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TO: BOARD OF SUPERVISORS County
FROM: Catherine Kutsuris, Director Conservation and Development rev
DATE: November 18, 2008
4*0
SUBJECT: Dougherty Valley Affordable Housing Program Compliance NT
SPECIFIC REQUEST(S) OR RECOMMENDATIONS(S) & BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS
DETERMINE that Shapell Industries of Northern California and Lennar Homes (on behalf of the
W indemere group of developers)are in compliance with the Dougherty Valley Affordable Housing
Program.
APPROVE AND AUTHORIZE the Deputy Director- Redevelopment to execute a Regulatory
Agreement and Declaration of Restrictive Covenants for the Highlands Point Apartments in the
Dougherty Valley to allow for the use of interim exception rents for Low Income Units are defined in
the Dougherty Affordable Housing Program in exchange for a 55-year term to the Regulatory
Agreement.
FISCAL IMPACT
None. No General Funds are involved.
BACKGROUND/REASONS FOR RECOMMENDATIONS
See attached.
CONTINUED ON ATTACHMENT: X SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATORECOMMEN ATION OF B ARD
COMMITTEE .X APPROVE _ OTHER
SIGNATURE(S):
_ACTION OF BOARD ON vel -VV &-y/P. ��i� APPR ED AS RECOM NDED ✓
VOTE OF SUPERVISORS
f I HEREBY CERTIFY THAT THIS IS A
v"/UNANIMOUS (ABSENT ) TRUE AND CORRECT COPY OF AN
AYES: NOES: ACTION TAKEN AND ENTERED ON THE
ABSENT: ABSTAIN: MINUTES OF THE BOARD OF
SUPERVISORS ON THE DATE SHOWN.
Source: Jim Kennedy
335-7225 ATTESTEq/y�d �6�Y/8
orig: Conservation and Development
DAVID TWA, CLERK OF THE
cc: County Administrator's Office BOARD OF SUPERVISORS AND
County Counsel COUNTY ADMINISTRATOR
Conservation and Development
via: Redevelopment BY , DEPUTY
• Shapell
• Lennar
• Fairfield Residential
• St. Anton Partners
• Essex Property Trust
• City of San Ramon
G:\CDBG-REDEV\redev\Board Orders and Greenies\BOARD.11.18.08.DVAHP.rev.doc
DOUGHERTY VALLEY AFFORDABLE HOUSING PROGRAM COMPLIANCE
Approved by the Board of Supervisors on March 22, 1994, and amended on October 16, 2001, the
Dougherty Valley Affordable Housing Program (DVAHP) sets forth the requirements to be met by the
Dougherty Valley developers(Shapell and Windemere group). The DVAHP requires the submittal of an
annual compliance report by the respective development entities. The following discussion and Table 1
summarizes the compliance status of Shapell Industries of Northern California, and the Windemere
group led by Lennar. A map depicting the location of DVAHP Projects is also attached as Figure 1.
A. Shapell Affordable Housing Compliance
The Shapell portion of the Dougherty Valley includes 5830 residential units. These units are being built in
four phases as follows:
Phase For-Sale Units Rental Total
Gale Ranch 1 960 256 1216
Gale Ranch II 1682 266 1948
Gale Ranch III 1041 165 1207
Gale Ranch IV 588 871 1459
Total 4271 1558 5830
(73%) (27%)
The DVAHP requires that at least 25% of the residential units be affordable to Very Low, Low, and
Moderate Income Households. The Shapell portion of the DVAHP Affordable Housing obligation is as
follows:
Affordability Requirement
Percent Number
Very Low Income 10% 145
Low Income 25% 365
Moderate Income 65% 947
100% 1457
To date the Shapell-Gale Ranch Affordable Housing Program has built 823 units, or 57%of its obligation
(Table 1 Section I-A). The remaining 634 affordable units are to be delivered in future phases of the
Gale Ranch development (Table 1, section 1-13). The Shapell program complies with the
requirements of the DVAHP.
The remainder of Shapell's Affordable Housing obligation will be delivered in Gale Ranch Phase III and
IV (Table I, Section I-B). Two mixed income rental projects would be built, one each in Phase III and
Phase IV. The phasing program reflects the recent modification to the development program resulting
from the relocation of the Dougherty Valley Middle School.
B. Windemere Affordable Housing Compliance
The DVAHP requires that at least 25% of the 5170 residential units to be affordable to Very Low, Low,
and Moderate Income Households. The Windemere portion of the DVAHP Affordable Housing obligation
is as follows:
Affordability Requirement
Percent Number
Very Low Income 10% 129
Low Income 25% 323
Moderate Income 65% 841
100% 1293
GACDBG-REDEV\redev\Board Orders and Greenies\BOARD.11.18.08.DVAHP.rev.doc
The Windemere Affordable Housing Program already completed1,000 of its affordable housing units in
phase 1, or 77%of its obligation (Table 1, Section II-A). The final phase, the Highland Point Apartments,
is the final planning phase, and is in the financing phase. The property is under option to St. Anton
Partners, a Sacramento based developer of affordable housing developments. St.Anton's is working with
the County to pursue a tax-exempt housing revenue bond financing in the next 3-4 months.
The Windemere program complies with the requirements of the DVAHP.
II IMPLEMENTATION DISCUSSION
A) Shapell-Gale Ranch
The construction of the Seville Apartments was substantially completed within 2007/08
compliance period.
According to Shapell officials,the remaining Phase III project could proceed to construction in the
2009-2014 time frame. The Phase IV units could proceed to construction in the 2011-2018 time
frame in order to comply with the DVAHP. The dramatic downturn in the housing market has
extended out the time frame for completion of the Dougherty Valley Program including the
DVAHP.
B) Windemere Ranch
1. Project Ownership changes- Since the last DVAHP Compliance Report one of three
Windemere Apartment project has changed ownership. The Mill Creek Project has been
sold to Essex Property Trust, Inc., a Palo Alto based real estate investment trust. The
Moderate Income Regulartory Agreement is in place, and the project complies with all
requirements.
2. The final component of the Windmere portion of the DVAHP is a mixed income rental
project of 293 units referred to as Highlands Point Apartments. The project is proposed to
be built by St. Anton Partners, a Sacramento based affordable housing developer.
Pursuant to the DVAHP the project would consist of moderate income, low income and
very low income units as shown in the table below.
Highlands Point Apartments
Current DVAHP Unit Count
Moderate Income 191
Low Income 73
Very Low Income 29
Total 293
St. Anton Partners is currently working with the County to finance the project with tax-exempt multi-
family housing revenue bonds. An issuance of bonds is currently anticipated in early 2009. Based on
the use of tax-exempt bond financing the income targeting profile for the project would be changed as
shown in the table below. From a public policy perspective the change results in enhanced income
targeting, which is positive and permitted under to DVAHP.
Highlands Point Apartments
DVAHP Unit Count Bond Financed Unit Count
Moderate Income 190
Low Income 44
Very Low Income 59
Total 293
Due to the current turmoil in the financial markets, and due to the income targeting required to fulfill
regulatory requirements associated with tax-exempt financing the project presently has a $4.1 million
financial gap. St. Anton Partners has approached the County and the Windemere Master Developer
G:\CDBG-REDEV\redev\Board Orders and Greenies\BOARD.11.18.08.DVAHP.rev.doc
(Lennar) to assist in addressing this financial gap. St Anton Partners has proposed that 1). The Master
Developer reduce the land price, which they have agreed to do; and 2)that the County provide an interim
exception and modify the definition of Low Income Rent to the lesser of a)prevailing market rent or b)a
rent calculated at 30%of 80%of the Contra Costa County Median Income(the DVAHP currently requires
the lesser of market rate rents or the Section 8 Voucher Fair Market Rents). The revised proposal would
increase the number of Very Low Income Units from 29 to 59, and reduce the number of Low Income
Units from 73 to 44. The substitution of Very Low Income Units for Low Income Units is permitted by the
DVAHP. County staff is recommending that the County provide an interim exception to the definition of
Low Income Rent under the DVAHP as follows:
"Low Income Rent" means the lesser of (1) the monthly market rate rent, including a Utility
Allowance; or (2) a monthly rent which is no greater than 30% of 80% of the Median Monthly
Income including a Utlity Allowance. Rents for studio units shall be calibrated utilizing the one-
person Low Income Household Income; two-bedroom units shall be calibrated utilizing the three-
person Low Income Household Income; and the three-bedroom units shall be calibrated utilizing
the four-person Low Income Household Income. Low Income Rents are permitted to increase at a
maximum of 1% per annum until such time as this Low Income Rent is less than or equal to the
Section 8 Voucher Program Fair Market Rent as set forth in the definition of"Low Income rent' in
the March 22, 1994 adopted Dougherty Valley Affordable Housing Program. Once this exception
Low Income Rent and the Section 8 Voucher Program rents equalize the Dougherty Valley
Affordable Housing Program of March 22, 1994 shall govern."
The effect of this modified definition is to raise the Low Income Rents by an estimated by $42-$332
unit/month. The provision limiting the Low Income Rent escalation to 1%/year will ultimately allow the
Section 8 Voucher Program Rents to "catch — up" to the exception rents. It is estimated this would
happen in year 12-15.
Staff is also recommending that the Affordability Term for all units in the project be increased from the
current DVAHP minimum of 30 years to a minimum of 55 years, corresponding to the Qualified Project
Period for the bond regulated units.
With these modifications the income targeting profile for the project would be as follows:
Highland Point Apartment
DVAHP Bond Financed Exception Rent Unit
Unit Count Unit Count Count
Moderate Income 191 175 190
Low Income 73 88 44
Very Low Income 29 30 59
Total 293 293 293
GACDBG-REDEV\redev\Board Orders and Greenies\BOARD.11.18.08.DVAHP.rev.doc
FIGURE 1
DOUGHERTY VALLEY AFFORDABLE HOUSING PROGRAM MAP
GICDBG-REDEV\redev\Board Orders and Greenies\BOARD.11.18.08.DVAHP.rev.doc
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