REQUEST FOR CITY COUNCIL / HOUSING AUTHORITY ACTION
SUBMITTED TO: Honorable Mayor and City Council Members / Honorable Chairman and Board Members
SUBMITTED BY: Al Zelinka, City Manager / Executive Director
VIA: Travis K. Hopkins, Assistant City Manager
PREPARED BY: Ursula Luna-Reynosa, Director of Community Development Brian Smith, Lieutenant / Manager, Police Department Community Outreach Bureau / Homeless and Behavioral Health Services
Subject:
title
**Future Development of 17642 Beach Blvd.
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Statement of Issue:
In August of 2020, the City of Huntington Beach Housing Authority (the “Housing Authority”) utilized funds from the Low and Moderate Income Housing Asset Fund (“LMIHAF”) to purchase a parcel of land located at 17631 Cameron Lane and entered into a lease to use the adjacent parcel at 17642 Beach Blvd. In January 2021, the Housing Authority completed the acquisition of 17642 Beach Blvd. also using funds from LMIHAF. Combined, this 1.6 acre site (the “Site”) was purchased for a future affordable housing project.
At about the same time, the City was in the process of identifying properties that could serve as the location of a temporary homeless shelter (“Navigation Center”), a facility intended to provide shelter and services for up to 174 individuals experiencing homelessness. The City ultimately selected the Site as an interim location for the Navigation Center.
Since LMIHAF was used to purchase the Site, the land must eventually be utilized for a qualifying affordable housing project within a reasonable time frame. If the Site is not ultimately used for such a project, the City must reimburse the LMIHAF with another funding source, which will most likely be General Fund dollars.
On June 7, 2022, the Housing Authority Board Members authorized the Executive Director to execute an Exclusive Negotiations Agreement (the “Agreement”) with Jamboree Housing to explore the development of the Site for a multi-use development that would include an affordable housing component. Staff is now seeking further direction from the City Council/Board Members on the future use of the Site.
Financial Impact:
The Recommended Action does not require any commitment of funding at this time.
Recommended Action:
recommendation
A) Receive and file this report; and
B) Provide direction to staff regarding future use of the Site.
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Alternative Action(s):
Provide alternative direction to staff.
Analysis:
History and Background on LMIHAF
In 1945, the California Legislature enacted the Community Redevelopment Act to assist local governments in eliminating blight through development, reconstruction, and rehabilitation of residential, commercial, industrial, and retail districts. In 1951, the Legislature superseded the Community Redevelopment Act with the Community Redevelopment Law (“CRL”), which provides funding from local property taxes to promote redevelopment of blighted areas. The CRL also established the authority for tax increment financing (“TIF”), which is a public financing method to subsidize redevelopment, infrastructure, and other community-improvement projects. TIF uses future increases in property taxes to subsidize current improvements, which are projected to create the conditions for the increases. For example, the completion of a public project might result in an increase in the value of surrounding real estate, which generates additional tax revenue. In 1976, the legislature required that 20 percent of all tax increment generated through redevelopment be set aside to create, preserve, and improve housing for low and moderate-income persons. Known as “housing set aside”, this source of funding became an important tool for the development of affordable housing in California and created tens of thousands of housing opportunities for the State's low and moderate-income residents, including in Huntington Beach.
In 2011, to respond to State budget deficits, Governor Jerry Brown proposed and the State Legislature approved legislation that dissolved redevelopment agencies. On June 28, 2011, the Governor signed AB 26 1X, requiring creation of successor agencies to oversee the dissolution process. After a period of litigation, redevelopment agencies were officially dissolved as of February 1, 2012. Successor agencies were able to retain housing assets, continue to enforce housing covenants and restrictions, and exercise all other rights, powers, duties, and obligations of the former redevelopment agency as it related to affordable housing. As part of dissolution operations related to housing assets and activities of successor agencies, each housing successor was required to establish a restricted fund called the Low and Moderate Income Housing Asset Fund (“LMIHAF”). In Huntington Beach, the Housing Authority was established in 2011 per Health & Safety Code Sections 34200 et. seq. for the purpose of addressing a shortage of safe and sanitary dwelling accommodations in the City available to persons of low income at rents they can afford. On January 9, 2012, the City Council approved Resolution No. 2012-01 to confirm the City’s role as the successor to the Redevelopment Agency (the “Successor Agency”) and Resolution No. 2012-02 to confirm the Housing Authority’s role as the housing successor (the “Housing Successor”).
As the Housing Successor, the Housing Authority retained all funds in the LMIHAF and is authorized to manage these affordable housing assets and to exercise the housing functions that the former Redevelopment Agency previously performed. While this account does not receive new TIF, the account does collect money from the repayment of loans previously provided by the Redevelopment Agency. The Housing Authority is required to expend funds in the LMIHAF to meet its enforceable obligations, if any, and for specified administrative and monitoring costs related to ensuring the long-term affordability of units subject to affordability restrictions. The Housing Authority may then expend a specified amount per fiscal year on homeless prevention and rapid rehousing services, and must use all remaining funds for the development of affordable housing. Unencumbered funds in the LMIHAF that exceed the greater of $1M or the aggregate amount deposited into the fund during the preceding four fiscal years, results in “excess surplus”.
The Housing Authority is required to prepare and submit an annual report to the City Council regarding the LMIHAF (the “Annual Report”). The Annual Report sets forth certain details of the Housing Authority activities (assets and activities) during the fiscal year. One function of the Annual Report is to conduct an “Excess Surplus Test” which provides the amount of excess surplus in the LMIHAF, if any, and the length of time that the Housing Authority has had excess surplus and a plan to eliminate the excess surplus. Excess surplus, once identified in an Annual Report, must be encumbered by an eligible activity, within three fiscal years. Failure to encumber the excess surplus within the allocated timeframe requires that the Housing Authority either 1) transfer the excess surplus to another eligible jurisdiction for an eligible use or 2) transfer the excess surplus to the Department of Housing and Community Development to be used for certain eligible uses within 90 days of the end of the third fiscal year.
In Fiscal Year 2019/2020, the Housing Authority received a large deposit in excess of $6.5M due to a re-syndication of a Low Income Housing Tax Credit (LIHTC) project where the Housing Authority provided funds to the deal. As a result, excess surplus in excess of $3M was anticipated if the Housing Authority did not encumber funds within the Fiscal Year 2020/2021. To avoid forfeiting funds to the State, the City began looking for properties to purchase for future affordable housing opportunities.
History of 17631 Cameron Lane and 17642 Beach Blvd. (Site)
Ultimately, on August 19, 2020 and January 5, 2021, a total of $6,094,847 of LMIFHAF funds were used to purchase the Site for use as a future affordable housing development. The purchase of the Site resolved the City’s anticipated excess surplus situation.
In 2018 the City began exploring locations to establish a Navigation Center to provide shelter and services to 174 individuals experiencing homelessness in Huntington Beach. After exploring several different sites, the City chose to build a temporary Navigation Center on the Site, understanding that at some point in the near future, affordable housing must be developed on the Site or the $6,094,847 used to acquire the Site must be reimbursed to the LMIHAF.
In December of 2020, a new address was assigned for both lots as 17642 Beach Boulevard with different suites assigned to the various structures and the 17631 Cameron Lane address was eliminated. This address change was made for multiple purposes including fire response, US postal service, and utilities as the two lots are accommodating one use.
On March 22, 2022, a Request for Qualifications (RFQ) was released by the Housing Authority seeking a real estate developer to develop, finance, and manage a new mixed-use development, potentially consisting of a homeless shelter, a sobering center, support services, and transitional and affordable housing at various income levels. On June 7, 2022, the City Council authorized the Housing Authority’s Executive Director to execute a no-cost Agreement with Jamboree Housing to provide exclusive negotiations and explore the development of the Site.
Four Concepts for Use of the Site
Since the execution of the Agreement, staff has explored various uses and potential development scenarios of the Site that would comply with zoning requirements, benefit the community, increase housing opportunities for low-income individuals and those experiencing homelessness or at-risk of experiencing homelessness, and with limited fiscal liability for the City.
Staff has identified four concepts for potential uses of the Site, including the following:
Concept 1: Healing Center
Develop a full-scale Healing Center, consisting of a Navigation Center, sobering center, facilities for support services, and a combination of transitional, permanent supportive, and affordable housing.
Concept 2: Pathways Project
Develop a multi-use facility, consisting of a Navigation Center and permanent supportive housing.
Concept 3: Permanent Supportive or Affordable Housing Options
Develop only permanent supportive or affordable housing and identify an alternate location for a Navigation Center.
Concept 4: Navigation Center Only
Develop a permanent Navigation Center for individuals experiencing homelessness. Because a Navigation Center does not qualify as an affordable housing project, this option would require the City to reimburse the LMIHAF, most likely using General Funds.
As an alternative, the City Council could choose to not develop the Site for any of the above options; however, long-term use of the Site for anything other than a qualifying affordable housing development would require repayment of the LMIHAF, which would trigger excess surplus for the Housing Authority. As outlined earlier in this staff report, a finding of excess surplus would require the Housing Authority to encumber or transfer the funds within three fiscal years.
At this time, selection of one of the above proposed concepts would not commit the City to any development of the Site; rather it would provide guidance to Jamboree Housing, allowing them to refine development concepts and identify funding sources for the development. At a future date, proposals would be brought before the Housing Authority Board for consideration, along with project details including concept design, operations plan, estimated total project costs for construction, projected costs for operation, sources of funding (including any Housing Authority or City contributions), developer’s responsibilities, etc.
Environmental Status:
Pursuant to CEQA Guidelines Section 15378(b)(5), administrative activities of governments that will not result in direct or indirect physical changes in the environment do not constitute a project.
Strategic Plan Goal:
Economic Development & Housing
Attachment(s):
1. PowerPoint Presentation