COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager's Office

DATE:

February 13, 2004

BOARD MEETING DATE:

March 2, 2004

TO:

Honorable Board of Supervisors

FROM:

Steve Alms, Real Property Services Manager

SUBJECT:

Resolution authorizing purchase of the real property commonly known as 252 - 5^th Avenue, Unit 3D, Redwood City (unincorporated), California and recording of a certificate of acceptance of a Grant Deed thereto.

Recommendation
Adopt a resolution authorizing the purchase of the real property commonly known as 252 - 5^th Avenue, Unit 3D, Redwood City (unincorporated), California and recording of a certificate of acceptance of a Grant Deed from Reynaldo and Edith Hernandez.

Background
In April of 1992 the County of San Mateo ("County") and Silverado Development Inc. ("Developer") entered into an agreement allowing Developer the right to construct an additional condominium unit in its project at 248-262 - 5^th Avenue, Redwood City (Unincorporated North Fair Oaks). In exchange for the right to develop eight units instead of seven, the Developer agreed to sell one unit to a low or very low income household and to impose a deed restriction limiting the price upon resale. The deed restriction is effective for forty years from the date of the agreement, and limits the price and qualifies the income of the purchaser. The affordable unit was acquired for $102,000 on March 18, 1993 by Reynaldo and Edith Hernandez ("Owners"). When the Owners desire to sell, the County has the option to purchase the property at a price that is established by the terms of the affordable housing agreement. If the County declines to purchase the property, the Owners may sell to a party of their choosing, but still subject to the price limitations. That buyer would not necessarily have to qualify under the standard affordable housing guidelines.

Discussion
Owners gave notice of their desire to sell the property on December 17, 2003, subject to the deed restrictions, and on January 13, 2004 the Board Of Supervisors approved exercising

County's option to purchase the property, but did not authorize the actual purchase of the property. The County has 60 days to close the purchase, which means the escrow must close by March 15, 2004, unless the Owners agree to extend the time allowed for closing.


The purchase price set by the deed restriction allows the County to buy the property at Owners original price plus 3% per year, compounded annually, plus any capital improvements in excess of 1% of the original purchase price minus any costs to bring the unit into conformity with County codes. Based on the formula for adjustment, the base price at which the County can purchase the unit, as of March 15, 2004, is $145,029.81. This calculated price is subject to adjustment for capital improvements and any costs to conform with County codes.


The Owners made substantial improvements to the property, but are not able to document the associated costs. Based on an inspection of the property, Real Property Services estimates that the Owners invested an additional $20,000 to $25,000 in capital improvements. An independent contractor's inspection of the property did not disclose any code deficiencies. The price of the property, adjusted for capital improvements made by the Owners and subject to the deed restrictions, is estimated at $165,000. The formula price is substantially below market value for the property. The most recent sale of a similar but non-restricted unit in the building was at a recorded price of $320,000.


The transaction is complicated by the fact that the Owners refinanced the unit in September of 2003. The loan amount of $207,000 exceeds the price at which the County is entitled to purchase the property. If the County purchases the property at the restricted price, the Owners would have to pay down the loan by approximately $42,000. The Owners have indicated that they do not have the cash to complete the transaction in this manner.


It is recommended that the Board of Supervisors authorize the County Manager or the County Manager's designee to purchase the property at the purchase price as established by the terms of the affordable housing agreement, or at some greater price not to exceed $207,000, if the County Manager determines that to be in the best interests of the County and its affordable housing programs. In order to complete the acquisition, it will be necessary for the Board to authorize execution and recording of a Certificate of Acceptance of the grant deed.

Vision Alignment
The transfer keeps the commitment of Responsive, Effective and Collaborative Government and goal number 20: Government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain. The purchase of the unit contributes to the long-term good of the community by maintaining affordable housing for the low-income segment of our population.

Fiscal Impact
Housing and Community Development will fund the purchase using Homeownership Program Funds. The estimated purchase price is $165,000 to $207,000, and it is expected that the property will be resold at the cost of acquisition, and no impact on the General Fund.