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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 12/17/2013 - FIRST READING OF ORDINANCE NO. 185, 2013, AUTHORIZAgenda Item 16 Item # 16 Page 1 AGENDA ITEM SUMMARY December 17, 2013 City Council STAFF Beth Rosen, CDBG/HOME Program Administrator SUBJECT First Reading of Ordinance No. 185, 2013, Authorizing the Release of Restrictive Covenants on Property at 405 Linden Street Owned by the Fort Collins Housing Authority. EXECUTIVE SUMMARY The purpose of this item is to obtain authorization from City Council to release the Agreement of Restrictive Covenants Affecting Real Property for the property located at 405 Linden Street, currently owned by the Fort Collins Housing Authority. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION On October 1, 2001, the Fort Collins Housing Authority received a grant of $174,931 in Community Development Block Grant funding to rehabilitate 11 buildings (41 dwelling units), of affordable rental housing. At the completion of the rehabilitation, a Restrictive Covenant was placed on all 41 units, requiring the units provide affordable rental housing for twenty years. This covenant is scheduled to be released on October 1, 2023 (20 years from project completion). The subject property of this request, 405 Linden Street, received $8,400 in funding to cover the cost of siding and a roof replacement. As part of the Fort Collins Housing Authority’s long-term plan to sell single family homes and strategically reinvest the funds and leverage the funds into more cost effective, multi-family housing, it is asking the City to release the covenant on 405 Linden Street, which would enable the Authority to sell the property and repay the $8,400 to the CDBG program. A buyer has been found. To date, five single family homes encumbered by this covenant have been sold and the covenant released. See Attachment 1, a memo from Julie Brewen, Executive Director of the Fort Collins Housing Authority, for more information about the request. Staff has worked closely with the leadership of the Fort Collins Housing Authority to both understand its long- term strategic plan, and identity ways to mitigate the loss of affordable rental housing. As a condition of this request, the Fort Collins Housing Authority has agreed to provide a comparable 3-bedroom replacement unit within the next five years. This must be a new affordable housing unit, rather than the designation of current unit. FINANCIAL / ECONOMIC IMPACT The approval of this request will initially result in the loss of one, 3-bedroom, affordable rental unit in the city. However, the repayment of $8,400 in Community Development Block Grant funding will return to the City’s Competitive Process and be available to fund future affordable housing. If allocated towards housing, these funds could leverage an additional $225,000 in affordable housing funding towards future affordable housing development. Agenda Item 16 Item # 16 Page 2 Approval of this request will lessen financial burden experienced by the Fort Collins Housing Authority related to the operation of single family homes and free up capital to be reinvested into future affordable housing. BOARD / COMMISSION RECOMMENDATION The Affordable Housing Board recommends adoption of the Ordinance on First Reading. At a public meeting held on December 5, 2013, the Affordable Housing Board voted to recommend the release of Agreement of Restrictive Covenants Affecting Real Property with the requirement that the Fort Collins Housing Authority provides a comparable 3-bedroom placement unit to the affordable housing inventory within the next five years. ATTACHMENTS 1. FCHA Request to Release Restrictive Covenant (PDF) 2. Location Map (PDF) 3. 405 Linden picture (DOC) 4. Affordable Housing Board Minutes, December 5, 2013 (draft) (PDF) 1 November 4, 2013 Honorable Mayor and City Council Members City of Fort Collins 300 LaPorte Avenue Fort Collins, CO 80521 Dear Mayor and Council Members, Please accept this letter as the formal request to release the restrictive covenants and allow repayment of the CDBG loan for the property owned by Villages Ltd. located at 405 Linden Street. This is a single family home with extensive long-term capital needs. A few years ago, Villages Ltd., the 501c3 affordable housing corporation managed by FCHA, made a strategic decision to liquidate aging, high operating cost single-family homes from its portfolio and to use the sale proceeds to leverage additional affordable housing in our community. At that time, the 405 Linden house was held back in order to determine its best use, especially because of its proximity to the Legacy Senior Residences, 72 new low-income apartments constructed through the Low Income Housing Tax Credit program. It became very important through the development of Legacy and the revitalization of the river corridor that a suitable buyer be found for the 405 Linden house. A silent real estate listing was executed with the intent of finding a buyer who would be active in the revitalization of the neighborhood. Such a buyer has been found. We respectfully request the release of the restrictive covenants which were placed on this property in exchange for repayment of $8,400 in CDBG loan funds which were awarded for improvements made many years ago. It is important to note that when the offer on this house was received by Villages Ltd., the resident living in the unit was offered a comparable rental unit at a reduced price. The resident immediately took advantage of the opportunity and was elated to be able to move right next to the school which her child attends. Further, she will be eligible for a project-based federal Housing Choice Voucher which will greatly reduce her rent burden. Additional information: 1. The history of the City of Fort Collins rehab loan a. Issued October 1, 2001, 20-year term, 0% Interest, Due on Sale b. $174,931 total award for upgrades on 41 total units at 11 properties c. $8,400 of the total was used for capital improvements on this one unit located at 405 Linden Street d. 35 units (4 properties) will remain encumbered by the restrictive covenant (6 single family homes from this loan have already been sold, released from the covenant and portions repaid in 2009/2010) ATTACHMENT 1 2. FCHA’s plans for the remaining units encumbered by the covenant a. The 35 remaining units in this particular loan and restrictive covenant are multi- family units and at this time the plan it that they will remain in the portfolio. 3. History and context of the disposition plan Again, Villages Ltd. made a strategic decision to liquidate aging, high operating cost single-family homes from its portfolio and to use the sale proceeds to leverage additional affordable housing in our community. This particular property operates in a loss position each year because the cost of operating a single family detached unit exceeds the affordable rent structure. Strategically, Villages Ltd. and FCHA decided to partner with Cornerstone and Associates LLC on the 72-unit Legacy Senior Apartments to replace affordable housing on this particular block in Old Town. Proceeds from the sale of 405 Linden Street will be used to pay back the loan portion allocated to this property and leverage additional units or substantial renovation of existing multi-family units. 4. Detailed information on the buyer in relation to the neighborhood a. Name of buyer, benefit of this particular buyer and justification of the buyer as it relates to the revitalization of the river corridor Randy Shortridge and Jason Kersley are architects and the owners of AUWorkshop. They have been actively involved in efforts to advance redevelopment of the river district for many years. Specifically they are the architects for the Block One project. They have also worked with three other property owners in the River District to develop conceptual plans for redevelopment of their properties. They are proposing to move their offices into the house at 405 Linden. They are ideal buyers for 405 Linden as they will now be directly involved in helping to coordinate the redevelopment of the NW quadrant of Linden and Willow, which is very difficult because of the size and shape of the parcels and number of individual owners. Their knowledge and personal investment will greatly enhance the potential for a successful outcome. 5. Supporting documentation/references regarding any City Plans regarding long-term planning & revitalization of the Poudre River Corridor The City and the Downtown Development Authority (DDA) have been encouraging redevelopment of the River District for many years. The RDR zoning district was created several years ago for this relatively small area of the downtown. It clearly promotes redevelopment and high density. In addition, the City and DDA have been making investments in the infrastructure of the River 2 District to encourage redevelopment, including the recent reconstruction of Linden Street. The city web site includes the following: “ The Downtown Development Authority and the City’s Transportation Services, Community Planning & Environmental Services, and Utilities departments have initiated this project to address the lack of sufficient public infrastructure in the Downtown River District area. The transportation and utility improvements that come about through this project will help this area achieve the visions and goals set forth by City Plan and the Downtown River Corridor Implementation Program. This project will determine improvements to support existing conditions as well as provide a framework for future development within this important area of Downtown Fort Collins.” Redevelopment is occurring all around 405 Linden. Immediately to the south is the Legacy Senior Housing project. The Block One mixed-use project is under construction across the street. The property at 359 Linden has recently received P and Z Board approval for a new apartment project and an adaptive reuse of the historic Northern Colorado Feeders Supply building. The NW quadrant of Linden and Willow includes several small lots. Redevelopment of this quadrant will ideally be done via the consolidation of several properties or coordination between owners to accomplish what none of them can do individually. Releasing the covenant helps this coordinated effort. The end result of the redevelopment of the River District will be additional employment and housing stock at the heart of the downtown. We are already seeing that take place. I would be very happy to answer any questions you may have. Thank you for your consideration. Sincerely, Julie J. Brewen Executive Director 3 Linden St Willow St N College Ave Jefferson St Walnut St E Mountain Ave Pine St E Lincoln Ave Old Firehouse Aly Poudre St Cherry St Maple St Buckingham St Tenney Ct Lincoln Ave Riverside Ave Laporte Ave Old Town Sq Chestnut St Linden Center Dr W Mountain Ave Mathews St Peterson St Trimble Ct Seckner Aly Remington St S College Ave Whitton Court Aly Pine St Linden St Tenney Ct Affordable 405 Housing Linden Restrictive Street Covenant CITY GEOGRAPHIC These and were map OF not products FORT designed and INFORMATION COLLINS or all intended underlying for general data SYSTEM are use developed by members MAP for use PRODUCTS of the by the public. City The of Fort City Collins makes for no its representation internal purposes or only, warranty dimensions, as to contours, its accuracy, property timeliness, boundaries, or completeness, or placement and of location in particular, of any its map accuracy features in thereon. labeling or THE displaying CITY OF FORT COLLINS PARTICULAR MAKES PURPOSE, NO WARRANTY EXPRESSED OF MERCHANTABILITY OR IMPLIED, WITH OR RESPECT WARRANTY TO THESE FOR FITNESS MAP PRODUCTS OF USE FOR OR THE UNDERLYING FAULTS, and assumes DATA. Any all responsibility users of these of map the use products, thereof, map and applications, further covenants or data, and accepts agrees them to hold AS the IS, City WITH harmless ALL from made and this against information all damage, available. loss, Independent or liability arising verification from any of all use data of contained this map product, herein should in consideration be obtained of by the any City's users having of these liability, products, whether or direct, underlying indirect, data. or consequential, The City disclaims, which and arises shall or not may be arise held from liable these for any map and products all damage, or the loss, use thereof or by any person or entity. Printed: November 26, 2013 0 0.035 0.07 0.105 0.14Miles Scale 1:4,800 ATTACHMENT 2 Social Sustainability 321 W. Maple Street PO Box 580 Fort Collins, CO 80522 970.221.6758 405 Linden Street Fort Collins, CO 80521 CITY OF FORT COLLINS AFFORDABLE HOUSING BOARD DRAFT BOARD MEETING MINUTES 300 Laporte Ave Fort Collins, Colorado December 5, 2013 4:00–5:00p.m. EXCERPT FROM DRAFT MINUTES: ITEM 1: FCHA REQUEST TO RELEASE RESTRICTIVE COVENANT ON SINGLE FAMILY PROPERTY Beth Rosen said in 2001 the FCHA received a CDBG grant of $175,000 to rehab properties, including single- and multi-family units. In the past a few covenants were released by a previous City administrator at the sale of properties. People assumed that when a unit sold it released the covenant. With a new administration, City Attorney, and Council, the code is being enforced. Council must approve an ordinance to release an ownership interest in a property. The FCHA owns a 3-bedroom, 1 bath single family unit at 405 Linden and is looking to sell to a buyer that will not be using the property for housing, and will be active in River Corridor development. To release the covenant City Council must approve the release. FCHA has a long term strategic plan to get out of scattered single family units and reinvest the funds into more long term affordable housing. These units are not cost effective and are difficult to maintain. They are requesting to sell, repay the loan of $8400 that was used to rehabilitate that property, and leverage the funds to purchase other properties. Discussion/Q & A: Dan asked why this didn’t have to go through Council in the past. Beth said that it was done administratively through staff and the City Attorney. Dan asked if City Council requested the release of the covenant come before them. Beth said staff and the City Attorney have a different interpretation which is a restrictive covenant represents an ownership interest in the property. The City has an ownership interest hat says the property must remain affordable for 20 years. To release that interest requires an ordinance of City Council. This was done improperly in the past, and staff and Council want to do this properly now. She has looked through documents and there is nothing that said the covenant would be released when sold. Dan asked Beth if she recommends approval of that with the caveat that it be replaced within 5 years. Beth said part of development plan is a comparable unit in a future development. Their comparable unit should have the same number of bedrooms, so that there is not a net loss of a type of unit. Dan said he noticed in the request from FCHA, that the single family homes aren’t cost effective because the rents don’t support the cost of the unit. Julie said it is a historic home with deferred capital needs. It has functional obsolescence. Dan asked if it is possible to have a 3 bedroom unit in the future that will be cost effective. Julie said they have a project in a tax credit neighborhood that contains attached 3 bedroom townhomes that are comparable in size. From vacancy studies they know that the biggest need now is 1 bedroom units. They just did Legacy on the same block and added 72 one bedroom units. But they do understand the concern about losing inventory. She is fine with the condition. Dan said his concern is the cost effectiveness, and if there are plans to have 3 bedrooms available to families, but not if it wouldn’t be cost effective. Curt asked how the houses are going to be sold. Are they going at market rate to investors? Julie said this portfolio has already sold off many of its single family homes. The majority have gone to first time home buyers. The product type lent itself to this. This one was held back because of its location on this block. They silently listed it with a broker, who was putting together a package for redevelopment. FCHA is a major partner in Legacy. They don’t want it to go to a tattoo parlor or Cheba Hut, or someone unable to maintain an historic home. There are times they try to get top dollar because they are leveraging for additional units. Curt is mindful of workforce housing and concerned that all these homes are snatched up by investors which causes another affordable housing issue. Julie, if we sell one and get seven workforce units we have increased the permanent inventory. Dan asked about repaying loan and whether that releases the covenant. Beth said that with exception of homebuyer’s assistance, the funds are due on sale loan, but you don’t want investors using our money to build appreciation and wealth, then lose affordable housing inventory when the market goes up. They place a 20 year restrictive covenant in order to reduce the marketability of that product for 20 years. An example would be if the FCHA has a four-plex with a covenant, the market value is lower because the potential rent income is lower. This is to prevent cashing out when the market is high and to maintain affordable housing units. Troy said he thought the City didn’t have any enforcement other than Provincetowne. Beth said for every rental that the City funds, there is a 20 year covenant. This is one house with $8400 in rehabilitation funds. There is good argument for the life and use of the building. The $8400 has been used in the 10 years since it was rehabbed. Other projects have approached her to sell their properties after 5 years because they are tired of being landlords, and in that case the buyer gets a reduced cost and inherits the covenant Dan asked if it was possible to require FCHA to replace this. How do you enforce that? Beth said in theory we would have to take them to court if they didn’t follow through. In reality, we are trusting their best intention, it will be written as a requirement, delegated renegotiation power to the city manager. Julie said they are going to do it anyway, so she is unsure the value of adding it to the ordinance. The housing authority board is appointed by council and council can take over if the board runs “rogue.” Beth, the idea is to make it more palatable to see that there will be no net loss of inventory. This is more in line with strategic plan. Tatiana asked if it would be commercial or residential. Julie said it will be commercial while the area is redeveloped. Troy Jones moved to recommend a release of Agreement of Restricted Covenants as requested by Fort Collins Housing Authority. Tatiana Martin seconded. The Affordable Housing Board recommends adoption of the Ordinance on First Reading. At a public meeting held on December 5, 2013, the Affordable Housing Board voted to recommend the release of Agreement of Restrictive Covenants Affecting Real Property with the requirement that the Fort Collins Housing Authority provides a comparable 3-bedroom placement unit to the affordable housing inventory within the next five years. Motion approved unanimously, 6-0-0 - 1 - ORDINANCE NO. 185, 2013, OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE RELEASE OF RESTRICTIVE COVENANTS ON PROPERTY AT 405 LINDEN STREET OWNED BY THE FORT COLLINS HOUSING AUTHORITY WHEREAS, on October 1, 2001 the City and the Fort Collins Housing Authority (“Authority”) entered into a Recipient Contract, through which the Authority received a grant from the City of $174,931 in Community Development Block Grant (CDBG) funds to rehabilitate affordable rental housing units in Fort Collins; and WHEREAS, the Authority used $8,400 of the CDBG funds to replace the roof and siding on a single-family house at 405 Linden Street owned by the Authority (the “Property”); and WHEREAS, the terms of the Recipient Contract, as amended in May 2003, require the Authority to restrict the benefitted housing units to households with income equal to or less than 50% of the area median income for not less than twenty years; and WHEREAS, the Recipient Contract gave the City the right to require a deed of trust or other security interest in properties improved using the CDBG funds and to require, in addition to or in lieu of a deed of trust, a deed restriction on such properties to protect the City’s interest in the funds provided under the Recipient Contract; and WHEREAS, on October 1, 2001, the Authority and the City also entered into an Agreement of Restrictive Covenants Affecting Real Property (the “Covenant”), which placed a twenty-year affordability requirement on multiple properties owned by the Authority and improved with CDBG funds under the Recipient Contract, including the Property; and WHEREAS, the Covenant gives the City the right to enforce the terms and conditions of the Covenant should the Authority ever fail to comply with them; and WHEREAS, the terms of the Recipient Contract do not require the Authority to repay the CDBG funds, and neither the Recipient Contract nor the Covenant allows for the Covenant to be released if the Property is sold or the funds are repaid before the twenty-year affordability period expires; and WHEREAS, as part of the Authority’s long-term plan to sell single family homes and reinvest the funds into more cost-effective multi-family housing, the Authority is asking the City to release the Covenant with respect to the Property, so that the Property can be sold for redevelopment; and WHEREAS, as a condition of releasing the Covenant, the Authority has agreed to repay the $8,400 of CDBG funds invested in the Property and to provide a comparable 3-bedroom replacement unit within the next five years; and - 2 - WHEREAS, the City’s right under the Covenant to restrict the use of the Property constitutes an interest in real property owned by the City that the City would be giving up by releasing the Covenant; and WHEREAS, Section 23-111 of the City Code states that the City Council is authorized to sell, convey or otherwise dispose of any interest in real property owned in the name of the City, provided that the City Council first finds, by ordinance, that such sale or other disposition is in the best interests of the City; and WHEREAS, the repayment to the City of $8,400 in CDBG funds will allow the City to make those funds available for future affordable housing projects; and WHEREAS, the Affordable Housing Board reviewed the Authority’s request at the Board’s regular meeting on December 5, 2013 and voted to recommend the release of the Covenant so long as a replacement unit is provided. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby finds that releasing the Covenant on the Property on the terms and conditions described herein is in the best interests of the City. Section 2. That the City Manager is hereby authorized to execute such documents as are necessary to release the Covenant and to document the Authority’s obligation to provide a replacement three-bedroom unit within five years on terms and conditions consistent with this Ordinance, along with such other terms and conditions as the City Manager, in consultation with the City Attorney, determines are necessary or appropriate to protect the interests of the City or effectuate the purposes of this Ordinance. Introduced, considered favorably on first reading, and ordered published this 17th day of December, A.D. 2013, and to be presented for final passage on the 7th day of January, A.D. 2014. __________________________________ Mayor ATTEST: _______________________________ City Clerk - 3 - Passed and adopted on final reading on the 7th day of January, A.D. 2014. __________________________________ Mayor ATTEST: _______________________________ City Clerk