007, incorporated herein by reference, concerning a Development Funding Agreement (DF A) between the City of Redding, the Redding Redevelopment Agency (Agency), and Kenneth W. Watson for the development of property located at 1805 Grant Street and 1810 Logan Street. Mr. Morgon explained that Mr. Watson proposes to develop his vacant lot in the Martin Luther King, Jr. (MLK) Neighborhood with a duplex consisting of two 2-bedroom affordable rental units. Based on competitive bids received for the project, the low bid will result in a total development cost of$282,000, exclusive of the value ofthe land. The cost per unit will be $141,000 and the cost per bedroom will be $70,500. Accordingly, Mr. Watson is requesting that the City and the Agency assist in the development of the site by providing a combination of HOME Program and Redevelopment Housing Set-Aside financing in the amount of $279,000. Mr. Watson will be contributing the value of the parcel, which has been appraised at $70,000. In addition, Mr. Watson has paid for the architectural drawings and appraisals, which total approximately $3,000. In order to provide sufficient cash flow to service the City and Agency loans, it is proposed that one unit be restricted for occupancy by low-income households and one unit for occupancy by moderate-income households. I Mr. Morgon stated that the key points of the DF A included: A loan in the amount of $139,500 utilizing City HOME funds at one percent (1 %) simple interest with monthly payments, remaining principal ~nd accrued interest due and payable in 20 years. A loan in the amount of$139,500 utilizing Agency Housing Set-Aside funds at one percent (1 %) simple interest with monthly payments, remaining principal and accrued interest due and payable in 20 years. A 20-year affordability covenant will be recorded for one unit and a 55-year covenant will be recorded on the second unit. Provides a 12-month time line for construction of the project. Mr. Morgon indicated that staffis confident that Mr. Watson has the ability to manage and maintain the property for the long term. An appraisal of the proposed project was completed in December 2006, which provided an estimated value of $310,000 for the completed development. The resulting loan-to-value ratio of 90 percent is within the guidelines established for existing City and Agency loan programs. Mr. Morgon recommended that the City Council authorize the Mayor to execute the DF A between the City, the Agency, and Kenneth W. Watson for the development of property owned by Mr. Watson at 1805 Grant Street and 1810 Logan Street and execute all necessary documents. He further recommended that the Agency's Board authorize the Chair to execute the DF A and all necessary documents pertaining to the proposed Agency loan. I Council/Agency Member Murray questioned the validity of providing a one percent (1 %) simple interest loan. Mr. Starman responded that typically pro forma cashflow projections are developed and the financing is tailored to meet those needs. To motivate owners, lower interest rate loans are provided in order for cashflow projections to permit lower rents for 1/22/2007 I I I 15 a specified period of time. In addition, the City/Agency is attempting to make strategic investments in the Neighborhood to remove blight and vacant lots. Council! Agency Member Murray stated that he could not support the recommendation because he did not have sufficient information to determine whether the proposal represented the best use of funds, i.e., are there other projects in the Neighborhood which would permit quicker repayment of the loans. In response to Council! Agency Member Bosetti, Mr. Starman stated that the loan would be due and payable in 20 years. He explained that typically, at the end of this period, the developer would adjust the rent to market rate and refinance accordingly to permit repayment of the loan. When the loan is made, a legal document is recorded against the property which requires rents to be set at specific levels, such as 20 and 55 years. In response to Council! Agency Member Murray, Mr. Starman explained that staff reviews the loan request and strives for a debt service coverage ratio of 1.15 in the early years. Ideally, for every $1 of debt, the owner is able to reinvest $0.15 in the property. The interest rate is then established accordingly. Council! Agency Member Bosetti indicated that it would be beneficial to receive a further breakdown which provided actual numbers, such as projected rent and then the 1.15 debt service coverage ratio. Council/Agency Member Dickerson did not believe it was necessary to know the amount of the payments and the rent being charged to determine whether the project was viable and would assist in revitalizing the Neighborhood. He expressed confidence in staffs expertise in these type of real estate transactions. He opined that the Council's/Agency's role wa~.to approve the requests based on the merits of what is presented by staff. MOTION: Made by Council Member Murray, seconded by Council Member Bosetti, to defer action on this matter until additional information is received. The Vote: AYES: Council Members - Bosetti and Murray NOES: Council Members - Dickerson, Jones, and Stegall ABSENT: Council Members - None . ABSTAIN: Council Members - None Motion failed. MOTION: Made by Council Member Stegall, seconded by Council Member Jones, to authorize the Mayor to execute the DF A between the City, the Agency, and Kenneth W. Watson for the development of property owned by Mr. Watson at 1805 Grant Street and 1810 Logan Street with one unit restricted to low-income families and one for moderate- income families. The Vote: A YES: Council Members - Dickerson, Jones, and Stegall NOES: Council Members - Bosetti and Murray ABSENT: Council Members - None ABSTAIN: Council Members - None Council! Agency Member Murray believed the City Council!Board had an obligation to obtain sufficient information to determine whether the request is the best expenditure of taxpayer money. He viewed this request differently from CRDC' s request which represented a short-term loan. He was not convinced that this proposal would not result in a windfall profit for the developer. RESOLUTION - Making required findings and Approving use of tax increment funds for right-of-way acquisition for Hilltop Drive Streetscape Project (C-070-01O & R-030-050-31O) Redevelopment Manager Morgon summarized the Report to City Council and Redding Redevelopment Agency dated January 8, 2007, incorporated herein by reference, regarding required findings and,right-of-way acquisition for the Hilltop Drive Streetscape Project. Mr. Morgon pointed out that the Project is a cooperative project between the Agency, the Hilltop Hotel Business Improvement District (HHBID), and the City of Redding Electric Utility (REU) to improve the appearance of this key corridor between Cypress Avenue and Highway 44. He stated that easements are needed for utilities and right-of-way to provide 1/2212007 16 for an adequate U-turn at the Hilltop/Presidio intersection. He related that the REU is responsible for the costs of the utility easements; however, the right-of-way easement is not a component of the utility relocation and, therefore, is not the responsibility of the REU. California Redevelopment Law, Health and Safety Code Section 33445, stipulated that the Agency can pay all or a part of the value of the land for and the cost of the installation and construction of the public improvement, if the legislative body determines all of the following: That the improvement is of benefit to the project area from which the funds are derived or to the immediate neighborhood in which the project is located. That there are no other means of financing the improvement available to the community. That the payment of funds for the improvement will assist in elimination of one or more blighting conditions in the project area and is consistent with an adopted implementation plan. I In addition, Health and Safety Code Section 33678 states that the use of tax increment funds for public improvements must meet the definition of redevelopment as described in Sections 33020 and 33021 and primarily benefit the project area. An Analysis of Findings was provided for the City Council's consideration. Mr. Morgon stated that in order to avoid dual reviews and action, staff is recommending that the Agency's Board authorize the City Council to act as the lead agency on this Project. This would enable the City Council to act on behalf of the Agency with respect to such actions as awarding the contract and authorizing the Notice of Completion. Mr. Morgon recommended that the City Council adopt the required resolution and determine that the findings can be made to use tax increment funds to help finance the construction of the Project. He recommended that the Agency's Board approve the acquisition of needed right-of-way and authorize the City Council to act as the lead agency for the Project. In response to Council! Agency Member Murray, Mr. Starman indicated that none of the improvements would be installed on Presidio. I MOTION: Made by Council Member Stegall, seconded by Council Member Bosetti, that Resolution No. 2007-09 be adopted, a resolution of the City Council ofthe City of Redding approving the use of tax increment funds to construct the Hilltop Drive Streetscape Project within the Canby-Hilltop-Cypress Redevelopment Project and making the required findings pursuant to Health and Safety Code Sections 33445 and 33678. The Vote: AYES: Council Members - Bosetti, Jones, Murray, Stegall, and Dickerson NOES: Council Members - None ABSENT: Council Members - None ABSTAIN: Council Members - None Resolution No. 2007-09 is on file in the office of the City Clerk. There being no further business, at the hour of 6:00 p.m., Mayor Dickerson declared the meeting adjourned. APPROVED c!2.J ~ Mayor I ATTEST: ~ 154~ City Clerk. '1- 1/22/2007