AHA2006/11/28 ANAHEIM HOUSING AUTHORITY MEETING
NOVEMBER 28, 2006
The Anaheim Housing Authority met in adjourned regular session in the Chambers of the
Anaheim City Hall located at 200 South Anaheim Boulevard.
PRESENT: Chairman Curt Pringle, Authority Members: Richard Chavez, Lorri Galloway,
Bob Hernandez and Harry Sidhu
STAFF PRESENT: City Manager David Morgan, City Attorney Jack White, Acting City Clerk
Catherine Godoy
A copy of the agenda for the meeting of the Anaheim Housing Authority was posted prior to
November 24, 2006 at the City Hall outside bulletin board.
Chairman Pringle called the regular meeting to order at 5:37 P.M. in the Council Chambers
of Anaheim City Hall, 200 South Anaheim Boulevard.
ADDITIONS /DELETIONS TO THE AGENDA: None
HOUSING AUTHORITY /COUNCIL /AGENCY JOINT PUBLIC COMMENTS: No comments
offered during the Joint Housing Authority /Council /Agency public comment session related to
the Anaheim Housing Authority agenda.
At 5:57 P.M., Chairman Pringle recessed the Housing Authority to consider the
Redevelopment Agency agenda, reconvening the Housing Authority meeting at 6:10 P.M.
CONSENT CALENDAR:
3. Approve the revised deal terms between the Anaheim Housing Authority and Elm
Street Commons, LLP, for an affordable multifamily development and authorize the
D1 55 Executive Director, or her designee, to continue to work toward finalization of
negotiations on behalf of the Anaheim Housing Authority.
Authority Member Chavez removed Item No. 3 from the consent calendar for further
discussion.
Elisa Stipkovich, Director of Community Development, provided a brief staff report indicating
this item was to approve terms and conditions which would give staff direction in preparing a
final affordable housing agreement with Elm Street Commons, an affordable multifamily
development. Some of the changes from the original exclusive negotiation agreement
approved April 25, 2006 were to: 1) to lend the developer up to $3.75 million with funding
used to pay for the property value of $2.4 million and the City receiving the option to
purchase the property in 55 years at no cost subject only to any further debt owed to the
Housing Authority; 2) the City would also be paying for environmental cleanup of the site on
a reimbursement basis up to $1.2 million; and 3) the developer requested the City do the
actual sewer improvements in the City right -of -way which had been estimated at $150,000 to
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Page 2
which the City agreed. Ms. Stipkovich stated the terms and conditions of the residual
receipts or payment of the loan back to the City had been spelled out and there would be six
different payments coming out of the net income before the City would see any residual
receipts with the Housing Authority receiving 85 percent of those residual receipts and the
developer receiving the remaining 15 percent.
Authority Member Chavez questioned why the Housing Authority was approving a concept
rather than approving the actual deal on this date; Ms. Stipkovich responded the Housing
Authority would be approving the negotiated deal points which would then be used to
prepare an affordable housing agreement that would return to the Housing Authority for final
approval. To the question posed by Authority Member Chavez as to whether further
negotiations would be needed; Ms. Stipkovich replied the deal points covered what the City
required as far as economics were concerned, although minor issues could arise once the
agreement was drafted. Authority Member Chavez asked for further clarification on the
sewer improvement issue with Ms. Stipkovich stating that after the staff report had been
written, staff had further discussions with the Public Works Department and it was
determined that the City and the Agency would take the responsibility for those sewer
improvements as it would take place in the public right -of -way and the street was found to
contain some hazardous substances. She then reduced the amount of funds going to the
developer by the estimated $150,000 and the affordable housing agreement would denote
that the responsibility to complete the sewer improvements would be the City's obligation.
Authority Member Chavez commented he had talked to the principals on the issue of the
85/15 percent split for the residual receipts and from the beginning, the developer had stated
he felt a 50/50 split was reasonable. Since the City would get the property back in 50 years
and had made a smaller investment in this project, Authority Member Chavez felt a 50/50
split was fair and that it might encourage other developers to come to Anaheim with a 100
percent affordable housing project. With those comments offered, Authority Member Chavez
moved to approve the deal terms, eliminating the word "concept," and changing the residual
receipt split to 50/50.
Chairman Pringle pointed out the 85 percent was not reflective of 85 percent of all funds
received but was after six levels of payments were made, including the developer's fee, the
deferred construction fee, the limited partner asset management fee, the general partner fee
after repayment of the general partner development loans and contributions, the nonprofit fee
for social services and the tax credit equity adjustors to the limited partners. After all of those
payments were made, he emphasized, the City would then receive 85 percent of the residual
funds to reflect repayment for the Housing Authority making the loan to Elm Street
Commons. He also pointed out that the developer was treated well by the City as originally
the loan was approved at $2.4 million but now reflected $3.75 million, the environmental
cleanup was originally for $850,000 and had now been increased to $1.2 million, and the
developer was to take care of the sewer improvements which benefited his project estimated
at $150,000 which would now be handled by the City. As five other affordable housing
agreements had been approved with the 85/15 split, Chairman Pringle supported no change
to that ratio and pointed out that the residual receipts received by the Authority could then be
used again for future affordable housing projects.
Gary Squier, SADI Development, stated his firm had been involved in over 30 projects and
he had never seen an 85/15 split. He encouraged the City to consider a 50/50 split as it was
an industry practice and developers were looking at increasingly narrow margins of profit. In
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Page 3
response to Chairman Pringle's question as to whether the project would work at the 85/15
split, Mr. Squier indicated SADI was committed to the project and would do it whether or not
the share was changed to 50/50, however, he emphasized the he felt the 50/50 division of
residual receipts was fair.
Authority Member Sidhu asked what dollar amount the 85/15 represented; Ms. Stipkovich
indicated in the first 10 years it would be negligible because there would not be much money
in residual receipts. She made the point that there were three separate contracts with SADI
development, the first being 100 percent in the Agency's favor and that SADI had
subsequently returned to contract for two other deals with the City. She further stated there
were three contracts with Mercy Housing with the same 85/15 split which she did not feel had
been a deterrent to developers. Ms. Stipkovich added the net cash flow for the first year was
estimated at $43,000 and in the 15 year was estimated to be $145,000. If this issue was a
deal breaker, Authority Member Sidhu indicated he would be supportive of changing the
residual receipt ratio to a 50/50 split to move this project forward especially since the amount
to be received would be minimal in the first ten years and seconded Authority Member
Chavez's motion.
Authority Member Hernandez expressed concern that since other developers had accepted
the 85/15 split and the percentages were changed at this point in time, it would place the City
in a bad bargaining position in the future and he could not support the change.
Authority Member Galloway indicated she had been involved in the project from the start and
had seen the negotiations from the City's side as well as the developer's and recognized City
staff had worked diligently to meet the needs of the developer who had received the property
and funds for the environmental mitigation as well as having the City take over responsibility
for the sewer improvements. Separate from that was the issue of fairness, and Authority
Member Galloway remarked she felt a 50/50 split for residual receipts was fair and would
support the change. .
Chairman Pringle again commented that this change would limit the amount of affordable
housing the City could do in the future as it lessened the amount of receipts received and
also felt this type of modification should have been discussed earlier rather than having the
Housing Authority hear it for the first time at this meeting and called for a vote on Authority
Member Chavez's motion to approve the deal points, remove the word "concept" and change
the 85/15 residual receipts to a 50/50 split, seconded by Authority Member Sidhu. Roll call
vote: Ayes — 3: Authority Members Chavez, Galloway and Sidhu. Noes — 2: Chairman
Pringle, Authority Member Hernandez. Motion Carried.
Adjournment:
There being no further business, Chairman Pringle adjourned the Anaheim Housing Authority
Meeting at 6:23 P.M. to reconvene the City Council meeting.
t spectfully submittrJ./
Cat rine Godo , Ac ing S= - ary
aheim Housin. • thorit