The City Council of the City of Sunnyvale adjourned from a 5:30 p.m. Study Session regarding Year End Report and Future Fiscal Issues, and met in regular session in the City Council Chambers, 456 West Olive Avenue, Sunnyvale, California at 7:30 p.m., with Mayor Miller presiding.

Marvin Rose, Director of Public Works, led the salute to the flag.

Mayor Miller announced the City is hosting a community press conference at 8:30 a.m. on January 29^th in Council Chambers to present the fiscal issues that will be facing the City and community.

Mayor Miller commended Public Safety Officer Lieutenant Phillip Carr and Public Safety Officer Russell Howard, for saving the life of a man by pulling the driver from his car to safety before impact with a train.

Councilmember Howe reported he met with the Sunnyvale Teen Advisory Council and stated that on January 31 they will be opening the new Teen Entertainment Program at Fair Oaks Park which they named "The Crash".

Silicon Valley Project 211 Steering Committee Chair, Mary Davey, and Nona Tobin, Loaned Executive to United Way, presented a report on a proposed information line for non-emergency services relating to health and housing needs. Ms. Tobin requested the Council adopt a resolution supporting the concept. She stated they would return with a detailed plan and budget and outline how the City could participate in this service.

Councilmember Valerio inquired how soon the resolutions of support were needed. Ms. Tobin responded sometime in the next few months.

Councilmember Fowler suggested this item be agendized for a future Council meeting. City Manager LaSala stated he would have staff undertake an analysis and would report back to Council.

Vice Mayor Risch moved, and Councilmember Vorreiter seconded, approval of the Consent Calendar. The motion carried unanimously.

Annabelle Yurutucu, Housing Officer, requested this item be continued to February 4, 2003.

Mayor Miller opened the Public Hearing at 8:01 p.m., and there being no public comments, closed the Public Hearing.

Motion by Councilmember Howe, and seconded by Councilmember Walker, to continue this item to February 4, 2003. The motion carried unanimously.

Trudi Ryan, Planning Officer, assisted by Annabelle Yurutucu, Housing Officer, and Simon Alejandrino, Bay Area Economics, presented the staff report. Ms. Ryan presented a slide show of the Below Market Rate Housing Program (BMR), which encompassed the purpose of the study, background, and outreach efforts. She further addressed concerns and recommendations relating the code requirements for the percentage of units, exempt developments, in-lieu fee, purchase unit deed restriction, rental unit term, purchase unit benefit population, rental unit benefit population, sales price calculation, sales price adjustment, resale price formula, rent calculation, rent increase method, and preference list. She recommended additional studies in 2004 for the evaluation of BMR’s in single family and mobile home zoning districts and review standards to encourage use of the density bonus. Ms. Ryan stated the four major developer concerns are sales price of new BMR units, percentage of units to be dedicated, application to rental development and pipeline projects.

Ms. Ryan stated the City engaged Bay Area Economics (BAE) to conduct a feasibility analysis. Simon Alejandrino presented a slide show detailing the methodology, findings and recommendations of the study.

Councilmember Vorreiter inquired if they received a response from the development community that a 10 percent on investment was unacceptable and if the effect on other communities was considered. Mr. Alejandrino responded that the subject did not come up in any of the meetings with the stakeholders and the study did not include other communities.

Mr. Alejandrino addressed the Council’s questions regarding clarification on income driven versus market driven trigger, impact on housing element requirements, viable apartments, and assumptions of the cost of money.

In response to Councilmember Vorreiter’s question on the housing element, Ms. Ryan stated the BMR program is consistent with the housing element.

Ms. Ryan reviewed the summary of recommendations for purchase units and rental projects.

Councilmember Howe inquired if the BMR units are economically viable. Ms. Ryan responded the land prices tend to adjust making the15 percent is affordable.

Councilmember Walker inquired if "in perpetuity" for rental units went with the land or with the project. Ms. Ryan responded it runs with the land and improvements as long as the development exists.

Vice Mayor Risch inquired if the housing sub element had an assumption that we would have an enhanced BMR program. Ms. Ryan responded staff based the analysis on current regulations.

Mayor Miller questioned if this is the right time to be addressing the BMR Program given the current economic climate. She inquired if any other cities have a voluntary BMR program. Ms. Ryan responded she was not aware of any voluntary programs. Director Paternoster added Sunnyvale already has a bonus that has not been taken advantage of and believes there would not be any volunteers.

Councilmember Walker inquired about a bi-annual review of the program and how the review triggered. Ms. Ryan suggested a review every five years.

Mayor Miller opened the Public Hearing at 9:03 p.m.

Bob Hines, Government Relations Director for the Tri-County Apartment Association, recommended deferring action stating there were no meetings with stakeholders on the new staff proposal. He further detailed his issues with the pro forma.

The Council entered into a lengthy discussion regarding the pro forma assumptions and fairness, rental rates, new construction, and the process of communicating with stakeholders.

Mayor Miller inquired if the hearing should be deferred until the pro forma is analyzed further by staff.

Councilmember Walker suggested that the public be given the opportunity to address Council on whether or not to continue this item.

Mayor Miller asked members of the public to address the Council on whether to continue the item and briefly state any additional issues.

Jeff Dennison, a member of the public, urged the City to consider a flexible approach to the BMR Program.

Alladin Dawood, a member of the public, stated he felt his rent of $1295/month for a two bedroom one bath under the BMR program is too high given the current economic climate.

John Vidovich, a member of the public, stated he supports a continuance.

Crisand Giles, representing the Home Building Association of Northern California, stated she does not recommend a continuance.

Councilmember Howe moved, and Councilmember Walker seconded, to continue the item to February 25^th and move the Transportation Infrastructure item to March 18^th.

City Attorney Armento advised Council to solicit input from the public on a continuance to February 25^th.

Timothy Kidney, a member of the public, stated he supports continuance but would like the Council to continue to hear comments.

Gary Schoennauer, a member of the public, stated he preferred a decision be made tonight.

Ken Riding, a member of the public, stated he preferred a decision be made tonight.

Paul Negus, a member of the public, stated the item should be continued.

Dan Carroll, a member of the public, stated he would like a decision tonight, but will accept a continuance.

Robert Martin, a member of the public, stated he does not support a continuance stating the owners and developers need resolution.

IrisAnn Nelson, Sunnyvale Housing and Human Services Commission Chair, stated they do not support a continuance.

Suzi Blackman, President and CEO of the Sunnyvale Chamber of Commerce, stated she does not support continuance.

At this juncture, Councilmember Howe withdrew his motion for a continuance.

Crisand Giles, Executive Director of the Home Builders Association, expressed concern with a $20,000 discrepancy between a two bedroom, two bath townhouse unit of $210,000 versus $191,000 which would alter the profit to 10 percent.

Timothy Kidney, Pastor of Saint Cyprians Church, stated he feels an analysis needs to be done on the below market percent, and felt the poor were not considered in this proposal. He further expressed concern on continually rising rents.

Gary Schoennauer, a member of the public, expressed concern with the number of BMR units required in a development and felt that 12.5 percent is a better compromise.

Ken Riding, a member of the public, stated the City should encourage market rate units, and make sure the program is very definitive so homebuilders can calculate their profit accurately. He further stated Council needs to be flexible on BMR units and recognize projects in the pipeline.

Paul Negus, a member of the public, expressed concern that the BMR rates are at a maximum and feels his rent has not changed with the market.

Dan Carroll, a member of the public, stated he would like the BMR rate to be 12.5 percent, and would like more flexibility in completing applications.

Robert Martin, a member of the public, stated land prices were high and not flexible, and felt the BMR percentage should not be increased.

IrisAnn Nelson, Sunnyvale Housing and Human Services Commission Chair, stated they support staff’s recommendations. She stated they do not want to reduce profitability, but the need for affordable housing needs to be addressed.

Suzi Blackman, CEO and Chairman of the Sunnyvale Chamber of Commerce, stated they support the home builders recommendations for a 12.5 percent BMR. She suggested looking at rental units separate from sale units.

Mayor Miller Closed the Public Hearing at 10:45 p.m.

City Attorney Armento clarified the Council could severe the rental portion from the purchase portion of the ordinance. She recommended a date be set when the new ordinance takes effect.

Motion by Councilmember Howe, and seconded by Councilmember Vorreiter, to:

1. Repeal Legislative Policies 2.3.3 and 2.3.7 once revised ordinance becomes effective.
2. Approve the following revisions to the Below Market Rate Housing Program and adopt the changes in the Affordable Housing Ordinance (SMC Chapter 19.66):

a. Increase the required percentage of BMR units for ownership projects to 12.5%;

c. Allow projects of less than 7 units to be exempt from BMR Program requirements;

d. Add condominium conversions to the types of residential development required to dedicate units;

e. Revise the in-lieu fee to be consistent with exempt projects of less than 7 units and a rental unit deed restriction of perpetuity;

f.  Extend the deed restriction for purchase units to 30 years;

h.  List priority categories for program participants based on a point system and return to City Council for approval;

i.  Lower the purchase unit income limits to 70% - 120% AMI;

j.  Establish the minimum BMR sale price based on affordability for households at 80% AMI, and allow higher sale prices (maximum price affordable to households at 120% AMI) based on the estimated cost of construction;

k.  Annually review the sale price range of new purchase units to adjust for changes in the area median income, interest and tax rates, and insurance costs.

l.  Institute 1/3 Bay Area CPI as the indexing method to annually adjust the resale price of existing purchase units; and,

3.  Review the BMR program before the next update of the Housing and Community Revitalization Sub-element.

4.  Allow development applications submitted prior to March 15, 2003 (Saturday) to comply with the 10% BMR requirement provided that discretionary approvals are completed within 6 months of that date (Monday, September 15, 2003).

Councilmember Vorreiter offered a friendly amendment to change the number of units from 7 to 9 units for items "c." and "e." The amendment was accepted.

Vice Mayor Risch offered a friendly amendment to establish the minimum BMR sales price based on affordability for households to 100% AMI. The amendment was not accepted.

The motion carried with Mayor Miller dissenting.

Motion by Councilmember Howe, and seconded by Councilmember Vorreiter, to:

1. Repeal Legislative Policies 2.3.3 and 2.3.7 once revised ordinance becomes effective.
2. Approve the following revisions to the Below Market Rate Housing Program and adopt the changes in the Affordable Housing Ordinance (SMC Chapter 19.66)

b.  Maintain a requirement that 10% of the units be dedicated as BMR for rental projects and increase the percentage to 15% when the vacancy rate drops to 3% or less as indicated on the semi-annual vacancy survey;

c.  Allow projects of less than 9 units to be exempt from the BMR requirements;

e.  Revise the in-lieu fee to be consistent with exempt projects of less than 9 units and a rental unit deed restriction of 55 years;

g.  Extend the deed restriction for rental units to 55 years;

h.  List priority categories for program participants based on a point system and return to City Council for approval;

i.  Lower the purchase unit income limits to 80% - 120% AMI; (Councilmember Howe clarified that purchase unit income limits to be set at 70% - 120% AMI at February 4, 2003 Council meeting)

m.  Revise the rent increase method of the lesser of 5% or the percentage increase in market rent in Sunnyvale.

Councilmember Walker offered a friendly amendment to consider a rent increase of 20 percent over a two-year rolling average for item "b" to take effect. The amendment was accepted.

The motion carried with Mayor Miller and Vice Mayor Risch dissenting.

No action was taken.

No action was taken.

There were no comments.