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HomeMy WebLinkAboutAgenda Statement 1984/12/11 Item 4 COUNCIL AGENDA STATEMENT Item 4 Meeting Date 1 2/11/84 ITEM TITLE: Public Hearing - Housing Policies Report for mortgage revenue bonds a. Resolution // Approving and directing publication of a Housing Policies Report SUBMITTED BY: Community Development Directo�5ths Vote: Yes No X ) REVIEWED BY: City Manage The Tax Reform Act of 1984 imposes a new requirement on jurisdictions issuing tax exempt single-family mortgage revenue bonds. In the year preceding a bond issue, a jurisdiction must publish a report which sets forth the housing policies it will apply to the bond issue and which assesses the City's single-family bond activity for the previous 12 months. The report must be considered in a public hearing. By Council action, the City has requested a bond allocation from the State for 1984, which would be issued in 1985, and therefore the report process must be undertaken this calendar year. RECOMMENDATION: That the Council approve the resolution adopting the Housing Policies Report and directing its publication. BOARDS/COMMISSIONS RECOMMENDATION: The Human Relations Commission supported the 1983 Single-Family Bond Issue, which was based on the policies stated in the subject report. DISCUSSION: The City has used the tool of single-family mortgage revenue bonds to enhance homeownership opportunities for moderate and middle-income families, in response to the Affordable Housing Program of the Housing Element of the City 's General Plan. The bonds, which are sold at tax exempt rates, have funded mortgages to income-qualified first-time homebuyers at rates significantly below the market, allowing home purchases by families otherwise unable to qualify. In 1983, the City participated in a Joint Powers Authority issuance of $20 million in single-family bonds, of which Chula Vista was allocated $10 million. The Council has since requested $10 million in single- family bond allocation from the State for 1984. At that point, developers will be invited to reserve portions of that $10 million commitment and bonds will be issued, if the City Council so desires. The new reporting requirements of the Tax Reform Act are aimed at creating public scrutiny of tax exempt bond issues prior to their issuance and at evaluating the performance of previous issues. As a result, the public can '71- Page 2, Item 4 Meeting Date 12/11/84 judge if the City's use of the single-family bond program authority appropriately serves the housing needs and goals of the community. The degree to which the City uses those bonds to assist lower income families, a federal statutory requirement, can also be analyzed. The subject report (Attachment 1 ) must be adopted in public hearing, published, and submitted to the Treasury by December 31 , 1984, or the City will not be able to have two main sections: a statement of housing policies as they pertain to mortgage revenue bond issuance, and an assessment of prior bond activity. The policies stated in the report are consistent with the understood but not formally stated policies used in formulating and issuing the City's 1983 Single-Family Mortgage Revenue Bonds. Federal law requires that jurisdictions maximize opportunities for lower income families as much as is feasible, and policy point "C" addresses that requirement. "C" also establishes that lower income opportunity must be balanced against the need for a strong bond rating and the development of desirable, balanced residential communities. It should be further pointed out that significant lower income participation in such a program is problemnatical . As the attached data sheet (Attachment 1 ) from the feasibility consultant for the 1983 bond issue indicates, the estimated average qualifying income for the 1984 bond issue would be in excess of $30,000 per year. In spite of congressional concern for housing lower income families, tax exempt single-family bond programs remain moderate-income programs in response to housing market realities, with realistic family-income ranges between $28,000 to $50,000. Policy point "D" references a new alternative to mortgage revenue bonds in the Tax Reform Act, the issuance of Mortgage Credit Certificates to homebuyers. Point "D" establishes that the City would not use some of its $10 million allocation to do mortgage credit certificates, as such certificates are more likely to be useful to higher income families who can afford to purchase homes at higher conventional interest rates and take tax credits on the interest payments for the few years. The report also assesses the activity of the 1983 Single-Family Mortgage Revenue Bond. As all of the mortgages used to date have been on the more expensive of the two participating projects (Charter Point) , it can be anticipated that the average buyer income level will come down significantly when the less expensive project (Chula Vista Woods) begins to sell . At that point, the City should be able to demonstrate better performance in pursuit of the goal of assistance to lower income households. If approved, the report will be published in its entirety in the Chula Vista Star-News and will be filed with the Treasury Department by December 31 . Finally, the Council should be aware that developer interest in the single- family bond program is high. To date, and without solicitation, Housing Opportunities, Inc. , EastLake Development Company, and McMillin Development have expressed the intention of applying for portions of the 1984 allocation of $10 million. EastLake Development Company has requested an allocation for 1985 of several times more than the $10 million for 1984. FISCAL IMPACT: Minor staff costs and publication costs will be paid from budgeted low and moderate-income housing fund monies. WPC 1012X ci Lt \\J 1 a7a,6-g) -e__s4 , 9 fl D :tc d L _ _ __ HOUSING POLICIES REPORT CITY OF CHULA VISTA DECEMBER 11 , 1984 The City of Chula Vista is contemplating the issuance of mortgage subsidy bonds to promote affordable homeownership in 1985. This report has been compiled in response to changes made by the Tax Reform Act of 1984 in the Housing Tax Law (Section 103A) governing the issuance of those bonds. The report will state the policies which will be followed in making the contemplated issue and assess the City 's mortgage subsidy bond performance for the year preceding the report. I. Policies A. The City will pursue the provision of decent housing in well-planned neighborhoods for low, moderate, middle, and upper income households. B. The City will pursue the provision of adequate housing for the elderly, handicapped, large families, and households of low or moderate income. C. The City will issue, where feasible, tax-exempt mortgage subsidy bonds to enhance home ownership opportunities for low, moderate, and middle-income households. D. The City will make the availability of the resultant below market interest rate mortgage commitments known to as many providers of local ownership housing as feasible and will provide for the competitive evaluation of all commitment proposals. E. The City will select commitment proposals based on the balancing of the following considerations: 1 . The maximization of the issue's investment-quality rating to yield the lowest interest rate. 2. The maximization of homeownership opportunities for lower income households. 3. The maximization of the quality and balance of Chula Vista's housing stock and residential environment. F. The City does not intend to establish a mortgage credit certificate program because the same would, by necessity, be directed to higher income persons than a housing bond program. G. The City may choose to participate with other jurisdictions in a joint powers agreement to issue mortgage subsidy bonds. H. Discourage concentration of low and moderate and income housing in any one area of the City. R-11862 II. Assessment A. The City did not publish a housing policies report in 1983. B. In December of 1983, the City of Chula Vista participated in the Chula Vista-El Dorado-Livermore-Menlo Park Housing Finance Agency Home Mortgage Revenue Bond Issue. Of that $20,600,000 issue, the City was allocated $10 million. The City committed the $10 million allocation to two developments: $5.2 million to a 110-unit manufactured housing subdivision with a proposed sales price range of $58,000-$76,000 (the price range has been changed to approximately $75,000-$90,000) ; and $4.8 million to a 104-unit condominium project with a proposed sales price range of $96,000-$114,000. Although target areas exist in Chula Vista, no mortgage funds were used in the target areas in spite of advertising of the availability of these mortgage funds. The first project has not yet received development approvals, so no mortgages have been utilized. The second project, as of November 20, 1984, has used 16 mortgages at an average buyer income level of 122% of the area median income. Development and sale of the first project should reduce substantially the average buyer income level for the issue. In designing the 1983 Bond Issue, the City used all efforts to the greatest extent possible to maximize lower income benefit, in particular selecting the manufactured housing subdivision with its lower sales prices. WPC 1004X t POTENTIAL ECONOMIC IMPACTS OF THE PROPOSED MORTGAGE REVENUE BOND PROGRAM (Estimate : Mid-November , 1984 ) ) City of Chula Vista Estimated Allocation $10, 000, 000 Comparison of a Typical vs Bond Program Purchase Bond Typical Program Comparison Estimated Price-Avg $80 , 000 $80 , 000 Same Downpayment $4, 000 $4 , 000 Same Loan $76,000 $76 , 000 Same Expected Mortgage Rates13. 50% 12. 00% 1 . 50% Monthly Payment $875 $786 $88. 34 Qualifying Income $34, 948 $31 , 418 -10. 10% Mortgage Payment Savings for Qualified Purchasers Per Unit All Units Monthly $88 $11 , 624 Annually $1 , 060 $139 , 487 Loan: 30 yrs $31 , 803 $4 . 18 million Employment Impacts for the Local Economy Economic Activity $10. 53 million Price-Avg $80, 000 Number of Units132 New Employment 908 Primary Sector. . . 316 $25 ,000 per year Support Sector. . . 592 $20 , 000 per year Fiscal Impacts Property Taxes/Yr $105, 263 Source: Empire Economics 300 East State St . Suite #502 ,C fi/i/' Redlands, CA 92373