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Home My WebLink About08-11-09 RDA Item 05CITY OF _Jonte~q~__ LADE LSII`IC_R.E DREAM EXTREME REPORT TO REDEVELOPMENT AGENCY TO: HONORABLE CHAIRMAN AND MEMBERS OF THE REDEVELOPMENT AGENCY FROM: ROBERT A. BRADY EXECUTIVE DIRECTOR DATE: AUGUST 11, 2009 SUBJECT: RESOLUTION AUTHORIZING A COMMITMENT OF LOW AND MODERATE INCOME HOUSING FUNDS TO PROVIDE FINANCING FOR THE NEIGHBORHOOD STABILIZATION PROGRAM Backaround The Riverside Housing Development Corporation (RHDC) has requested the Agency's assistance with respect to a foreclosure acquisition/rehabilitation program primarily funded by the County. RHDC secured $2.8 million from the Riverside County Economic Development Agency's Neighborhood Stabilization Program (NSP) to leverage with $898,250 of Agency housing set-aside funds for the acquisition and rehabilitation of foreclosed properties in the City of Lake Elsinore. RHDC and Agency staff anticipate that the Program will provide for the acquisition and rehabilitation of at least 15 foreclosed homes for sale to low to moderate income families. Discussion The Agency's participation in this program will be by way of temporary construction financing with Agency Low and Moderate Income Housing Funds devoted to pay rehabilitation costs for residences acquired with NSP funds. The rehabilitated homes will be sold to eligible low and moderate income homebuyers at an affordable housing cost. Agency funds will be repaid from the proceeds of the sale of each property to a qualified homebuyer. Although the Agency generally commits its Low and Moderate Income Housing Fund to assist projects and programs that qualify as "inclusionary housing" within the meaning of the California Community Redevelopment Law, structuring the Agency assistance to meet those objectives in the context of the NSP would not be beneficial to future homeowners or the overall success of the foreclosure acquisition/rehabilitation program. Rather than requiring forty-five (45) year affordability covenants/resale restrictions with subsidy retention, long-term monitoring, project area placement, and silent seconds necessary to meet inclusionary housing obligations, the pR bkV"I P2WQuftP (N AI Page 1 of 6 Resolution Authorizing a Commitment of 20% Low/Mod Housing Set-Aside Funds August 11, 2009 Page 2 affordability only to low and moderate income homebuyers with Agency subsidy recapture upon the sale of the property to a qualified homebuyer. The foreclosure acquisition/rehabilitation program merits divergence from the Agency's policy of requiring long term affordability covenants to meet inclusionary housing goals because of the unique foreclosure crisis context of the community. This program promises to provide many other benefits to the Agency and broader community, including the following: 1) Great leveraging of funds: This program presents a relatively small and temporary contribution of Agency housing set-aside funds compared to the large infusion of NSP funds to the Lake Elsinore community; 2) Short-term investment with long-term gains: Agency housing set-aside funds will be repaid upon sale of the rehabilitated homes so that the funds will be available for other projects consistent with Agency Implementation Plan policies; 3) Placing property back on the tax rolls: The Agency investment will not only preserve and rehabilitate local housing stock, it will also increase the long-term value of the property and future property tax assessments; 4) Prevention and resolution of blight in neighborhoods: The program not only provides initial affordable housing, but also eliminates blighting influences of foreclosed and abandoned properties while allowing homeowners to realize future equity gains; 5) Promotion of responsible homeownership and long-term homebuyer benefits: This program is better for homebuyers because of more relaxed resale restrictions that do not force Agency investment where it isn't necessary just to achieve inclusionary housing; 6) Less complicated: Since purchasing foreclosed properties requires speed and efficiency in process, this program seems more conducive to needs of Agency partners by requiring less documentation and less long-term monitoring requirements for the Agency; 7) Greater impact: By restricting the rehabilitation to less than substantial, Agency monies will stretch further and may benefit more properties and more low and moderate income homebuyers; and 8) Economic development and job opportunities: This program continues to support local contractors and the local economy by leveraging funds from outside the Lake Elsinore community to provide work within the community that will require local labor and resources from Lake Elsinore residents and businesses. Based on the program's many community and housing benefits, staff believes that the program warrants participation by the Agency. Fiscal Impact Funding is available for the presently proposed $898,250 investment in the foreclosure acquisition/rehabilitation program with RHDC. The Redevelopment Agency's 20 percent Low / Mod Housing Set-Aside Fund has an unencumbRERVALYit tea Welt4A OWN $13 million. Page 2 of 6 Resolution Authorizing a Commitment of 20% Low/Mod Housing Set-Aside Funds August 11, 2009 Page 3 Recommendation That the Agency Board approve Resolution No. 2009-_ authorizing a commitment of $898,250 from the Redevelopment Agency's 20% Low/Mod Housing Set-Aside Fund for purposes of providing temporary financing for the acquisition/rehabilitation of foreclosed properties within the City of Lake Elsinore pursuant to the County's Neighborhood Stabilization Program and authorize the Executive Director to enter into a loan agreement with RHDC and related ancillary documents. Prepared by: Steven McCarty / Redevelopment Project Manager Reviewed by: Barbara Leibold Agency Counsel Approved by: Robert A. Brady Executive Director RDA August 11, 2009 Item No. 5 Page 3 of 6 Page 1 of 3 RESOLUTION NO. 2009- RESOLUTION OF REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE, CALIFORNIA, AUTHORIZING A COMMITMENT OF 20 PERCENT LOW / MOD HOUSING SET-ASIDE FUNDS TO PROVIDE FINANCING FOR THE NEIGHBORHOOD STABILIZATION PROGRAM WHEREAS, by action of the City Council pursuant to Chapter 2 of the California Community Redevelopment Law (Health & Safety Code 33000 et seq.) ("Redevelopment Law") the City has established the Redevelopment Agency of the City of Lake Elsinore (the "Agency"), whose purposes include increasing, improving and preserving the community's supply of housing affordable to and occupied by low and moderate income households pursuant to 33334.2, 33334.3, 33334.6 and 33413 of the Redevelopment Law; and WHEREAS, the Riverside Housing Development Corporation ("RHDC") is an experienced affordable housing developer; and WHEREAS, RHDC has secured $2,800,000 from the Riverside County Economic Development Agency's Neighborhood Stabilization Program ("NSP") for the purpose of acquiring and rehabilitating foreclosed residential properties within the City of Lake; and WHEREAS, RHDC seeks to borrow $898,250 from the Agency in order to cover rehabilitation costs that Developer will incur in connection with the NSP; and WHEREAS, the Agency desires to provide financial assistance to Developer for certain eligible rehabilitation costs in the form of an Agency loan in the aggregate amount not to exceed $898,250 from the Agency's Low and Moderate Income Housing Fund (the "Agency Loan"); and WHEREAS, RHDC and Agency agree that the Agency Loan will facilitate the implementation of the NSP which is in the vital and best interest of the Agency, is necessary for the protection of the health, safety and welfare of Lake Elsinore residents, and is in accord with the public purposes and provisions of applicable federal, state and local laws and requirements. NOW, THEREFORE, THE REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The foregoing recitals are true and correct and are incorporated as substantive findings of the Agency by this reference. SECTION 2. The Agency hereby commits funds from its Low and Moderate Income Housing Fund in an amount not to exceed $898,250. for the purpose of providing temporary financing for the acquisition/rehabilitation of foreclosed properties within the City of Lake Elsinore pursuant to the NSP. RDA August 11, 2009 Item No. 5 Page 4 of 6 RDA Resolution No. 2009- Page 2 of 3 SECTION 3. The Agency Loan shall require that any outstanding balance as to each property benefited be due and payable upon the transfer of such property to a residential home buyer and that such residential home buyer shall be to a qualified low or moderate income household. SECTION 4. As a condition of the Agency Loan, the Agency will require that the loan (or components thereof as the case may be) be secured by a Deed of Trust which will be recorded against the applicable benefitted property acquired pursuant to the NSP. SECTION 5. That the making of the Agency Loan shall be contingent on and subject to such other appropriate terms and conditions as the Executive Director may establish. SECTION 6. All loan documents shall be reviewed and approved by the Agency General Counsel for form and legality prior to execution. SECTION 7. Subject to all applicable laws, including all notice and hearing requirements, the Agency Board hereby authorizes the Executive Director to execute a loan agreement along with any ancillary documents, administer the Agency Loan, and take any other action with respect to the loan and the NSP consistent with this Resolution and its basic purpose. SECTION 8. This Resolution shall take effect from and after the date of its passage and adoption. PASSED, APPROVED AND ADOPTED at a regular meeting of the Redevelopment Agency of the City of Lake Elsinore, California, this 11th day of August 2009. THOMAS BUCKLEY, CHAIRMAN REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE ATTEST: DEBORA THOMSEN AGENCY SECRETARY RDA August 11, 2009 Item No. 5 Page 5 of 6 RDA Resolution No. 2009- Page 3 of 3 APPROVED AS TO FORM: BARBARA ZEID LEIBOLD AGENCY COUNSEL STATE OF CALIFORNIA COUNTY OF RIVERSIDE SS CITY OF LAKE ELSINORE I, DEBORA THOMSEN, Agency Secretary of the Redevelopment Agency of the City of Lake Elsinore, California, hereby certify that Resolution No. was adopted by the Board of the Redevelopment Agency of the City of Lake Elsinore at a regular meeting held on the 11th day of August 2009, and that the same was adopted by the following vote: AYES: NOES: ABSTAIN: ABSENT: DEBORA THOMSEN AGENCY SECRETARY RDA August 11, 2009 Item No. 5 Page 6 of 6