Report Prepared by: Scott McBride, Development Services Director
Title
SUBJECT: Acceptance of the Housing Successor Agency Annual Compliance Report for Fiscal Year 2020-21 Pursuant to Health and Safety Code Section 34176.1(f) Including, but not Limited to, Housing Asset Fund Activities, Compliance with Expenditure and Surplus Limits, Real Property Assets and Loans Receivable
REPORT IN BRIEF
Annual Report summarizing Housing Successor activity for the City of Merced in Fiscal Year 2020-21 per California Senate Bill (SB) 341, which requires the City to prepare an annual report on the City’s compliance with Housing Successor requirements imposed by Health and Safety Code Section 34176.1(f).
RECOMMENDATION
City Council - Receive and file the Housing Successor Agency Annual Report for Fiscal Year 2020-21.
Body
ALTERNATIVES
1. Approve as recommended by staff; or
2. Approve, subject to conditions as specified by the City Council; or,
3. Deny the report; or
4. Refer back to staff for reconsideration of specific items as requested by the City Council; or,
5. Defer action until a specified date.
AUTHORITY
Charter of the City of Merced, Section 200.
CITY COUNCIL PRIORITIES
The Annual Report is required by the State of California Health and Safety Code Section 34176.1(f). The City of Merced chose to be the Housing Successor Agency to the former Merced Redevelopment Agency following its dissolution in 2012.
DISCUSSION
Background
The City of Merced is the Housing Successor Agency (Housing Successor) to the former Merced Redevelopment Agency (Agency). State law requires the City prepare an annual report describing how it is meeting housing successor requirements imposed by Health and Safety Code Section 34176.1(f). The Fiscal Year (FY) 2020-21 Housing Successor Agency Annual Report (Annual Report) is being presented to City Council to receive and file. The report is due to the California Department of Housing and Community Development (HCD) by April 1st of each year and must be posted on the City’s website.
The City is meeting all requirements imposed by State law. The City’s progress on major requirements is summarized below.
Housing Asset Fund Activity
As of June 30, 2021, the Housing Asset Fund had a balance of approximately $13.5 million ($2.3 million of which is cash). The Housing Asset Fund received $1,989,336 in revenues, originating from interest earnings, investment earning, and loan repayments. The Housing Asset Fund had $1,478,980 in expenditures in FY 2020-21, which included $278,980 of administrative expenses and $1,200,000 assisting the Childs and B Street Affordable Housing Development.
Expenditure Limit Compliance
Expenditures from the Housing Asset Fund must meet specific proportionality requirements by income level and age:
• Administrative and compliance monitoring expenses have an annual cap, which was $476,895 in FY 2020-21. Merced spent $278,980 in this category during FY 2020-21, which is well below the limit.
• If Housing Asset Funds are spent on housing projects, they must meet specific affordability targets by income level every five years. The current five-year compliance period began on July 1, 2019, and ends on June 30, 2024. The Housing Successor is required to spend at least 30% of its affordable housing expenditures assisting households with incomes up to 30% Average Median Income (AMI) and at most 20% assisting households with incomes between 60-80% AMI. Merced has spent $1,200,000 assisting households with incomes up to 30% AMI and therefore complies with the proportionality requirements. The City will monitor future expenditures to remain in compliance with this requirement.
• If more than 50% of rental housing units assisted by the City or the former Agency in the prior ten years are restricted to seniors, Housing Asset Funds may not be spent on senior housing. The City and former Agency have not assisted any deed-restricted rental units in the prior ten years and may spend Housing Asset Funds on senior housing if it complied with the 50 percent limit.
The City is meeting all Housing Asset fund requirements and will ensure compliance with future expenditures.
Excess Surplus
The Housing Asset Fund may not accumulate an “excess surplus,” which is an unencumbered amount that exceeds the great of $1 million or the sum of deposits in the prior four fiscal years. This requirement ensures that housing successors are actively spending available Housing Asset Funds on affordable housing. The Housing Successor did not have an excess surplus at the end of FY 2020-21.
Real Property Assets and Loans Receivables
As of June 30, 2021, the City owned ten housing successor properties with a statutory value of $1.1 million. The properties must be developed with affordable housing or sold by February 25, 2023. The City issued a Request for Proposals in April 2021 inviting proposals to develop the properties with affordable housing. The City Council approved entering into Exclusive Negotiating Agreements with three developers in October 2021 (Linc Housing, Habitat for Humanity, and Custom Containers 915), and Development Services staff continues to work with these developers in finalizing and executing those agreements.
The Housing Asset Fund also has approximately $9.6 million in loans receivable from first-time homebuyer loans and developer loans for multifamily rental projects. Loans are repaid either on an annual basis or when a property is sold.
IMPACT ON CITY RESOURCES
None
ATTACHMENTS
1. Merced Housing Successor Agency Annual Report Fiscal Year 2020-21
2. Presentation