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HomeMy WebLinkAboutSS3 - Affordable Senior Housing Development at Lower Bayview Landing & View Park Development at Upper Bayview LandingCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Study Session Agenda Item No. 3 January 14, 2003 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Sharon Wood, Assistant City Manager 644 -3222, swood @city.newport- beach.ca.us SUBJECT: Review of Affordable Senior Housing Development at Lower Bayview Landing and View Park Development at Upper Bayview Landing ISSUES: 1. City participation in development of an affordable senior housing project at Lower Bayview Landing, using the affordable housing in -lieu fund. 2. Coordination of the housing development with development of a view park at Upper Bayview Landing. RECOMMENDATION: Review housing and park projects, and provide direction to staff. HOUSING DISCUSSION: Background: State planning law requires cities to adopt general plan housing elements that address regional needs for housing affordable to all income levels. One of the principal provisions of the Newport Beach Housing Element is that developers of market rate housing should allocate 20% of the annual production of units to lower income households. The number of affordable units is to be negotiated for each development project, taking into account proper planning, CEQA compliance, project characteristics, incentives and government financing. The Circulation Improvement and Open Space Agreement ( CIOSA), approved in 1992, gave The Irvine Company entitlements to develop 861 market rate units. Because CIOSA is silent on a specific affordable housing requirement, the City has taken the position that the 20% requirement in the Housing Element should apply, resulting in the Bayview Landing January 14, 2003 Page 2 production of 172 affordable housing units. The Irvine Company does not believe this requirement applies to CIOSA, but has been willing to work with the City and potential affordable housing developers to provide an affordable senior housing project. As early as 1995, the City and The Irvine Company began discussing such a project on the Lower Bayview Landing site. The development agreement for One Ford Road, approved in 1995, specified that Ford's affordable housing requirement was 15% of the 404 units entitled, or 61 affordable units. In lieu of constructing affordable housing units, the developer paid the City $5,000 for every market rate unit developed, for a total of $2,020,000, to facilitate affordable housing in Newport Beach. These funds were received in May 1997, and have been held in an account while the City has explored the best use of them. The affordable housing in -lieu fund was increased by $540,000 in 2000, when an in -lieu fee was paid by the developers of Sailhouse. Affordable Housing Task Force: The City Council created the Affordable Housing Task Force in 2000, charging it to identify, evaluate and implement one or more affordable housing projects to satisfy community needs and achieve regional housing goals. Current members are Mayor Bromberg and Mayor Pro Tern Ridgeway, with one vacancy formerly filled by Dennis O'Neil. The Task Force has been involved in the following activities: • Monitored progress on updating the General Plan Housing Element; Wrote to The Irvine Company urging development of a senior housing project as the affordable housing component of its CIOSA developments; • Issued a request for proposals (RFP) for additional projects that could be assisted with the affordable housing in -lieu fund, reviewed the responses, and recommended that the City Council decline to pursue them; and • Most recently, worked with The Irvine Company, The Related Companies and staff to implement an affordable senior housing project at Lower Bayview Landing. Current Proposal: The Irvine Company responded to the Task Force's letter by beginning to discuss the possibility of a density bonus for an affordable housing project, and the City's goals in terms of rent limits and level of affordability. The Task Force provided clarity, and continued to urge The Irvine Company to pursue a project. In June 2001, The Irvine Company identified The Related Companies of California as the affordable housing developer. Related has designed a project with which staff and the Task Force are satisfied, and is ready to make the necessary applications to the Planning Commission and Coastal Bayview Landing January 14, 2003 Page 3 Commission for development approvals, and to the City Council for financial assistance. The project is summarized as follows: • 150, 1 bedroom and 2 bedroom units in three, 3 -story, elevator buildings with parking, community room and swimming pool. Available to households headed by persons 55 or older. 100% of units affordable, 80% to low- income households and 20% to very low - income households for a term of 55 years. If built today, the income limit would be $36,300 and the rent limit would be $908. • Site provided by The Irvine Company as part of their contribution to affordable housing in connection with CIOSA development. Planning Approvals Required: Both the General Plan and the Local Coastal Program Land Use Plan designate the site as Retail and Service Commercial, and provide that the site may be developed with senior affordable housing if the Coastal Development Permit findings demonstrate that there are adequate visitor serving uses in the coastal zone. There are no dwelling units included in the Land Use Element summary table for Statistical Area K1, where the site is located, but 200 units of "miscellaneous residential" are included in the Citywide Growth Projections table. These 200 units were intended to allow for the development of affordable housing. Therefore, the project is consistent with the General Plan. The site is in Area 1 of the Bayview Landing Planned Community, a zoning designation that allows development of 120 units of senior housing with a use permit. Both State law and the City's Housing Element require a density bonus of 25% for affordable housing projects, so no additional discretionary action is required to allow the development of 150 units. The site is in the coastal zone, and a Coastal Development Permit from the Coastal Commission is required. Request for City Assistance: Affordable housing projects typically are not economically feasible unless they receive financing from a number of sources at the Federal, State and local levels. Related intends to finance this project with a tax - exempt bond awarded by the California Debt Limit Allocation Committee ( CDLAC), Low Income Housing Tax Credits that are awarded automatically with CDLAC financing, and a grant of $250,000 from The Irvine Company. After all of these sources, the project has a financial gap of just over $1 million, and Related has requested that the City loan this amount from the affordable housing in -lieu fund. Staff has obtained an analysis of Related's financial pro forma from Kathleen Head of Keyser Marston Associates (KMA). Ms. Head specializes in financial analyses of affordable housing projects, and has assisted Newport Beach in analyzing potential Bayview Landing January 14, 2003 Page 4 projects, including earlier proposals for the Lower Bayview site, for several years. Ms. Head verified Related's estimates for construction costs, their financing plan, and their operating pro forma. Her conclusion is that the project requires $1.03 million in City assistance to achieve financial feasibility. After discussions between Related, staff and the Task Force, we have arrived at $1 million of assistance as an acceptable amount. City assistance would be in the form of a loan, subordinate to the other financing sources and payable over the 55 -year period during which affordability restrictions are in place. This form of assistance is consistent with regulations governing CDLAC and tax credit financing. Potential Additional Assistance: SB 975, effective January 2003, requires that prevailing wages be paid for any project that is financed with public funds. The bill includes an exception for affordable housing projects that receive a tax credit allocation by December 2003. A project must have local approval and Coastal Commission approval, as required in this case, before CDLAC consideration. Related and staff are working as fast as we can to meet this deadline. But especially with Coastal Commission approval required, it is possible that we will not meet the deadline. If prevailing wages do apply to the project, Related estimates that construction costs will increase by 15% and KMA estimates they will increase by 20 %. The requirement to pay prevailing wages creates a cost burden, estimated to be $1.2 million, that cannot be recouped through an increase in the project financing. Neither can it be recouped through developer profit, because affordable housing projects provide only a developer fee to the developer. Related has proposed sharing this burden with the City by deferring $600,000 of their developer fee. KMA has confirmed this is the maximum they could defer and still comply with IRS guidelines. Staff and the Task Force are proposing that the City increase our loan by $500,000, if the project becomes subject to prevailing wages. The City also is being asked to assist the project through waivers of Planning and fair share traffic fees. The Housing Element provides that the City Council may waive Planning fees for affordable housing projects, and staff recommends that the Council waive all Planning fees for this project. The Municipal Code provides that fair share traffic contributions shall be waived for affordable housing projects. The development loan agreement for this assistance program will be on a regular agenda for consideration and action by the City Council. Bayview Landing January 14, 2003 Page 5 PARK DISCUSSION: Background: Upper Bayview Landing is one of the open space sites The Irvine Company agreed to dedicate to the City through CIOSA. The City has discussed limited development of this site as a view park, which would include the following features: • Asphalt bicycle trail between Coast Highway and Back Bay Drive; • Lowering of west side of the park to improve views of Upper Newport Bay; • Coastal sage revegetation between the new bicycle trail and Jamboree Road; • Native grass meadow between the new bicycle trail and the eastern bluff top; • Ornamental landscaping at the perimeter along Jamboree Road and part of Coast Highway; • Bluff top fence; and • Drainage improvements. Relationship to Housing Protect: Public Works staff knew that grading for the view park would result in excess dirt that would need to be exported, and learned that Related had discovered soil problems with the housing site that could be remediated by "surcharging," depositing dirt and allowing it to compact the underlying materials. Both sites also need to provide for drainage in a manner that will protect water quality in Upper Newport Bay, which can be done by creating a joint water quality wetlands. Finally, it would be difficult to connect the new bicycle trail to the one through Newport Dunes without extensive grading or some reconfiguration of the park and housing sites. Related and City staff concluded that the two projects need to be designed in close coordination, and have been working together to resolve these design issues. The proposed design includes a land swap that provides additional land to the City for a better trail design in exchange for additional land to Related for the water quality wetlands. The size of the park would not be reduced as a result of this exchange, and it will allow the housing structures to be tucked into the hillside, contributing to improvement of views. The proposed site plan and grading plan for the projects will be available at the study session. The parties will continue to coordinate work on the two projects to minimize costs and impacts. ENVIRONMENTAL REVIEW: Staff has retained Civic Solutions to prepare environmental documentation to satisfy the CEQA requirements for both projects. It is expected that a Negative Declaration will be presented for the Planning Commission's consideration. Bayview Landing January 14, 2003 Page 6 FUNDING AVAILABILITY: The affordable housing in -lieu fund has a balance of $2,560,000. Capital Account C5100562 has $679,000 available for development of the view park. Submitted by: Sharon Wood Assistant City Manager