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RTC#02-234

June 11, 2002

SUBJECT:

Request to Increase Funding for BMR Second Mortgage Program to Accommodate BMR Audit Action-Budget Modification Number 34

REPORT IN BRIEF

Approval is requested for Budget Modification No. 34 to appropriate funds from Housing Mitigation Reserves that will allow the City to take action, if needed, to make timely purchases of BMR units that may be at risk of being lost from the City’s BMR housing stock. Through the City’s audit of the BMR Purchase Program, several forced sales of properties are in progress. Timely actions for the sale on transfer of ownership are required in the deed restrictions. Unforeseen circumstances may require the City to act as the interim purchaser to allow sufficient time for the sale to a new BMR buyer. The increase of funds will provide sufficient revolving funds to accommodate two transactions which will safeguard the ownership of these units.

BACKGROUND

On March 5, 2002, a Status Report on the ongoing Audit of the BMR Purchase Program was presented to the City Council (RTC 02-076). This report provided Council with information on a City audit certifying the occupancy of 133 out of 181 housing units in the BMR Purchase program. One of the deed restrictions under the BMR Program requires that each owner continuously occupy the unit as their principal residence. Through this audit, several occurrences of breaches in occupancy restrictions were discovered. The actions taken to resolve these cases have been the forced sale of each unit. Presently, there are six forced sales in escrow.

Another specific deed restriction under the BMR Purchase Program limits the number of days the City has to find a buyer for the property and also the number of days allowed to close escrow. The deed Restrictions allow the City to purchase the BMR property when the unit might be lost from the City’s BMR housing stock if unforeseen circumstances occur in escrow such as the buyer not qualifying for a loan. The time limit during which the City must find a buyer and close escrow on a for-sale BMR unit is limited. If the time limit is reached the seller is released from the resale restrictions and can sell the unit on the open market at full market price.

EXISTING POLICY

Land Use and Transportation Sub-Element (1997):

GOAL C2: Ensure ownership and rental housing options in terms of style, size, and density that are appropriate and contribute positively to the surrounding area.

Housing and Community Revitalization Sub-Element (1992):

GOAL A: Foster the expansion of the housing supply to provide greater opportunities for current and future residents given environmental, social, fiscal, and land use constraints.

GOAL C: Promote and maintain a diversity in tenure, type, size, location and cost-of-housing to permit a range of individual choice for all current residents and those expected to become city residents as a result of normal growth processes and employment opportunities.

The Housing Sub-Element also encourages the City to continue the resale control elements of the BMR program.

DISCUSSION

Staff will make every effort to accomplish transfers directly to the new buyers and will take actions to purchase units by the City only as a last resort to prevent the loss of units.

Staff is recommending Council approve Budget Modification No. 34 to appropriate funds for purchase of the unit for subsequent resale in order to keep the unit in the BMR housing stock.

FISCAL IMPACT

There is no fiscal impact to the General Fund. Approval of Budget Modification Number 34 would appropriate $250,000 in Housing Mitigation Reserves and appropriate it to 814700 BMR Second Mortgage Program-Real Property Purchase. This would enable the City to purchase the BMR units, if needed to keep the units in the BMR housing stock. Proceeds from the sale of the property at a later date will be returned to Housing Mitigation Reserves.

BUDGET MODIFICATION NO. 34
FISCAL YEAR 2001/2002

Current

 

Increase
(Decrease)

 

Revised

Housing Fund

Expenditures:

 

 

 

 

 

Project 814700

BMR Second Mortgage Program

$ 131,964

 

$ 250,000

 

$ 381,964

Reserves:

 

 

 

 

 

Housing Mitigation Reserves

$ 9,268,098

 

$ (250,000)

 

$ 9,018,098

PUBLIC CONTACT

Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s Office.

ALTERNATIVES

1. Approve Budget Modification Number 34 to appropriate from Housing Mitigation Reserves for purchase of BMR units related to the on-going audit.

2. Do not approve Budget Modification Number 34 appropriating funds out of Housing Mitigation Reserves to purchase BMR units.

RECOMMENDATION

Staff recommends Alternative 1- Approve a budget modification of $250,000 appropriating funds out of Housing Mitigation Reserves for purchases of BMR units related to the on-going audit.

Prepared by:
Katrina L. Ardina
Housing Programs Analyst

Reviewed by:
Annabel Yurutucu
Housing Officer

Robert Paternoster
Director, Community Development

Mary J. Bradley
Director of Finance

Approved by:
Robert S. LaSala
City Manager

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