Recommendation to: (1) Based on the analysis provided, consider the request to (i) adopt resolution authorizing the City to support the California State Communities Development Authority Community Improvement Authority’s (CSCDA) issuance of bonds under its Middle-Income/Workforce Rental Housing Program to enact moderate-income deed restrictions on the existing Oceanaire apartment project, at 150 West Ocean Boulevard (Project), and (ii) authorize the execution of a Public Benefits Agreement (PBA) with CSCDA in connection therewith that includes a provision that shares any future sale profits with taxing bodies proportionate to the current tax allocation; (2) Request City Manager to develop a proposed policy for any future similar projects that participate in the Middle Income/Workforce Rental Housing Program; and (3) If action (1) is approved, designate the Project as a pilot, with no similar projects to be approved until the City Council has an opportunity to consider the City Manager’s proposed policy. (District 2)
Thank you. Next up is I am 20. Item 20 Report from Development Services. Recommendation two DAB Resolution Authorizing the city to support the California State Communities Development Authority. Issuance of bonds under its Middle Income Workforce Rental Housing Program to enact moderate income deed restriction on the existing Ocean Air apartment project at 150 West Ocean Boulevard, District two. Thank you, Mr. Modica. Thank you, Mayor and Council. This is a relatively new program that was brought to the state of California to look at how to convert some existing housing to a moderate income housing, something that the council had asked us to look at back in November. And we are here to you tonight to recommend a pilot project. We've done a lot of negotiating on this. We want to make sure that you're aware of the various program features. There's some benefits. There's also some risk that we need you to be aware of. And with that, I'll turn it over to Oscar Orsi, our development services manager. Thank you, ma'am. Thank you, Mayor. Members of the city council. As the senator indicated in November, Council had directed staff to study the benefits and risk associated with participation of the Community Statewide Development Authority, also known as CDA, to develop and preserve middle income workforce housing staff contracted with HRA advisors to analyze the proposal between CDA and Waterford to acquire property and maintain it for middle income households. So that would be the ocean area. 150 West Ocean Staff Attorney CDA in Waterford have worked to address and identify concerns and address those through some project modifications. Can you please go back to the previous slide? Thank you. The as you can see from the slide, the there are many steps in this involved in this transaction. We've highlighted the area where. The. Council is asking for your direction on how to proceed with this transaction. Overall, Waterford proposes to purchase Ocean Air from the air for 122 million. Proposes to simultaneously purchase Ocean Air from Waterford, who will act as a project administrator and asset manager. What we are requesting that you consider tonight is the city's proposal to is is a request to enter into a public benefit agreement PPA with CDA to act as a host. Forgoing our ad valorem property taxes and reserving the right to force the sale after 15 to 30 years. Excellent. Thank you. CCD will finance the project through tax exempt bonds as well as housing revenue bonds. The financial structure also includes closing fees and annual ongoing fees for property maintenance and property administration and asset management. Next slide, please. As indicated in our staff letter, this transaction provides several benefits. It preserves 216 units for middle income households for again, for a period of 15 to 30 years or longer, if the council chooses to do so in the future. In response to his staff's comments, Waterford and KDA have modified their initial proposal to the following. They've modified the affordable housing mix to provide additional 80% Army units. They've also agreed to provide annual reports, as well as that allow staff the opportunity to investigate the condition of the building to make sure that the Oceanarium maintain is maintained at a class A condition. This slides indicates the May levels and the household size for the project. Typically, the city will use the state income limits. This transaction proposes to use the light tech, which is slightly higher in terms of income household requirements at 3530 5% versus 30%. Next slide of. Patrick yeah will complete continue this presentation and we do have the project proponents CDA in Waterford here also to provide a brief presentation once we conclude our presentation. Thank you, Patrick. Thank you, Oscar. And good evening. Mayor Garcia and City Council. I'm now going to cover the project's potential issues and risks. Before doing so. I must reiterate that this is a new program designed to assist moderate income households. There are no other programs or funding available to provide moderate income housing opportunities. So along with a few issues, there is a great benefit to providing moderate income housing units. The projects for affordable housing gains are modest compared to market. There are significant rent reductions only at the 80% AMI level, which comprise 87 of the 216 units. These units have a 28% reduction from market rents. We will not be able to get credit for these units because they're not new construction units and they do not have long term 55 year affordability covenants placed on them. And it is estimated to take about four years for all the units to convert to affordable units. A completed I'm sorry, a complicated financing structure and aggressive rent growth assumptions may result in high debt and limited sales proceeds to taxing entities upon the project sale at 15 or 30 years. There are no new housing units created. But again, this is currently only the only option for providing moderate income housing units. It will take a little time for the units to become affordable through attrition, but that's really unavoidable. Based on Rene's analysis, the initial loss property tax revenue would be about 1.5 million for all taxing entities in year one, which includes 264,000 for the city over 30 years. The lost revenue would have a present value of $43 million for all taxing entities and about $8 billion for the city. With the current structure, the city can request the sale of the project after 15 years. There are risks and trade offs associated with the exit scenarios. If the city chooses to sell earlier at 15 years, this minimizes the lost tax revenue and risk of deferred maintenance, but it also limits the affordability term and sales revenue. Conversely, if the city chooses to sell it later, there is a risk of deferred maintenance cost. Additionally, the option to maximize the value of the asset is to allow the project to return to market rate, which means that the city would lose the affordability benefits. Staff believes that this is an undesirable outcome for the city and therefore there's a risk that sales proceeds, which are needed to pay off bonds and repay taxing entities, will be limited. Only a few of these projects have been approved in cities throughout California, and there are no operating experience or models that we can show how the long term transaction may play out. Staff recommends that the City Council consider designating this particular transaction to be a pilot project and request staff to develop a draft policy for this type of project going forward. The city has an established track record of working with CDA on the development of affordable housing. Waterford is a well-known developer that owns major assets in the city, including City, Place and the World Trade Center. Staff is encouraged by the development team's positive track record in the city and as such is supportive of approval of the project as a pilot. Create Middle Income Housing Project. Here again are the recommendations before you for your consideration this evening, and that concludes our presentation. Thank you. Aaron Council that concludes staff presentation. Kay and Waterford are here and available to answer any questions if you have of them. I think we've done a lot of work on this project. We've done a ton of analysis. We're at the point where we do feel like this is something we can try as a pilot if the council wants to move forward and otherwise, we're ready to answer questions. Thank you. Thank you. County Councilwoman Allen. No. Yeah. Thank you. Thank you, Mayor. And thank you, Oscar and Patrick, for the presentation and staff for all of your hard work on this. I know we started talking about this a while ago, and and I know it's been an incredible amount of work for for the team. I moved this item and I again, I just think the staff are there hard work it's an. ETA. And new type of program. And I'm happy to consider this as a pilot project only so that we can first analyze the impacts prior to setting any precedent for for other developers. One of the things that I do like about this project is that Water Ford is a well known developer. And like we said and you said in the presentation, they have substantial investment in the city. I mean, city plays and the World Trade Center are are significant developments in the area. And given their success and history and Long Beach definitely makes it easier for me to support this item also. More unit more unit units at a lower income level of affordability are crucial, and I'm always open to new ideas to add workforce housing for the missing middle. So again, I commend our city manager and staff for their diligent efforts and for a thoroughly, thoroughly vetted proposal, and especially that it's something new and innovative. So a question that I do have is if you are someone that's answering questions can describe what the Anaheim Project program is under and what that looks like. I'm sorry. Could you repeat the question, please? Yes. What does the what does the project in Anaheim look like? Remember, this is a Christopher Cross. There's three different projects in the city of Anaheim, one which is further along than the two others. We spend a lot of time with the Anaheim projects and the unit mix that was described by Patrick and Oscar earlier tonight is a similar request that was made by the city of Anaheim. So this deal is structured very similar to the city of Anaheim. And if you're familiar with Anaheim, it's its three platinum triangle multifamily buildings that are involved in what's been under consideration in Anaheim. So that's the information we have. But Waterford is with us and they were also involved in those transactions and would be able to provide you some more information about the Anaheim deals that preceded this deal by about two months. Thank you, Christopher. Councilwoman Price. I just queued up to second the motion. Okay. Thank you. Motion asked. Can Council Councilmember Austin? Count some of your anger. Thank you. I also cued up the second, but now that you have me, I have one question about the. It's early on in the presentation, there was no directive on the restrictions. Can you explain what that is? Yes, Councilmember. What? The property will be restricted for the life of the bond sales 15 to 30 years. They will be limited to only. Being able to. Have residents that meet the middle income household requirements, EMI requirements so they the deed restrictions. Will not allow for the CDA to offer those at market rate prices. Well, I think it's is a great project, it's a great experiment, and I'm looking forward to it as it is about it. I understand that. But the way it's celebrated now, it's great. And again, the Waterford and CSA are great partners for the city and the support to work with the ministry. Thank you. Vice Mayor Richardson. Thanks, Mr. Mayor. I just wanted to chime in and just acknowledge, you know, a couple of things. The dedication on the part of Waterford to figure out how to make this happen and city staff's cooperation and working together to address this idea as a number of innovative pilots that they do with respect to this program and others across the state. I've I've, you know, probably had relation with a seat with CSP, KBA for the last five, six years in terms of seeing them at local government commission, others. And sometimes, you know, things are brought to us that we may not be familiar with. And I think the approach here with the pilot makes sense, makes a lot of sense. So I think the city manager did a good job at sort of working with the developer, negotiate the income levels and ensure that, you know, the project got better as it moved along. So congratulations to everyone and I look forward to support this project. Thank you. Thank you, Councilman Mongo. Thank you. I want to echo Councilman Allen's comments. It is hard to approve of projects like this that can bring so much but have so much risk. It's great that it a trusted partner of the city and I was one of the reasons why I'm able to support it today. But as we move forward, I would look for options that come to the city like this to be even better and better as the housing market has also become better and better on the developer side. So thank you to this partner. I'm excited to support it today, but I look forward to more support of our community through future projects. Thank you, Councilwoman. Sun has been coming here. I just want to say how excited I am about this project. I don't think that we have enough middle income housing, so I think that this is really good. Any housing that is developed is going to help our housing crisis, not only the one that we're in right now, but what we're facing . So I know that there's going to be so many families and just people in general that will be able to benefit from this middle income housing that is going to be available to them. And I'm so excited that we are working with Water Board. Thank you, Water Board for your commitment on this project and for, like Councilmember Mungo said and for the risk that you are taking and willing to take on for this project. So I look forward to seeing this project come to fruition. So congratulations, Councilmember Allen. Thank you, Councilwoman Sorrell. Thank you, Mayor. I appreciate all the work that's gone into this. I know that there's a lot of layers to this. And I just have a you know, I you know, I'm still learning about this process. So I just have a few questions because I am you know, I know that there's benefits with risk. And I just want to make sure I understand, you know, the benefits are laid out in a way where we are moving forward with a pilot project so that we can learn from this. So maybe I can get some questions answered about, you know, because my concern is just the loss in potential property tax revenue with this pilot project. And I just want to make sure that we are being, you know, wise about our approach to taking risk that can also benefit keeping housing our our our our middle income, essential workers and teachers. And so if I could just kind of get it understanding and a little bit more explanation about how that works out so that we're moving forward in the best way possible. Yeah. Councilmember, this is one of the reasons why we are identifying this as a pilot program. We need we need to be able to study policy moving forward and bringing that to your attention for your review involving such things as property taxes and the benefit of of middle income as well as other income households, and solicit your direction on how to proceed moving forward with other similar projects, we are mindful of the property taxes and the loss or the foregone of those property taxes and would like to come back to you to discuss that that policy in greater detail. Great. Thank you so much. Thank you. I think that concludes. Council comment for now. Let me go to you public comment. Mr. Clarke. We have an election. Thank you, Mayor. Members of City Council Alex Charron with Englander and Albion Allen representing Waterford, want to thank first and foremost city staff. I know this has been several months of discussion in a learning process and engagement, so thank you to Tom, Linda, Oscar, Christopher Patrick and Regina Anthony in the city attorney's office . There were hundreds and hundreds of exchanges and ideas and conversations, and tonight is really the culmination of that. I know it's a complex issue structurally, but I think it checks a number of housing boxes and policy boxes for the city, some of which were recently addressed in the city's housing studies last year. So I think this is incredibly consistent with where the city wants to have long term. And I'm glad that we can launch this as a pilot project to to see the benefits similar to what other cities have enacted, including Anaheim, San Jose, Oakland and others. There was a comment, I think, that Mr. Urie made about the arena numbers. We've been in discussions and I know others have too. There's a lot of momentum up in Sacramento to close that gap and to give cities that are enacting these programs arena credit. So just wanted to make the council aware of that. And lastly, just echoed the sentiments raised. Waterford is a good actor in the city and a good partner to launch this pilot program with. So thank you very much. Thank you. That concludes public comment for this item. Thank you. Roll call vote, please. Councilwoman Sun has. I. Councilwoman Ellen. I. Councilwoman Pryce. I. Councilman Sabina. Hi. Councilwoman Mongo. I. Councilwoman Sara. I. Councilmember Oranga. Hi. Councilman Austin. I Vice Mayor Richardson. All right. Motion carries. Thank you. I think that concludes the regular agenda. Mr. Quirk if that's correct. And that. Is correct. With that, great. I'm going to go on to a new business and any closing item. So I'm going to I'm going to start from I I'm sure that we all learned earlier today that our former mayor, Eunice Sotto, passed away.