PRESENT:

Mayor Anthony Spitaleri

Vice Mayor Melinda Hamilton

Councilmember John Howe

Councilmember Otto Lee

Councilmember Ron Swegles

Councilmember Christopher Moylan

Councilmember David Whittum

ABSENT:

None

STAFF PRESENT:

City Manager Amy Chan

Assistant City Manager Robert Walker

City Attorney David Kahn

Director of Community Development Hanson Hom

Affordable Housing Manager Ernie DeFrenchi

Transportation Traffic Manager Jack Witthaus

Housing Program Analyst Katrina Ardina

Director of Human Resources Erwin Young

Assistant Planner Noren Caliva

Intergovernmental Relations Officer Yvette Agredano

City Clerk Gail Borkowski

1.A.

Approval of Revised Draft Minutes of April 22, 2008

1.B.

Approval of Revised Draft Minutes of May 6, 2008

1.C.

Approval of Information/Action Items – Council Directions to Staff

1.D.

RTC 08–152

List of Claims and Bills Approved for Payment by the City Manager – List No. 400

Staff Recommendation: Council reviews the attached lists of bills.

1.E.

RTC 08–155

Request Approval to Purchase Below Market Rate (BMR) Ownership Property at: 595 Blackwood Terrace, Sunnyvale, and Approval of Budget Modification No. 54

Councilmember Howe explained that within the Below Market Rate (BMR) program, units should be turned over to the next individual in a condition that is acceptable; however, this unit appears to need a lot of rehabilitation. Councilmember Howe inquired why the unit had a rehabilitation cost attached to it. Affordable Housing Manager Ernie DeFrenchi explained that the rehabilitation cost included upgrading the unit to current standards. Manager DeFrenchi stated the $61,000 expense includes escrow fees, property taxes, and a set-aside fund to cover any added expenses in closing the purchase.

Councilmember Howe inquired whether the City incurs these types of expenses when a unit is sold from one seller to another and the City is not involved with the transaction as an owner. Manager DeFrenchi explained that when the City is not involved in the transaction, the City would not normally incur this type of expense. Typically, the City would perform an inspection of the unit, identify the items that need to be rehabilitated, and then would require the seller to make those corrections or the City would fix the units and hold the funds in escrow as part of the closing.

Councilmember Howe inquired why the City would fund the expense for this unit when it is not required with a traditional transfer. Manager DeFrenchi explained that when a traditional transfer between seller and buyer occurs, there is an equity component built in to help cover those costs. In this particular situation, the seller over-financed the property and no equity is left in the unit. If it was sold as it is, the new buyer would have to make the upgrades themselves. Manager DeFrenchi explained that the purpose of the program is move new buyers into units that are up to the current standards so as not to cause the buyer additional expenses.

Councilmember Howe verified with Manager DeFrenchi that the seller pulled out approximately $200,000 in equity. Councilmember Howe stated that this owner took their funds when they refinanced this property and left the City with the $60,000 repair bill for the unit. Manager DeFrenchi explained the repair cost is not actually a bill because the City will recapture the funds when the unit is sold. Councilmember Howe responded that when the unit is sold the new BMR buyer will pay the $60,000 expense because their purchase price will be higher by that amount. Councilmember Howe stated he understands that the expense will be recouped when the unit is sold; however, that causes the new BMR buyer to actually be stuck paying for the rehab of the unit, while the seller has taken all the equity and not kept the unit in good condition. Councilmember Howe stated that is not the way the program is supposed to work. Manager DeFrenchi explained that any unit that is up to the current standards would be priced the same.

Councilmember Howe verified with Manager DeFrenchi that this issue has been brought before the city attorney regarding the City’s options on how to obtain the repair cost back from the seller. Councilmember Howe inquired what options are being reviewed and Manager DeFrenchi stated the options are still being discussed. Councilmember Howe stated a problem exists when a seller has the ability to walk away with approximately $200,000 in funds and yet the City has no recourse to obtain the $60,000 that the City will spend making repairs from the seller. Councilmember Howe stated this is a problem that needs to be addressed.

Director of Community Development Hanson Hom stated when the units are rehabbed for resale, they are being brought up to a standard typically higher than when a unit is sold from seller to buyer. Director Hom stated staff felt it would be best to bring the unit up to as new of condition as possible in order to get the maximum price allowable under the affordable housing provisions. Director Hom stated he does not see this as passing the cost on to the buyer because if the buyer wished to purchase a completely new unit, the price would be higher. Staff is trying to deliver as new of a unit as possible. 

Councilmember Howe inquired what the cost of the unit would be if the City was not involved with this unit and staff responded that it would be approximately $166,000, which would be the price without the rehab work being done. Councilmember Howe stated that someone could have bought the unit for $166,000 and lived in a reasonable fashion as a below market rate unit if the City did not have to get involved.

City Manager Chan explained that a transaction between two private parties allows the parties to sell their properties in whatever condition and price they agree upon. The City is passing on BMR units to potential buyers and if the unit is not marketable, it is difficult to attract BMR buyers, even though the unit may be less expensive. City Manager Chan stated the City does not need to perform rehab on a property; however, the City’s objective should be to have as many units available in marketable condition for potential buyers. Staff is attempting to have this unit prepared to sell; however, Council may direct staff to sell the unit in its current condition. City Manager Chan stated if Council has concerns over the BMR program, Council can raise them as a study issue.

Councilmember Howe stated the City has a policy that there will be reasonable upkeep on a BMR unit so that when it is transferred, it will be transferred in a reasonable condition.  Councilmember Howe stated the operational issue concerns whether staff has deemed the unit acceptable in its current condition which is an issue he will leave to the city manager. Councilmember Howe explained that he understands that the City is required to have affordable housing in the City through the BMR program; however, his concern is over the City having to add an additional $63,000 to a unit for repairs where the owner walked away with $200,000. Councilmember Howe stated this type of scenario does not help affordable housing in the City.

Mayor Spitaleri stated Councilmember Howe’s concerns can be addressed with the city manager at a later time.

Vice Mayor Hamilton inquired as to how this unit came to the City’s attention and Manager DeFrenchi explained that staff performs an annual audit to ensure that homeowners are in compliance with the program, and it was during this audit that staff determined that the owner had over-financed the property. After the audit, the owner indicated she could no longer afford to make her payments on the property. Manager DeFrenchi explained that the City has the first right of refusal to purchase units in order to preserve properties within the program and that is what staff is recommending in this case.

Vice Mayor Hamilton inquired whether staff anticipates that similar situations will arise due to the current sub-prime mortgage situation and Manager DeFrenchi stated at this time staff does not know what the results will be from the annual audit; however, results should be available in the new fiscal year. Director Hom explained that this situation is not a sub-prime situation; rather this situation occurred because a mortgage company or bank did not realize that this property was BMR and they went ahead and financed the unit at the market value.  The bank recognizes that they financed a piece of property beyond its market value and they are absorbing the loss. 

Councilmember Swegles stated he would like to sponsor a study issue on how to recoup damages or fees from BMR units. Councilmember Swegles would like the study to explore options on how to avoid having new buyers absorb the renovation costs from the previous owner.

City Manager Chan explained that the City does pursue fraud issues. In response to Councilmember Howe’s earlier question about this particular owner, the City Attorney is exploring ways to pursue the property owner and City Manager Chan stated she will report back to Council on these efforts. City Manager Chan suggested that a study issue would not be required as these types of actions are normal day to day operations; however, nothing would prevent Council from setting a policy, but it might not be necessary. 

Councilmember Swegles stated he was not speaking about fraud, rather he was suggesting a study issue to review the maintenance and upkeep of the BMR units. City Manager Chan stated that policy is already in place; however, the situation at hand is that staff did not realize the situation with this property until the audit was performed.  Currently the City is doing damage control with respect to this issue.

Councilmember Moylan explained that if this was not a policy issue, then this item would not be on the agenda. 

Councilmember Moylan inquired as to how this unit will receive a sales price given the fact the owner violated the rules under which they received subsidized housing. Manager DeFrenchi stated the City uses the current Consumer Price Index (CPI) value for the unit which becomes the sales price. Councilmember Moylan stated that is a reasonable way to arrive at a sales price for someone who turns the unit back to the City as part of a good faith sale. However, in this situation the owner broke the BMR rules and pulled out $200,000. Councilmember Moylan questioned if the City has the authority to pay the seller below market rate for their unit. Manager DeFrenchi stated he was not aware if that option existed. Councilmember Moylan suggested adding a clause in future BMR agreements that would allow the City to have the option to purchase the unit at below market rate should the owner violate BMR rules. Councilmember Moylan explained that this clause could assist the City from having to cover this type of budget modification. 

Manager DeFrenchi explained that the lender on this property knows the value of the property and staff has explained how the CPI value works. Staff would need to have further discussions with the city attorney if attempts were made to reduce the value price of the unit. Councilmember Moylan stated since the lender dropped the ball on this and did something that was not allowed, they should own the expense. The owner might not have the resources to repay the City but certainly the lender would. Councilmember Moylan verified that staff is having discussions with the city attorney over this possibility.

Public comments opened at 7:53 p.m.

No speakers.

Public comments closed at 7:53 p.m.

MOTION: Councilmember Howe moved and Vice Mayor Hamilton seconded to approve Alternative 1: Council approves Budget Modification No. 54 to appropriate $166,237 from the Housing Fund/Housing Mitigation Sub-Fund Reserve to Project 814700 BMR Acquisition for the purchase, rehabilitation costs, ongoing monthly costs and associated fees related to the acquisition and resale of 595 Blackwood Terrace, Sunnyvale

with additional direction to the city manager and city attorney to work on the possibility of obtaining additional funds from the seller and/or the lender before this deal is so far down the road that the City no longer has any options for restitution.

Councilmember Howe mentioned that this issue has been ongoing for a period of time.

VOTE: 7-0

1.F.

RESOLUTION

RTC 08–159

Amendment to the Classification Plan and Salary Resolution to Add the Newly-Established Classifications of Mail Clerk and Senior Plan Check Engineer.

Staff Recommendation: Council adopts a Resolution to amend the City’s Classification Plan and Salary Resolution to add the newly-established classifications of Mail Clerk and Senior Plan Check Engineer.

1.G.

RTC 08–150

Approval of Contract for Third Party Workers’ Compensation Administration Services.

Staff Recommendation: Council authorizes a two-year contract in substantially the same form as the attached Agreement and in an amount not to exceed $257,500 for FY 2008/09, and $263,938 for FY 2009/10, to Gregory B. Bragg & Associates to provide workers’ compensation claims administration services with the option that the City reserves the right to reduce the claims administration fee for FY 2009/10, based upon the number of open indemnity claims at the conclusion of FY 2008/09. The fee for additional services, as referenced in this report, shall remain at $5,000 for FY 2008/09 and FY 2009/10.

1.H.

RTC 08–145

Award of Bid No. F0703-83 to Remove and Replace 200 Theater Seats

Staff Recommendation: Council awards a purchase order, in substantially the same form as the attached draft and in the amount of $56,421.26 to Krueger International Incorporated, to remove and replace 200 theater seats.

1.I.

RTC 08–151

Award of Bid No. F0703-80 for the Installation of Curb Ramps

Staff Recommendation:

·        Council awards a contract, in substantially the same form as the attached draft and in the amount of $82,110, to Spencon Construction for the installation of curb ramps; and

·        Council approves a project contingency in the amount of $12,317.

1.J.

RTC 08–136

Amendments to Countywide AB 939 Fee and Household Hazardous Waste Agreements for FY 2008/09

Staff Recommendation: Council authorizes the City Manager to execute the proposed amendments to the Agency Agreement for Countywide AB 939 Fee and the Agency Agreement for Countywide Household Hazardous Waste Collection Program (with an augmentation amount of $180,000) and continues to delegate to the City Manager the authority to approve an increase of up to 20% ($36,000) in the City’s augmentation amount.

2.

RTC 08–157

Consider Approval of FY 2008/09 Action Plan: Recommendations for Funding of Community Development Block Grant (CDBG) and HOME Funds

Housing Programs Analyst Katrina Ardina presented the staff report.

Vice Mayor Hamilton verified that there is nothing in the contract that legally obligates the City to fund a certain amount and the agencies are aware that the amount funded is based on what the City has available. Director Hom explained that the City does not offer any commitment as to whether the funding would be the same amount for the second year. Director Hom stated the Housing and Human Services Commission’s opinion was that the City has a moral obligation to continue the same level of funding for each agency during the second year, based on the City’s original commitment. Vice Mayor Hamilton expressed that Council would certainly like to offer that; however, the City’s economic reality must be considered.

Councilmember Whittum verified that staff is proposing to fund $200,000 in Home Investment Partnerships Act Program (HOME) funds as a loan to Maitri, a non-profit agency, for the acquisition of an eight bedroom transitional house.

Councilmember Whittum inquired if there are unspent capital funds that could be used for curb ramps and Analyst Ardina explained that Community Development Block Grant (CDBG) funds are eligible to fund the curb retrofits. Councilmember Whittum verified that all of the CDBG programs are allocated to activities. Director Hom explained that Council does have the option to reduce funding for one and increase funding for another.

Councilmember Whittum questioned if the exterior paint program is lead hazard abatement or neighborhood preservation. Analyst Ardina stated the rehab program covers costs associated with lead-based paint depending on the age of the home. 

Councilmember Whittum questioned how much of the $100,000 that is programmed for home access, paint and emergency programs is for exterior paint jobs. Analyst Ardina responded that the majority of the funds are used for home access and not painting.

Councilmember Whittum questioned whether the proposed reductions in funding to Project Sentinel and other items will come back to Council during the budget workshop along with the option of restoring funding through the General Fund. Analyst Ardina explained that the request to fund the $53,182 shortfall involved mainly human services; however, Council could also consider funding the additional shortfall in fair housing services. Councilmember Whittum verified that the shortfall of $53,182 does not include funding for Project Sentinel.

City Manager Chan verified that it is possible for Council to fund the $53,182 shortfall from the General Fund as part of the upcoming budget consideration; however, that would not be staff’s recommendation. City Manager Chan explained that funding this shortfall has been recommended by the Housing and Human Services Commission, not City staff.

Councilmember Whittum verified with Analyst Ardina that the interest received on the City’s Housing Fund goes back into the Housing Fund.

Councilmember Whittum verified Analyst Ardina that the transitional housing service that the non-profit agency, Matri, provides is open to everyone as long as they are income eligible. 

Councilmember Whittum inquired as to what the City is doing to provide more low income and senior housing. Director Hom stated that there are a couple of projects in the works which mainly include the use of housing mitigation funds. Staff plans to come before Council in the near future with a proposed housing strategy outlining the various sources of housing and human services funding; projections for potential future redevelopment set-aside funds, and a proposed 20-year forecast.

Councilmember Howe verified with Director Hom that staff is closely looking at the Fair Oaks Garland Senior Housing project, which would require both HOME funds and a significant amount of housing mitigation funds. Councilmember Howe verified with Director Hom that due to HOME funds being fairly limited, possible funding sources in the future could include housing mitigation funds, redevelopment set-aside funds and attempts to leverage funds with non-profits in order to obtain additional state tax credit financing or other Housing and Urban Development (HUD) programs. Staff will continue to review how the City can best leverage their funds to gain additional assistance through other sources.

Councilmember Howe inquired if HOME funds can be used for down payment assistance for very low income individuals and rental deposits. Director Hom explained that HOME funds are limited to the rehabilitation and production of new affordable housing. These funds are more restricted than CDBG Funds.

Public hearing opened at 8:32 p.m.

Florence Tindle, Vice Chair of Housing and Human Services Commission, explained that she is filling in for the Chair who was unable to attend the Council meeting. Tindle explained that the members of the commission have acknowledged the reduction in funding, however, they support maintaining current FY 2007/08 funding levels because the needs are truly unfulfilled for an underserved community. Tindle explained that the commission’s recommendation to fund the shortfall was due to what they viewed as a moral obligation on the City’s part based on the two-year cycle which implied equal funding for both years.

Ann Marquart, Executive Director for Project Sentinel, thanked Council for their past support. Marquart stated she is seeking Council’s support for fair housing services because they have been recommended to receive a 30 percent cut in funding.

Public hearing closed at 8:37 p.m.

MOTION: Councilmember Swegles moved and Councilmember Howe seconded to approve Alternative 1: Council approves the Housing and Human Services Commission (HHSC) and staff recommended Action Plan of FY 2008/09 and appropriate $1,962,508 in CDBG funds and $1,267,917 in HOME funds (Attachment A).

VOTE: 7-0

3.

RTC 08–140

Roadway Reconfiguration Guidelines for Retrofitting Streets with Bike Lanes (Originally Titled Policy for Allocation of Street Space) – Study Issue. Revised Policy Recommendation

Transportation and Traffic Manager Jack Witthaus presented the staff report.

Vice Mayor Hamilton verified with Manager Witthaus that the guidelines will mainly apply to arterials and collector streets.

Councilmember Whittum verified with Manager Witthaus that persons with disabilities are included with bicyclists, pedestrians, and motor vehicles, as mentioned in the first paragraph of the proposed policy, Attachment B.

Councilmember Whittum verified with Manager Witthaus that Council has the option to consider reasonable accommodations for parking in certain situations where parking has been removed from the street.

Public hearing opened at 8:45 p.m.

Linda Eaton asked Council for their support of the proposed policy on allocation of street space.

Kevin Jackson, Bicycle and Pedestrian Advisory Commission Chair, stated the proposed policy received unanimous support from members of the commission. Although, the policy does not include everything that the commission wanted, it is a big step forward in making pedestrian and bicycle safety more visibility without mandating any particular outcome.

Richard Withers, spoke in support for the proposed policy.

Patrick Grant gave a presentation on the benefits of walking and bicycle riding along with the importance of improving bicyclist safety and traffic improvements.

Patrick Walz expressed his support of the proposed policy. Walz stated the way to increase ridership is to make it safer and more accessible. 

Craig Horne, member of Cool Cities Team, expressed support for the proposed policy.

Barbara Fukumoto stated she enjoys riding her bike, but would like it to be safer.

Public hearing closed at 8:58 p.m.

MOTION: Councilmember Moylan moved and Councilmember Lee seconded to approve Alternative 1 and 3:

Alternative 1: Council approves the policy on allocation of street space as described in Attachment B, and directs staff to prepare a General Plan Amendment to incorporate the proposed street allocation policies into the Land Use and Transportation Element of the General Plan, and

Alternative 3: Council directs staff to develop action strategies for improving engagement of the bicycling community when developing bicycle improvement projects, consistent with Community Engagement Sub-Element policy.

Councilmember Moylan acknowledged and praised BPAC for making the distinction between transport modes and non-transport modes and for originating this policy idea themselves. Councilmember Moylan stated this policy will assist Council when they are reviewing tight spaces for City streets.

Councilmember Lee expressed support for the policy. Councilmember Lee stated it is important to remember that everyone shares the roadways and the proposed policy will make the cycling safer in the City. Councilmember Lee thanked staff and BPAC members for assisting in bringing this item forward successfully.

Vice Mayor Hamilton stated she will be supporting this motion as it addresses her concerns over the previous version of this policy. Vice Mayor Hamilton stated that this policy gives Council more flexibility in determining what will work best for a particular situation or neighborhood. Vice Mayor Hamilton stated adopting this policy is a first step; however, more needs to be done such as offering driver education along with other programs. Vice Mayor Hamilton thanked BPAC for their work on the policy.

Councilmember Swegles inquired if staff could look into having showers available that Council could use if they wanted to ride their bike to the Council meetings. Councilmember Swegles thanked BPAC for bringing this policy before Council. 

VOTE: 7-0

4.

RTC 08–154

Review and Approval of the Position Profile for the New Sunnyvale City Manager

Director of Human Resources Erwin Young introduced Bill Avery of Avery and Associates who is conducting the city manager recruitment.

Director Young presented the staff report. 

Councilmember Whittum recommended changing the requirements to remove “four year” from the degree requirements and instead state that the position requires a degree in Public Administration, Business Administration or related field, which would allow an applicant to have a different undergraduate degree.

Councilmember Whittum suggested removing “city’s” from the reference of Baylands Park on page 1 of the proposed job announcement. Councilmember Whittum stated the park is a county park.

Councilmember Whittum suggested correcting the last sentence of paragraph 2 on page 3 of the proposed job announcement under the Ideal Candidate section because it requires experience in effective relationships with city councilmembers. Councilmember Whittum suggested a change to this section because it is clear later in the job announcement that someone with public entity experience, other than a city, would be considered. Councilmember Whittum suggested the following change, as highlighted and by use of a strikethrough to this section:

In addition, the new Manager must have a reputation of success in complex and fast-paced organizations, as well as a history of building effective relationships; with the City Council members; key to that success will be a proven track record of keeping the Council and a proven track record of keeping elected officials collectively informed of all relevant issues and concerns.

Councilmember Whittum suggested the following change shown by a strikethrough to the last paragraph, last sentence under Ideal Candidate section on page 3.

Candidates with experience managing a large and sophisticated public entity as a City Manager, Assistant City Manager or Executive Director are highly encouraged to apply.

Vice Mayor Hamilton explained that she is the Chair of the subcommittee assisting with the oversight of the city manager recruitment and selection process. Vice Mayor Hamilton stated there is a distinction between elected officials and councilmembers because City Council is the hiring group for this position.

Vice Mayor Hamilton stated the committee agreed that the wording “related field” under the four year degree section would cover other degrees that might be relevant. Councilmember Whittum stated his concern is whether the current language will attract a wide-enough group of applicants.

Public hearing opened at 9:13 p.m.

Werner Gans stated he submitted a list of ten attributes for the city manager profile, however, two attributes did not make it into the profile. Gans explained that the two missing attributes suggest that the applicant should have California government experience and should also understand Sunnyvale’s way of doing business from both the finance and management perspectives.

Councilmember Moylan explained that the section in the job announcement about the City of Sunnyvale is intended to show at length what is unique about the City of Sunnyvale as Gans suggested.

Public hearing closed at 9:15 p.m.

MOTION: Councilmember Lee moved and Vice Mayor Hamilton seconded to approve Alternative 1: Council reviews, provides input and approves the position profile for the new Sunnyvale City Manager developed by Mr. Avery and reviewed by the City Council subcommittee.