03/19/2019 - SPCITY OF GRAND TERRACE
CITY COUNCIL AND CITY COUNCIL AS THE SUCCESSOR AGENCY
TO THE COMMUNITY REDEVELOPMENT AGENCY
AND HOUSING AUTHORITY
AGENDA ● MARCH 19, 2019
Council Chambers Special Meeting 6:00 PM
Grand Terrace Civic Center ● 22795 Barton Road
City of Grand Terrace Page 1
The City of Grand Terrace complies with the Americans with Disabilities Act of 1990. If you require
special assistance to participate in this meeting, please call the City Clerk’s office at (909) 824-6621 at
least 48 hours prior to the meeting.
If you desire to address the City Council during the meeting, please complete a Request to Speak Form
available at the entrance and present it to the City Clerk. Speakers will be called upon by the Mayor at
the appropriate time.
Any documents provided to a majority of the City Council regarding any item on this agenda will be made
available for public inspection in the City Clerk’s office at City Hall located at 22795 Barton Road during
normal business hours. In addition, such documents will be posted on the City’s website at
www.grandterrace-ca.gov.
CALL TO ORDER
Convene City Council and City Council as the Successor Agency to the Community
Redevelopment Agency and Housing Authority
Pledge of Allegiance
Roll Call
Attendee Name Present Absent Late Arrived
Chair Darcy McNaboe
Vice-Chair Pro Tem Doug Wilson
Board Member Sylvia Robles
Board Member Bill Hussey
Board Member Jeff Allen
A. PUBLIC COMMENT
This is the opportunity for members of the public to comment on items on the agenda
only. At a special meeting of the City Council, pursuant to California law, the City
Council will only be taking public comment on items listed on the agenda.
Agenda Grand Terrace City Council March 19, 2019
City of Grand Terrace Page 2
B. NEW BUSINESS
1. A Public Workshop on the Background and History of the Grand Terrace Housing
Authority and on the Housing Authority's Functions
RECOMMENDATION:
Conduct a Workshop and Discussion on Housing Authority Functions
DEPARTMENT: PLANNING & DEVELOPMENT SERVICES
2. Housing Successor Annual Financial Report for the Year Ended June 30, 2018
RECOMMENDATION:
Receive and file the Housing Successor Annual Financial Report for the Year Ended
June 30, 2018.
DEPARTMENT: FINANCE
3. A Public Workshop of the Grand Terrace Housing Authority on Housing Functions,
Assets, and Future Programs
RECOMMENDATION:
1. Conduct a Workshop and Discussion on Housing Authority Goals and Future
Program; and
2. Provide Direction to Staff for Future Agenda Items and Programs.
DEPARTMENT: PLANNING & DEVELOPMENT SERVICES
C. ADJOURN
The Next Regular City Council Meeting will be held on Tuesday, March 26, 2019 at 6:00
p.m.
AGENDA REPORT
MEETING DATE: March 19, 2019 Housing Authority Item
TITLE: A Public Workshop on the Background and History of the
Grand Terrace Housing Authority and on the Housing
Authority's Functions
PRESENTED BY: Sandra Molina, Planning & Development Services Director
RECOMMENDATION: Conduct a Workshop and Discussion on Housing Authority
Functions
2030 VISION STATEMENT:
This staff report supports our Mission: To preserve and protect our community and its
exceptional quality of life through thoughtful planning, within the constraints of fiscally
responsible government.
BACKGROUND/DISCUSSION:
Former Community Redevelopment Agency
In 1979 the City Council formed the Community Redevelopment Agency (Agency).
Subsequently, Ordinance No. 25 and 52 were adopted for the redevelopment project
area which encompassed the entire City boundaries.
The former Agency was required by statute to set-aside a minimum of twenty percent
(20%) of its annual tax increment into a low- and moderate-income housing fund. The
purpose of the Low/Mod Housing Fund was to produce, increase, improve and preserve
the community's supply of low- and moderate-income housing. The former Agency had
certain powers which it could use to carry out the annual housing set-aside
requirements, including the following, but not limited to:
Improve real property or building sites with on-site or off-site improvements,
but only if the improvements directly and specifically improve or increase the
community's supply of low or moderate income housing.
Donate real property to private or public persons or entities.
Construct and/or acquire buildings or structures.
Rehabilitate buildings or structures.
Provide subsidies to, or for the benefit of, very low-income households, as
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defined by H&S Code § 50105, lower income households, as defined by H&S
Code § 50079.5, or persons and families or low or moderate income, as
defined by H&S Code § 50093, to the extent those households cannot obtain
housing at affordable costs on the open market. (Housing units available on
the open market are those units developed without direct government
subsidies.)
Maintain the community's supply of mobile homes.
Preserve the availability to lower income households of affordable housing
units in housing developments which are assisted or subsidized by public
entities and which are threatened with imminent conversion to market rates.
The agency may use these funds to meet, in whole or in part, the
replacement housing provisions of state redevelopment law.
The Low/Mod Housing Fund can also be used for planning and general
administrative costs, when directly related to programs and activities
associated with H&S Code § 33334.2(e).
Housing Programs of the former Agency
Residential Rehabilitation: The former Agency operated a Residential Rehab
program that provided low cost loans to Low to Moderate Income Households to
Improve their homes. This program improved housing stock in the City. This
Program has been discontinued for several years. There are currently four loans still
in place from this Program.
First Time Home Buyers Program: The former Agency operated a First Time
Homebuyers Program to assist households of Low to Moderate income obtain
homeownership in the form of loans, secondary to the primary loan, referred to as
silent seconds. This Program has been discontinued for several years. There are
currently 9 properties still in this program.
Financial Assistance to Produce Affordable Units: The former Agency partnered with
Corporation for Better Housing (CBH) by providing financial assistance towards the
construction of the Blue Mountain Senior Villas rental apartments. This program
produced 120 low and very low income senior rental units. The property that the
senior apartments is located on is not owned by the Housing Authority. The rental
apartments are operated by CBH.
Neighborhood Improvement Grant Program: During the 2008-2009 and 2009-2010
fiscal years, a Neighborhood Improvement Grant Program granted up to $1,000 to
residents of low income households to complete exterior home improvements, such
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as repainting, minor repair and landscaping. Twenty five properties were improved in
the 2008-2009 fiscal year and 24 properties were improved in the subsequent year.
Dissolution of Redevelopment and Formation of the Housing Authority
With the adoption of ABX1 26 redevelopment agencies throughout the state were
dissolved, and the housing functions identified above were either limited or no longer
available. On January 10, 2012, the City Council adopted a resolution to be the
successor agency to the Community Redevelopment Agency (Agency). On January 24,
2012, the Council approved actions transferring title from the former Agency’s real
property to the City, as the Successor Agency, with exception to those properties
acquired with the Low to Moderate Income Housing Fund.
As part of the dissolution, Health and Safety Code Section 34176(a)(1) authorized a
city, which previously had a redevelopment agency, to elect to retain the housing assets
and functions (production and preservation of affordable housing) of the
redevelopment agency. To accomplish this, on January 30, 2012, the City Council
activated the Grand Terrace Housing Authority (Housing Authority) to hold the assets,
liabilities and responsibilities of the dissolving Agency’s Low to Moderate Income
Housing Fund and other housing functions (Resolution 2012-05).
Housing assets include:
Any real property, interest in, or restriction on the use of real property,
whether improved or not,
Any funds that are encumbered by an enforceable obligation to build or
acquire low- and moderate-income housing, unless required in the bond
covenants to be used for repayment purposes of the bond.
Any loan or grant receivable, funded from the Low and Moderate Income
Housing Fund, from homebuyers, homeowners, nonprofit or for-profit
developers, and other parties that require occupancy by persons of low or
moderate income.
Any funds derived from rents or operation of properties acquired for low-
and moderate-income housing purposes by other parties that were
financed with any source of funds, including residual receipt payments
from developers, conditional grant repayments, cost savings and proceeds
from refinancing, and principal and interest payments from homebuyers
subject to enforceable income limits.
Repayments of loans or deferrals owed to the Low and Moderate Income
Housing Fund which shall be used consistent with the affordable housing
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requirements.
Further, the housing powers of the former-redevelopment agency described above have
either been removed or substantially modified by Health & Safety Code Section
34176.1. These changes will be discussed further in a staff report entitled “A Public
Workshop of the Grand Terrace Housing Authority on Housing Functions, Assets, and
Future Programs,” which is a part of this Agenda Packet.
Grand Terrace Housing Authority Assets
On June 30, 2012, the City Council also adopted Resolution 2012-06 transferring the
housing assets to the Housing Authority. A list of Housing Authority assets are listed in
the Housing Successor Annual Financial Report for the Year Ended June 30, 2018,
included in the Agenda Packet.
FISCAL IMPACT:
None.
APPROVALS:
Sandra Molina Completed 03/18/2019 1:44 PM
City Attorney Completed 03/18/2019 2:14 PM
Finance Completed 03/18/2019 3:54 PM
City Manager Completed 03/18/2019 3:55 PM
City Council Pending 03/19/2019 6:00 PM
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AGENDA REPORT
MEETING DATE: March 19, 2019 Housing Authority Item
TITLE: Housing Successor Annual Financial Report for the Year
Ended June 30, 2018
PRESENTED BY: Cynthia Fortune, Assistant City Manager
RECOMMENDATION: Receive and file the Housing Successor Annual Financial
Report for the Year Ended June 30, 2018.
2030 VISION STATEMENT:
This staff report supports City Council Goal #1, “Ensuring Our Fiscal Viability” through
the continuous monitoring of revenue receipts and expenditure disbursements against
approved budget appropriations.
BACKGROUND:
Senate Bill 341 (Chapter 796, Statutes of 2013) previously amended Health & Safety
Code (HSC) Section 34176 to address particular provisions and functions relating to
former “redevelopment agencies” and new “housing successor” entities allowed to elect
and assume particular functions of redevelopment agencies dissolved in 2012.
Senate Bill 107 (Chapter 325, Statutes of 2015, effective January 2016) further
amended HSC Section 34176.1(f) to change annual report requirements for housing
successors to redevelopment agencies.
HSC 34176.1(f) states that the housing successor shall conduct and shall provide to its
governing body (the Grand Terrace Housing Authority is the housing successor’s
governing body), an independent financial audit of the Low and Moderate Income
Housing Asset Fund (LMIHAF).
Each year, the Grand Terrace Housing Authority has an independent audit conducted of
its housing successor, its LMIHAF and related internal control procedures. The audit for
the fiscal year ended June 30, 2018 has been completed and the Financial Statements
have been issued by the City’s auditor, Lance, Soll & Lunghard, LLP.
DISCUSSION:
One of the key aspects of any annual financial audit is the Independent Auditor’s
Report, which is provided on page 1 of the housing successor financial statements
(Exhibit A). The Independent Auditor’s Report provides its opinion on whether or not
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the financial statements fairly present, in all material respects, the respective financial
position of the governmental activities, its major governmental fund (LMIHAF), and the
respective changes in financial position, in conformance with Generally Accepted
Accounting Principles (GAAP). The resulting “opinion letter” is either unqualified or
qualified. The “opinion letter” received by the housing successor for its financial
statements for the period ended June 30, 2018 is unqualified, indicating that the
financial statements fairly represent the housing successor’s financial position in
accordance with GAAP.
In addition to the Financial Statements, the independent auditor also issues an Internal
Control and Compliance Report (Exhibit B). This report identifies any material internal
control deficiencies that impact the financial statements. The results of the tests
performed by the auditors disclosed that there were no instances of noncompliance that
is required to be reported under Government Auditing Standards.
STATEMENT OF NET POSITION
Grand Terrace Housing Authority
Low and Moderate Income Housing Asset Fund (LMIHAF)
As of June 30, 2018
ASSETS
Cash and Investments $206,732
Receivables:
Accounts (Note 1) $35,098
Notes and Loans:
Notes - Silent Second Program (Note 2)
Amanda R - 1st Time Homebuyer $69,000
Michelle B - 1st Time Homebuyer $44,000
Diane K - 1st Time Homebuyer $39,000
Alisa F - 1st Time Homebuyer $62,000
David F - 1st Time Homebuyer $29,000
Julia C - 1st Time Homebuyer $33,000
Dana G - 1st Time Homebuyer $28,000
Philip B - 1st Time Homebuyer $190,000
Michael M - 1st Time Homebuyer $20,000
Charles H - 1st Time Homebuyer $155,000
$669,000
Loans (rehabilitation 2nd trust loans)
John B (3% interest) $12,912
Monte C (0% interest) $31,379
Henry J (0% interest) $8,932
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Grand Terrace Housing Authority
Low and Moderate Income Housing Asset Fund (LMIHAF)
As of June 30, 2018
Carma W (3% interest) $6,297
$59,519
Total Notes and Loans $728,519
Due from Other Governments
Loan Payment from the Successor Agency (Note 3) $398,636
Advances to City
Loan Payment from the General Fund (Note 4) $168,205
Land Held for Resale (Note 5)
APN 1167-231-01 (22293 Barton Rd: 1.38 acres) $240,227
APN 1167-311-01 (22317 Barton Rd: 1.36 acres) $222,939
$463,166
TOTAL ASSETS $2,000,356
LESS LIABILITIES
Due to Other Governments
Unidentified Tax Increment received from SB County $21,165
Deferred / Unavailable Revenues (Rehabilitation Loans) $59,519
TOTAL LIABILITIES $80,684
FUND BALANCE (Assets less Liabilities)
Restricted for Low and moderate Housing Income Activities $1,919,672
Note 1 of the Financial Statements – Accounts
On May 22, 2018, the Grand Terrace Housing Authority approved a loan to the Habitat
for Humanity for the construction of two homes on Michigan Street. As of June 30,
2018, total owed to the Housing Authority, including interest was $35,098. Habitat for
Humanity paid for the loan by August 15, 2018 totaling $35,172.
Note 2 of the Financial Statements – Notes and Loans
On February 13, 2018, the Grand Terrace Housing Authority elected not to approve a
Subordination Policy that allowed existing first time home buyer loans to refinance their
current loans.
Note 3 of the Financial Statements – Due from other Governments
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The State of California had required former redevelopment agencies to make deposits
into a Supplemental Educational Revenue Augmentation Fund (SERAF); this fund is
then distributed to schools in compliance with the State’s Proposition 98 obligation to
education. The Community Redevelopment Agency of the City of Grand Terrace (CRA)
was required to make these SERAF payments by May 10 of the applicable fiscal year.
According to the California Community Redevelopment Law (CRL), Health and Safety
Code Section 33000, the CRA can use any legally available funds to make the SERAF
payment, including loaning funds from the Low and Moderate Income Housing Fund
(LMIHF) to make these payments. In FY2010-11, the CRA had insufficient funds to
make the required SERAF payment and therefore loaned $448,636 from the LMIHF
fund to meet their payment requirement.
Since redevelopment dissolution, certain requirements had to be met prior to requesting
this loan be repaid. The Department of Finance (DOF) has approved a 9-year payment
plan, listed on the Grand Terrace Successor Agency’s Last and Final Recognized
Obligation Payment Schedule (Last & Final ROPS) as shown below:
9-year Payment Plan
Payment
No. Description Payment Balance
Original Amount of Loan - $448,636
1 FY2017-18 $50,000 $398,636
2 FY2018-19 $50,000 $348,636
3 FY2019-20 $50,000 $298,636
4 FY2020-21 $50,000 $248,636
5 FY2021-22 $50,000 $198,636
6 FY2022-23 $50,000 $148,636
7 FY2023-24 $50,000 $98,636
8 FY2024-25 $50,000 $48,636
9 FY2025-26 $48,636 $0
The housing successor received its first payment in FY2017-18; the financials as shown
above, reflect a balance owed by the Successor Agency of $398,636.
Note 4 of the Financial Statements – Advances to City
In 1998 and 2001, the Low and Moderate Income Housing Fund (LMIHF) of the former
Community Redevelopment Agency (CRA) made two cash loans to the General Fund:
$158,425 in 1998 and $141,780 in 2001, bringing the total loan amount to $300,206. In
2011, the General Fund made a $132,000 payment, leaving a balance of $168,205 still
owed to the Housing Authority.
In 2013, the Successor Agency, on behalf of the General Fund, requested
redevelopment credits in exchange for the loan; this was denied by the Department of
Finance (DOF). As shown in the financial statement above, the General Fund still owes
$168,205 to the Housing Authority as of today.
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Note 5 of the Financial Statements – Land Held for Re-sale
The Grand Terrace Housing Authority is currently in escrow to sell the two (2) parcels in
the Financial Statements to the General Fund for $650,000.
FY2018-19 REVENUE AND EXPENSE STATEMENT
As approved by the City Council and Housing Authority, below is the adopted Budget for
the LMIHAF fund:
Grand Terrace Housing Authority
Low and Moderate Income Housing Asset Fund (LMIHAF)
Approved Budget FY2018-19
Revenues
Miscellaneous
Loan Payment from the Successor Agency $50,000
Total Revenue $50,000
Expenditure
Salaries $13,760
Benefits $6,310
Professional Services (financial, auditing and legal services) $8,070
Utilities $180
Homelessness Prevention & Rapid Rehousing (HOPE program) public safety
services $26,000
Total Expenditures $54,320
NET (Revenue less Expense) Approved use of Fund Balance ($4,320)
Below is a summary of the current and projected funds that may be used for LMIHAF
programs:
Grand Terrace Housing Authority
Low and Moderate Income Housing Asset Fund (LMIHAF)
Cash Available
Cash and Investments, June 30, 2018 $206,732
Habitat for Humanity Loan Repayment $35,172
Approved use of Fund Balance for FY2018-19 ($4,320)
Total Cash and Investments projected for June 30, 2019 $237,584
Revenue from Purchase of Land Held for Re-sale to the City $650,000
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Grand Terrace Housing Authority
Low and Moderate Income Housing Asset Fund (LMIHAF)
Cash Available
APN 1167-231-01 (22293 Barton Rd: 1.38 acres)
APN 1167-311-01 (22317 Barton Rd: 1.36 acres)
Revenue from Successor Agency for SERAF Loan Repayment
FY2019-20 (Revenue of $50,000 less Operating Expense of $28,420) $21,680
FY2021-22 (Revenue of $50,000 less Operating Expense of $28,420) $21,680
FY2022-23 (Revenue of $50,000 less Operating Expense of $28,420) $21,680
FY2023-24 (Revenue of $50,000 less Operating Expense of $28,420) $21,680
FY2024-25 (Revenue of $50,000 less Operating Expense of $28,420) $21,680
FY2025-26 (Revenue of $48,636 less Operating Expense of $28,420) $20,216
TOTAL CASH $1,016,200
FISCAL IMPACT:
There is no fiscal impact associated with the receipt of the housing successor Financial
Statements and related documents for the year ended June 30, 2018.
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INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
Grand Terrace Housing Successor
City of Grand Terrace, California
Report on Financial Statements
We have audited the accompanying financial statements of the governmental activities and the major
governmental fund of the Grand Terrace Housing Successor, (the Housing Successor), a Special Revenue
Fund of the City of Grand Terrace, California, as of and for the year ended June 30, 2018, and the related
notes to the financial statements, which collectively comprise the Housing Successor’s basic financial
statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
203 N. Brea Blvd., Suite 203 Brea, CA 92821 Phone: 714.672.0022
An Association of Independent Accounting Firms
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To the Honorable Mayor and Members of the City Council
Grand Terrace Housing Successor
City of Grand Terrace, California
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities and the major governmental fund of the Grand
Terrace Housing Successor, as of June 30, 2018, and the respective changes in financial position for the
year then ended in accordance with accounting principles generally accepted in the United States of
America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the budgetary
comparison information be presented to supplement the basic financial statements. Such information,
although not a part of the basic financial statements, is required by the Governmental Accounting Standards
Board, who considers it to be an essential part of financial reporting for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied certain limited
procedures to the required supplementary information in accordance with auditing standards generally
accepted in the United States of America, which consisted of inquiries of management about the methods
of preparing the information and comparing the information for consistency with management’s responses
to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the
basic financial statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an opinion or provide
any assurance.
Management has omitted the management’s discussion and analysis that accounting principles generally
accepted in the United States of America require to be presented to supplement the basic financial
statements. Such missing information, although not a part of the basic financial statements, is required by
the Governmental Accounting Standards Board, who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or historical
context. Our opinion on the basic financial statements is not affected by this missing information.
Other Information
We have audited the financial statements of Grand Terrace Housing Successor, (the Housing Successor)
as of and for the year ended June 30, 2018, and have issued our report thereon dated December 17, 2018,
which contained an unmodified opinion on those financial statements. Our audit was conducted for the
purpose of forming an opinion on the financial statements as a whole. The accompanying report on
excess/surplus calculation is presented for purposes of additional analysis only and is not a required part
of the financial statements. Such information is the responsibility of management and was derived from the
financial statements. The report on excess/surplus calculation has not been subjected to the auditing
procedures applied in the audit of the basic financial statements, and accordingly, we do not express an
opinion or provide any assurance.
2
B.2.a
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To the Honorable Mayor and Members of the City Council
Grand Terrace Housing Successor
City of Grand Terrace, California
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
December 17, 2018 on our consideration of the Housing Successor’s internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of internal
control over financial reporting and compliance and the results of that testing, and not to provide an opinion
on internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering Housing Successor’s
internal control over financial reporting and compliance.
Brea, California
December 17, 2018
3
B.2.a
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4203 N. Brea Blvd., Suite 203 Brea, CA 92821 Phone: 714.672.0022
An Association of Independent Accounting Firms
B.2.a
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To the Honorable Mayor and Members of the City Council
Grand Terrace Housing Successor Agency
City of Grand Terrace, CA
Housing Successor to determine the auditing procedures that are appropriate in the circumstances for the
purpose of expressing an opinion on compliance and to test and report on internal controls over
compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over
compliance. Accordingly, we do not express an opinion on the effectiveness of the Housing Successor’s
internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance of California Health
and Safety Code sections applicable to California Housing Successor Agencies on a timely basis. A
material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in
internal control over compliance, such that there is a reasonable possibility that a material noncompliance
with a type of compliance requirement of California Health and Safety Code sections applicable to
California Housing Successor Agencies will not be prevented, or detected and corrected on a timely
basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of
deficiencies, in internal control over compliance that is less severe than a material weakness in internal
control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control over
compliance that might be material weaknesses or significant deficiencies. We did not identify any
deficiencies in internal control over compliance that we consider to be material weaknesses. However,
material weaknesses may exist that have not been identified.
Report on Excess/Surplus Calculation
We have audited the financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of the City of Grand Terrace, California, as of and for the year
ended June 30, 2018, and have issued our report thereon dated December 17, 2018, which contained an
unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming an
opinion on the financial statements as a whole. The accompanying report on excess/surplus calculation is
presented for purposes of additional analysis only and is not a required part of the financial statements.
Such information is the responsibility of management and was derived from the financial statements. The
report on excess/surplus calculation has not been subjected to the auditing procedures applied in the
audit of the basic financial statements, and accordingly, we do not express an opinion or provide any
assurance.
The purpose of this report on internal control over compliance is solely to describe the scope of our
testing of internal control over compliance and the results of that testing based on the requirements of
California Health and Safety Code sections applicable to California Housing Successor Agencies.
Accordingly, this communication is not suitable for any other purpose.
Brea, California
December 17, 2018
5
B.2.a
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GRAND TERRACE HOUSING SUCCESSOR AGENCY
STATEMENT OF NET POSITION AND GOVERNMENTAL FUND BALANCE SHEET
JUNE 30, 2018
Reclassifications
Governmental and Statement of
Fund Eliminations Net Position
Assets:
Cash and investments 206,732$ -$ 206,732$
Receivables:
Accounts 35,098 35,098
Notes and loans 728,519 - 728,519
Due from other governments 398,636 - 398,636
Advances to City 168,205 - 168,205
Land held for resale 463,166 - 463,166
Total Assets 2,000,356$ - 2,000,356
Liabilities, Deferred Inflows of Resources,
and Fund Balance:
Liabilities
Due to other governments 21,165$ - 21,165
Total Liabilities 21,165 - 21,165
Deferred Inflows of Resources:
Unavailable revenues 59,519 (59,519) -
Total Deferred Inflows of Resources 59,519 (59,519) -
Fund Balance/Net Position:
Fund Balance
Restricted for:
Low and moderate housing activities 1,919,672 (1,919,672) -
Total Fund Balance 1,919,672 (1,919,672) -
Total Liabilities, Deferred Inflows of
Resources and Fund Balance 2,000,356$
Net Position
Restricted for:
Low and moderate housing activities 1,919,672 1,979,191
Total Net Position 59,519$ 1,979,191$
See Notes to Financial Statements 6
B.2.a
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GRAND TERRACE HOUSING SUCCESSOR AGENCY
STATEMENT OF ACTIVITIES AND GOVERNMENTAL STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
YEAR ENDED JUNE 30, 2018
Reclassifications
Governmental and Statement of
Fund Eliminations Activities
Revenues:
Use of money and property 685$ 323$ 1,008$
Total Revenues 685 323 1,008
Expenditures:
Current:
Community development 9,585 - 9,585
Total Expenditures 9,585 - 9,585
Excess (Deficiency) of Revenues
Over (Under) Expenditures (8,900) 323 (8,577)
Fund Balance/Net Position:
Beginning of Year 1,928,572 59,196 1,987,768
End of Year 1,919,672$ 59,519$ 1,979,191$
See Notes to Financial Statements 7
B.2.a
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GRAND TERRACE HOUSING SUCCESSOR AGENCY
BUDGETARY COMPARISON SCHEDULE
GOVERNMENTAL FUND
YEAR ENDED JUNE 30, 2018
Variance with
Final Budget
Budget Amounts Actual Positive
Original Final Amounts (Negative)
Budgetary Fund Balance, July 1 1,928,572$ 1,928,572$ 1,928,572$ -$
Resources (Inflows):
Use of money and property - - 685 685
Amounts Available for Appropriations 1,928,572 1,928,572 1,929,257 685
Charges to Appropriations (Outflow):
Community development 8,200 43,200 9,585 33,615
Total Charges to Appropriations 8,200 43,200 9,585 33,615
Budgetary Fund Balance, June 30 1,920,372$ 1,885,372$ 1,919,672$ 34,300$
12
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CITY OF GRAND TERRACE HOUSING SUCCESSOR
COMPUTATION OF HOUSING SUCCESSOR
EXCESS/SURPLUS (HSC 34176.1)
Opening Fund Balance 1,928,572$ 1,919,672$
Less Unavailable Amounts:
Land held for resale (640,166)$ (463,166)$
Advances to City (168,205) (168,205)
Loans receivable (669,000) (669,000)
(1,477,371) (1,300,371)
Available Housing Successor Funds 451,201 619,301
Limitation (greater of $1,000,000 or four years deposits)
Aggregate amount deposited for last four years:
2017 - 2018 - 685
2016 - 2017 175 175
2015 - 2016 8,262 8,262
2014 - 2015 20,935 20,935
2013 - 2014 42 -
Total 29,414$ 30,057$
Base Limitation 1,000,000$ 1,000,000$
Greater amount 1,000,000$ 1,000,000$
Computed Excess/Surplus None None
Low and Moderate
All Project Area
July 1, 2018
Low and Moderate
All Project Area
July 1, 2017
Housing Funds Housing Funds
13
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INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the City Council
Grand Terrace Housing Successor Agency
City of Grand Terrace, California
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the financial statements of the governmental
activities, and the major governmental fund of the Grand Terrace Housing Successor Agency (the Housing
Successor) a special revenue fund of the City of Grand Terrace, California (the City), as of and for the year
ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the
Housing Successor’s basic financial statements, and have issued our report thereon dated
December 17, 2018.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Housing Successor’s
internal control over financial reporting (internal control) to determine the audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinions on the financial statements,
but not for the purpose of expressing an opinion on the effectiveness of the Housing Successor’s internal
control. Accordingly, we do not express an opinion on the effectiveness of the Housing Successor’s internal
control.
A deficiency in internal control exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the Housing
Successor’s financial statements will not be prevented, or detected and corrected on a timely basis. A
significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe
than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses
may exist that have not been identified.
203 N. Brea Blvd., Suite 203 Brea, CA 92821 Phone: 714.672.0022
An Association of Independent Accounting Firms
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To the Honorable Mayor and Members of the City Council
Grand Terrace Housing Successor Agency
City of Grand Terrace, California
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Housing Successor’s financial statements
are free from material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and material
effect on the determination of financial statement amounts. However, providing an opinion on compliance
with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the Housing Successor’s
internal control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the Housing Successor’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Brea, California
December 17, 2018
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AGENDA REPORT
MEETING DATE: March 19, 2019 Housing Authority Item
TITLE: A Public Workshop of the Grand Terrace Housing Authority
on Housing Functions, Assets, and Future Programs
PRESENTED BY: Sandra Molina, Planning & Development Services Director
RECOMMENDATION: 1. Conduct a Workshop and Discussion on Housing
Authority Goals and Future Program; and
2. Provide Direction to Staff for Future Agenda Items
and Programs.
2030 VISION STATEMENT:
This staff report supports our Mission: To preserve and protect our community and its
exceptional quality of life through thoughtful planning, within the constraints of fiscally
responsible government.
BACKGROUND:
When the City Council established the Grand Terrace Housing Authority (Housing
Authority) the Housing Authority retained the housing assets and functions of the former
Community Redevelopment Agency (CRA) - mainly the production and preservation of
affordable housing.
However, with the adoption of ABX1 26 dissolving redevelopment agencies, the
legislature also specified how funds are to be spent.
Use of Low and Moderate Income Housing Asset Fund (LMIHAF)
The LMIHAF must first be used to meet housing obligations of the former
redevelopment agency that are included on a Recognized Obligation Payment
Schedule (ROPS) approved by the Department of Finance. Health & S C §34176.1(a).
This is not applicable to the Housing Authority because there are no housing
enforceable obligations.
The use of any remaining funds must meet the following requirements:
1. The funds may be used to monitor and enforce long-term affordability
covenants and restrictions and to administer housing activities funded
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with LMIHAF. Health & S C §34176.1(a)(1). The greater of $200,000 or 5
percent of the statutory value of real property and of loans and grants
receivable held by the housing successor may be used for this purpose.
Health & S C §34176.1(a)(1).
The only long-term affordability covenants are related to the Senior
Villas, First Time Homebuyer Program and Habitat For Humanity
projects. The Housing Authority sold a property to a private
developer and the proceeds were deposited in the LMIHAF. The
cost of monitoring/enforcement of long-term affordability
covenants is $20,000 a year.
2. Up to $250,000 may be spent per fiscal year, at the housing successor's
option, for homelessness prevention and rapid rehousing, but only if
there are no outstanding housing replacement obligations (i.e.,
relocation of persons displaced by projects) and the housing successor
has satisfied its monitoring and online database obligations. Health & S
C §34176.1(a)(2).
The Authority is currently spending $26,000 for a Sheriff’s Deputy
in relation to the HOPE Program, which provides rapid rehousing
assistance to homeless individuals.
3. Any remaining funds must be spent for the "development" (defined later
in this report) of housing affordable to and occupied by households
earning 80 percent or less of the area median income (with at least 30
percent of these funds expended for the development of rental housing
affordable to and occupied by extremely low income households (30% or
less of the area median income) and no more than 20 percent of these
funds expended for the development of housing affordable to and
occupied by very low and income households ( between 60 percent and
80 percent of the area median income). The income and expenditure
percentage restrictions must be met every 5 years or additional
restrictions on the use of the remaining funds in the LMIHAF will apply.
Health & S C §34176.1(a)(3).
The expenditure of LMIHAF for development will be discussed later
in this report. It should be noted, however, that LMIHAF cannot be
used to produce moderate income housing or otherwise be used
towards moderate income households. Moderate income
households earn 120% or more of the area median income.
4. Program income derived from housing assets transferred to the housing
successor must be deposited in the LMIHAF and is subject to the
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restrictions described above, but such income may be spent anywhere in
the jurisdiction of the housing successor without the finding of benefit
required by Health & S C §33334.2(g). Health & S C §34176.1(c)(1).
Income derived from housing assets is deposited into the LMIHAF.
Location restrictions are not applicable as the entire City was in a
redevelopment project area.
However, note that program income derived from housing assets is the primary source
of funding for the housing administration, homelessness prevention, and development
activities listed above. If the housing successor receives less program income than
required for housing administration and monitoring, no additional funds can be obtained
from tax increment (i.e., property taxes) unless it is related to enforceable obligations
and for the housing authority payments described above.
Regional Housing Needs Allocation (RHNA)
The use of LMIHAF for the development of housing can be considered towards the
City’s housing allocation under the Regional Housing Needs Allocation (RHNA). The
preparation of the City’s 2013-2021 Housing Element demonstrating sufficiently zoned
land to accommodate the RHNA allocation is a legislative function of the City Council.
The 2013-2021 Housing Element is certified that it meets the statutory requirements of
housing law, for the 2013-2021 housing element cycle. Table 1 below is from the
Housing Element and identifies the City’s RHNA, by household income levels.
Table 1 Regional Housing Need
Assessment 2013 - 2021 Target
Income Level RHNA Target
Very Low 28
Low 19
Moderate 22
Above Moderate 49
Total 118
Source: Grand Terrace Housing Element
While the standard has been that cities are required to demonstrate adequate land to
accommodate the RHNA, but not produce homes, the State is taking a firmer stance
regarding production of affordable housing. Therefore, it may be prudent for the
Housing Authority to focus its efforts in producing dwelling units in accordance with the
City’s allocation.
During this current housing element cycle, three moderate income, one low income and
one very low income for sale units have been produced. The three moderate income
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units were produced by a private developer who produced the units to obtain a density
bonus. Since no financial assistance was provided, the term of the affordability
covenant is 10 years. The remaining two for-sale units are the two homes built by
Habitat for Humanity with 45-year covenants.
Table 2 below depicts affordable housing costs for San Bernardino County. It provides
the income levels for extremely low, very low, and income households and the
maximum affordability limits for the purchase of a home or rental. The income levels are
based on the San Bernardino area median income of $65,800 for a four-person
household.
Table 2 - Affordable Housing Costs-San Bernardino County
Based on a 4-Person Household
Income
Category
Annual Income1 Maximum
Home
Purchase
Price2
Maximum
Monthly Rent3
Subsidy Needed
Based on
Median Home
Value of
$369,4004
Extremely Low Less Than $25,100 $88,000 $628/month $281,400
Very Low $25,100 - $33,700 $150,000 $843/month $219,400
Low $33,701 - $53,900 $235,000 $1,348/month $134,400
Sources: 1. Cal. HCD. Income is adjusted for household size. 2. Estimate based upon 10%
down payment, 4% interest rate, 1.2% property taxes and $100/mo. property insurance. Maximum
price will differ depending on circumstances (e.g., HOA dues, interest rate, down payment) 3.
Based upon 30% of gross income (including utilities) 4. Zillow Website 3/14/2019
Table 3 provides the same analysis for a 2 person household and using the median
home value for a two-bedroom home. It shows that the subsidy would need to be less
because of the lesser home value.
Table 3 - Affordable Housing Costs-San Bernardino County
Based on a 2-Person Household
Income
Category
Annual Income1 Maximum
Home
Purchase
Price2
Maximum
Monthly Rent3
Subsidy Needed
Based on
Median Home
Value of
$233,0004
Extremely Low Less Than $16,460 $58,000 $412/month $175,000
Very Low $16,461 - $27,000 $120,000 $675/month $113,000
Low $27,001 - $43,150 $188,000 $1,079/month $45,000
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Sources: 1. Cal. HCD. Income is adjusted for household size. 2. Estimate based upon 10%
down payment, 4% interest rate, 1.2% property taxes and $100/mo. property insurance. Maximum
price will differ depending on circumstances (e.g., HOA dues, interest rate, down payment) 3.
Based upon 30% of gross income (including utilities) 4. Zillow Website 3/14/2019, for a 2 bedroom
home
DISCUSSION:
Existing Affordable Programs Operated by other Jurisdictions
With dissolution of redevelopment housing programs in most cities have curtailed and
what is offered is very limited. The following are examples of programs operated by
other jurisdictions that may be possible programs for the Housing Authority to explore
and/or seek, should the Authority be interested in similar programs.
City of Chino Home Improvement Loan Program: To assist low to moderate
income single-family homeowners with an opportunity to finance improvements
to their home. Eligible improvements include exterior and interior improvements,
code violations, handicapped repairs and more. Qualified homeowners may
borrow up to $40,000 for eligible home improvements. This deferred payment
loan program requires no payments for ten years and has a 3% interest rate.
City of Rialto, Home Sweet Home Program is a deferred loan program. No
payments are required. The loans must be used to correct code violations and
health and safety problems along with general property improvements. The loan
is a 3% simple interest loan payable when the house sells, a transfer/change of
title occurs or the owner ceases to reside at the residence.
City of Ontario Housing Development Assistance Program. The Agency has the
ability to issue multi-family Mortgage Revenue Bonds, provide low interest loans
or grants for acquisition or rehabilitation of affordable housing projects.
Development of housing includes rehabilitation of single and multi family and
development of new affordable units
City of Fontana Housing Rehabilitation Program provides grants and zero
interest deferred loans (up to $25,000). This program uses CDBG funds to
provide up to $5,000 grants or up to $25,000 tax deferred loans. Improvements
are limited to such things as health and safety improvements, correct code
violations, paint/stucco, basic rehabilitation and energy efficiency improvements.
County of San Bernardino Mortgage Revenue Bonds. These bonds provide
funding at a reduced interest rate due to their tax-exempt status. Assists
developers of multifamily rental units in increasing the supply of affordable rental
units available to qualified households. Funds are used to acquire sites, develop
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affordable rental housing, and acquire and rehabilitate affordable rental housing.
State Program CalFHA: CalHFA offers first mortgage loans, both FHA and
conventional, which can be combined with its down payment and closing cost
assistance. This type of assistance is often called a junior or subordinate loan.
CalHFA's subordinate loans are "silent seconds,” meaning the borrower is not
required to make payments on these loans until the home is sold, refinanced or
paid off in full.
However, while the programs listed above may be available for the Housing Authority,
these programs generally cannot be funded by LMIHAF (in fact, many of the programs
listed above are not funded by their respective agencies’ LMIHAFs). If the desire is to
seek implementation of the above-mentioned programs, then staff will explore ways to
make modifications to the programs so that they can be funded by the LMIHAF.
Development of Housing
Development includes (1) new construction; (2) acquisition and rehabilitation; (3)
substantial rehabilitation, meaning the value of the rehabilitation must equal 25% of the
value of the home after it has been rehabilitated; (4) acquisition of long-term affordability
covenants on multi family units as described under Health & Safety Code §33413; or
(5) preservation of an assisted housing development that is eligible for prepayment or
termination or for which the expiration of rental restrictions is scheduled to occur within
5 years. Health & S C §34176.1(a)(3)(D).
It should also be noted that the new requirements permit remaining funds to be spent on
affordable senior housing projects so long as the number of affordable rental housing
units for seniors does not exceed 50 percent of the total number of affordable rental
housing units assisted in the last 10 years by the Authority, City, or former
redevelopment agency. If this limit is exceeded, then the Authority cannot spend any of
its remaining LMIHAF funds on affordable senior housing projects, rental or owner-
occupied, until the maximum 50 percent is met. The Blue Mountain Senior Villas
developed 108 units affordable to extremely low, very low and low income households,
and received occupancy in July 2009; therefore, there is a small window for 54 senior
units. The Habitat produced two units, and received occupancy in 2018. The Authority
could construct 1 senior housing unit after 2019.
Table 4 below shows how the LMIHAF are allowed to be used pursuant to the
restrictions of the Health and Safety Code. The discussion on possible programs, later
in this report, are in consideration of these restrictions.
Table 4 - Use of Low Moderate Income Housing Asset Fund
(4-person household)
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Category Percent of Median
Income
Income Range Use of LMIHAF
Extremely Low 30% or Less Less Than $25,100 Yes, minimum 30%
Must be rental
housing
Very Low 31% to 50% $25,100 - $33,700 Yes
Low 51% - 80% $33,701 - $53,900 Yes, no more than
20% towards 60-
80% AMI
Median Income: $65,800 based on a 4-person household
As an example, assume the Housing Authority has $1,000,000 in LMIHAF. At least
$300,000 would need to be used towards production of rental housing for households
earning 30% or less of the area median income; no more than $200,000 could be used
towards households earning between 60% to 80% of the area median income; and the
remaining $500,000 could be used towards very low income households earning
between 31% to 59% of the area median income.
Change in Housing Assets
Since creation of the Housing Authority, one of its properties located at 11695 Canal
Street has been sold to a private developer for $160,000. The remaining two properties
are in escrow to be purchased by the City of Grand Terrace for $650,000.
There are 13 loans related to the Housing Rehabilitation and First Time Homebuyer’s
Programs.
Possible Affordable Housing Programs
Partner with other successor agencies - Two or more housing successors within
a prescribed geographic areas may "partner" and pool funds from their
respective LMIHAF (up to $1 million each fiscal year for each housing successor)
for purposes of developing "transit priority projects," permanent supportive
housing, housing for agricultural employees, special needs housing, or a regional
homeless shelter, if there are no outstanding housing replacement or production
obligations. However, the pooled funds are restricted to assisting housing for
individuals and families at less than 60 percent of the area median income, and
additional restrictions and findings may apply. Health & S C §34176.1(c)(2)
Develop Housing in Accordance with RHNA - The Housing Authority could direct
Staff to identify programs that would produce units extremely low, lower and low
household income levels in accordance with the RHNA and use of LMIHAF
requirements.
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Rental Subsidies - The Authority could identify rental properties (i.e. duplexes,
triplexes, fourplexes, or accessory dwelling units) where rental property owners
willing to enter into long term rental subsidies with the Authority in exchange for
affordability covenants. Household income levels could range between extremely
low income (30% or less of median income) to low income (31% to 50% of
median income) households.
Acquisition and Rehabilitation - The Authority could acquire multiple family
properties and rehabilitate the property and units. The Authority could then make
these properties available (sell) to an entity that would own, operate and manage
the rental property for affordable housing and subject to affordability covenants.
New Construction - The Authority could identify a developer that in return for
financial assistance on the purchase of land or development of housing units,
would be willing to construct a percentage of the homes to low income
households. Those units would be subject to affordability covenants. An example
would be the Habitat project on Michigan where the former Agency provided the
land at a reduced rate and the homes are subject to long term affordability
covenants.
Substantial Rehabilitation - The value of the rehabilitation work must be 25% of
the value of the unit after it has been rehabilitated. This type of project may work
for multiple family properties, where a number of affordable units could be
created. While it could also apply to single family homes, there would be more
value with multiple units.
FISCAL IMPACT:
No fiscal impacts related to this report.
APPROVALS:
Sandra Molina Completed 03/18/2019 9:25 AM
City Attorney Completed 03/18/2019 3:51 PM
Finance Completed 03/18/2019 3:54 PM
City Manager Completed 03/18/2019 3:55 PM
City Council Pending 03/19/2019 6:00 PM
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