COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Housing

DATE:

January 27 2010

BOARD MEETING DATE:

February 9, 2010

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Duane Bay, Director, Department of Housing

SUBJECT:

Affordability Compliance Monitoring Fee for LaTerrazza Apartments at Colma Station

RECOMMENDATION:

Adopt a Resolution authorizing:

A. The President of the Board to execute an Amendment to the Covenant and Agreement regarding Affordability Restrictions for La Terrazza at Colma Station.

B. The Director of the Department of Housing or his designee to set the per unit annual affordability compliance monitoring fee; and

C. The Director of the Department of Housing or his designee to record the Amendment.

BACKGROUND:

In 2005 Colma Apartment Association, L.P., developed La Terrazza Apartments at Colma BART Station. The development was built in accordance with the BART Station Area Specific Plan and the County’s Density Bonus Ordinance. In return for the development of 153 units, the developer was required to provide 31 units to be occupied by and rented at rates affordable to very low-income households (incomes not exceeding 50% AMI) for not less than 55 years.

The terms of the deal were enshrined on March 8, 2005, by Resolution No. 067205, which authorized a three-party affordability covenant and agreement with Colma Apartment Associates, L.P., and the San Mateo County Transit District (SamTrans). SamTrans owns the underlying land and master ground-leased it to the developer for 75 years in a separate agreement.

The affordability covenant runs with the land for 55 years and binds all owners and their heirs, successors, and assignees. The covenant further gives authority to the Board of Supervisors to set the annual affordability compliance monitoring fee. The Department of Housing (DOH), which did not formally exist at the time of the execution of the Covenant, has since taken responsibility for monitoring affordability compliance at La Terrazza.

On August 14, 2007, La Terrazza changed ownership to EQR-La Terrazza at Colma Station Limited Partnership, a Delaware limited partnership. This change was evidenced by an Assignment and Assumption Agreement with the same August date.

DISCUSSION:

Upon assuming responsibility for monitoring compliance, DOH staff identified a number of administrative inefficiencies, including ambiguous cost escalation index, impractical calculation method, and consumption of staff time by DOH, County Manager’s Office, and County Counsel, for very minor dollar amounts. The subject amendment addresses these issues.

The original March 2005 covenant set a starting fee of $50 per affordable unit per year, or an aggregate amount of $1,550 for the 31 affordable units. The fee is collected at the end of the calendar year for the preceding 12-month period. The covenant further provides that starting in 2008, the fee may be adjusted to cover the County’s actual costs to monitor the affordable units, but that in no event will the adjustment exceed the percentage increase of the Consumer Price Index (CPI). However, the CPI is not a definitive single numerical indicator. The U.S. Bureau of Labor Statistics (BLS) publishes thousands of consumer price indexes, many as regional measures. A relevant local CPI is the San Francisco-Oakland-San Jose CPI for Housing.

The subject Amendment: (1) authorizes the use of the San Francisco-Oakland-San Jose Housing CPI as the index for determining monitoring fee increases; (2) provides flexibility to bank any increases less than one percent and to defer the fee adjustment to a subsequent year; and (3) delegates authority to set the annual monitoring fee to the Director of DOH. Any increases to the fee will be made in accordance with the March 2005 covenant that they be based on actual monitoring costs not to exceed the CPI-adjusted maximum. Authorizing DOH to set annual monitoring fees renders the task of changing and charging new fees more efficient administratively.

County Counsel has reviewed and approved the Amendment as to form.

Approval of this Agreement contributes to the Shared Vision 2025 outcome of a livable community by preserving the supply of affordable housing in San Mateo County.

FISCAL IMPACT:

No Net County Cost is incurred in this activity.