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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/15/2016 - SECOND READING OF ORDINANCE NO. 028, 2016, AUTHORIAgenda Item 4 Item # 4 Page 1 AGENDA ITEM SUMMARY March 15, 2016 City Council STAFF Beth Rosen, Affordable Housing Program Administrator SUBJECT Second Reading of Ordinance No. 028, 2016, Authorizing the Release of Restrictive Covenants on Property at 520 Cherry Street Owned by the Fort Collins Housing Corporation. EXECUTIVE SUMMARY This Ordinance, unanimously adopted on First Reading on March 1, 2016, authorizes the release of the Agreement of Restrictive Covenants Affecting Real Property for the property located at 520 Cherry Street, Units A and B, currently owned by the Fort Collins Housing Corporation. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading. ATTACHMENTS 1. First Reading Agenda Item Summary, March 1, 2016 (w/o attachments) (PDF) 2. Ordinance No. 028, 2016 (PDF) Agenda Item 8 Item # 8 Page 1 AGENDA ITEM SUMMARY March 1, 2016 City Council STAFF Beth Rosen, Affordable Housing Program Administrator SUBJECT First Reading of Ordinance No. 028, 2016, Authorizing the Release of Restrictive Covenants on Property at 520 Cherry Street Owned by the Fort Collins Housing Corporation. EXECUTIVE SUMMARY The purpose of this item is to authorize the release of the Agreement of Restrictive Covenants Affecting Real Property for the property located at 520 Cherry Street, Units A and B, currently owned by the Fort Collins Housing Corporation. STAFF RECOMMENDATION Staff is not making a recommendation. Staff supports the Fort Collins Housing Authority as a key partner in the provision of affordable housing to the community and achieving the long-term goals of the Affordable Housing Strategic Plan (AHSP) adopted by Council on October 6, 2015. Staff acknowledges that the immediate loss of affordable rental units does not align with the AHSP. BACKGROUND / DISCUSSION On February 21, 2003, the Fort Collins Housing Corporation, now known as Villages, Ltd., the non-profit development arm of the Fort Collins Housing Authority, received a grant in the amount of $258,000 in Community Development Block Grant (CDBG) funds to rehabilitate 16 units of permanent affordable rental housing in Fort Collins. At the time of contract, a Restrictive Covenant was placed on all 16 units, requiring the units provide affordable rental housing for a period of twenty years. This covenant is scheduled to be released February 21, 2023. The subject property of this request is a duplex located at 520 Cherry Street which received $30,100 in funding to cover the cost of a new roof, exterior repairs and interior renovation. Villages, Ltd. has since made the strategic decision to sell aging, high operating cost, single family homes and reinvest the funds into more cost effective, multi-family housing. This property was not included in that original restructuring plan. Villages, Ltd. has been approached by an adjacent property owner and would like to take advantage of this opportunity to sell. The proposed purchaser, whose primary residence shares a lot line with this duplex, has stated that the main objective in obtaining these properties is to replat the properties in order to increase the lot size of the residence at 412 North Whitcomb to 10,000 square feet. (Attachment 1) In order to accommodate this sale, the Fort Collins Housing Authority is requesting a release of the Agreement of Restrictive Covenant in exchange for the entire repayment of the CDBG Grant Funds in the amount of $30,100. (Attachment 2) To date, four single-family homes encumbered by this covenant have been sold with the original grant funding returned to the City. The approval of this request would further reduce the total affordable units under the covenant, with 10 units remaining out of the original 16. ATTACHMENT 1 Agenda Item 8 Item # 8 Page 2 CITY FINANCIAL IMPACTS The approval of this request will initially result in the loss of two affordable rental units in the City. The repayment of $30,100 Community Development Block Grant funding will return to the City’s Competitive Process and be available to fund future affordable housing projects. It is more expensive to create new affordable housing than to retain the existing inventory. The return of these funds will most likely leverage but not fully fund one (1) additional unit at the time of allocation. Based on the most recent competitive process, the total amount of subsidy needed from the City to create new affordable housing is $38,310 per unit. Approval of this request will lessen the financial burden experienced by the Fort Collins Housing Authority related the operation of this property and free capital to be reinvested in future affordable housing. BOARD / COMMISSION RECOMMENDATION The Affordable Housing Board (AHB) recommends adoption of the Ordinance on First Reading. At a public meeting held February 4, 2016, the Affordable Housing Board voted to recommend the release of the Agreement of Restrictive Covenants Affecting Real Property with the requirement that Villages, Ltd. return the grant funds and place the balance of the deed restriction on two currently unrestricted units, if financially prudent. (Attachments 3 and 4) On February 16, 2016, Julie Brewen notified the City that Villages, Ltd. conducted a review of its units pursuant to the recommendation of the Affordable Housing Board and determined it was not feasible to restrict additional units. (Attachment 5) ATTACHMENTS 1. 412 North Whitcomb Replat (PDF) 2. Fort Collins Housing Authority Request (PDF) 3. Affordable Housing Board minutes, February 4, 2016 (draft) (PDF) 4. Affordable Housing Board memo, February 16, 2016 (PDF) 5. FCHA letter re: AHB recommendation (PDF) -1- ORDINANCE NO. 028, 2016 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE RELEASE OF RESTRICTIVE COVENANTS ON PROPERTY AT 520 CHERRY STREET OWNED BY THE FORT COLLINS HOUSING CORPORATION WHEREAS, on February 21, 2003, the City entered into a Recipient Contract with the Fort Collins Housing Corporation, now known as Villages, Ltd. (the “Corporation”), the non- profit development arm of the Fort Collins Housing Authority (the “Authority”); and WHEREAS, through the Recipient Contract, the Corporation received a grant from the City of $258,000 in Community Development Block Grant (CDBG) funds to rehabilitate 16 affordable rental housing units in Fort Collins; and WHEREAS, the Corporation used $30,100 of the CDBG funds to replace the roof and make interior and exterior repairs to a duplex at 520 Cherry Street owned by the Corporation (the “Property”); and WHEREAS, the terms of the Recipient Contract require the Corporation to use the Property for affordable rental housing in accordance with federal law 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 February 21, 2003, the Corporation 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 Corporation 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 Corporation ever fail to comply with them; and WHEREAS, the terms of the Recipient Contract do not require the Corporation to repay the CDBG funds, and neither the Recipient Contract nor the Covenant allows for the Covenant to be released before the twenty-year affordability period expires if the Property is sold or the funds are repaid; and WHEREAS, the Corporation has been approached by the owner of a residential property adjacent to the Property who would like to buy the Property and replat it to increase the size of her existing lot; and -2- WHEREAS, the Corporation would like to sell the Property to the neighbor and so has asked the City to release the Covenant with respect to the Property in exchange for repayment of the $30,100 of CDBG funds invested in the Property; and 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(a) 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, approval of this request will result in the loss of two affordable rental units in the City, but the sale of the Property will generate sales proceeds that the Authority can use for future affordable housing projects, and the repayment to the City of $30,100 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 Corporation’s request at the Board’s regular meeting on February 4, 2016, and voted to recommend the release of the Covenant so long as the CDBG funds were repaid and the Corporation agreed to restrict two currently unrestricted units for the duration of the Covenant, if such a restriction would be financially prudent; and WHEREAS, the Corporation has since notified the City that it has determined it would not be feasible to restrict two additional units. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. 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 3. That the City Manager is hereby authorized to execute such documents as are necessary to release the Property from the Covenant upon repayment of the CDBG funds, 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. -3- Introduced, considered favorably on first reading, and ordered published this 1st day of March, A.D. 2016, and to be presented for final passage on the 15th day of March, A.D. 2016. __________________________________ Mayor ATTEST: _______________________________ City Clerk Passed and adopted on final reading on the 15th day of March, A.D. 2016. __________________________________ Mayor ATTEST: _______________________________ City Clerk