City Administrator Dale Neiman took to the council a proposal to loan $700,000 to Irvine-based Global Premier to help cover a portion of the $761,877 in cost overruns and $878,239 in developer impact fees for sewer, water and school districts the developer incurred on its local projects.
As part of the deal, the city would receive 55-year affordability covenants on 108 units at the Adagio and Olympic Village apartment complexes. Those 108 units, along with 38 units the city has covenants for already at the Walnut Grove apartments, would bring the city's total to 146, just 22 short of what it needs to meet it the city's redevelopment housing production requirement, according to Neiman's report.
Neiman said the council previously had given him direction to negotiate a $700,000 loan with Global Premier for the Edgewater, Adagio and Olympic Village projects, but he said the Edgewater didn't obtain its longterm financing and won't be built.
The city would receive a total of $853,581 in payments, said Neiman, with interest on the loan set at 3 percent. The interest on the loan wouldn't begin to accrue until the 14th year of the loan. Global Premier would pay off the loan in its 24th year.
“If you don't do this deal, you've got to find covenants somewhere else,” said Neiman, suggesting that the city would have to get other developers to come in.
Council member Joyce Overton said its sounded to her like the city was buying the covenants, and she questioned the low interest rate and 13 years with no interest on the loan.
Neiman said they could change the agreement to include interest accrual earlier in the agreement, but that would lengthen the time it would take for Global Premier to pay back the loan.
“The easy thing to do is just ignore this,” Neiman said of the need to pursue affordable housing.
But that wasn't his suggestion, reminding the council that the 38 housing covenants the city current has resulted from the city being forced to get them due to litigation.
Neiman said the city has paid more than $161,000 for each of its affordable housing units previously, while the proposed agreement would mean they would paying a little under $7,000 per unit.
Michael de la Torre, a Global Premier project manager, said the delay in paying interest gives the company a chance to pay back federal tax credits to the Internal Revenue Service. He said they have 15 years to pay back those credits or else the IRS can take away the financing.
“We just have an obligation to pay them back first,” he said.
He told the council that Global Premier is willing to consider the new percentage, but the city wouldn't get its money back as quickly.
Overton said they may not get the money back as quickly but they'll receive more money if the interest rate accrual terms are changed. She said she wanted to postpone a decision in order to have staff bring back budget scenarios. Neiman said there is some financial information that they can't disclose to protect the company.
The council eventually decided in a 4-1 vote – with Councilman Curt Giambruno voting no – to bring the discussion back next month.
In other news, the council voted unanimously to continue a second reading of a resolution to rezone the Provinsalia property. Neiman had proposed they postpone it in order to give the city attorney a chance to provide a report on the city's handling of the Feb. 26 in relation to the Brown Act.
The council also approved sales of surplus property – a 25 foot by 100 foot lot on Austin Drive to be sold for $3,000; a 7-foot-wide strip in Lakeshore to be sold for $5,000; and a lot on Davis Street that dead ends into Highway 53, which is worth $40,000 but needs $30,000 of engineered fill to make it buildable, for a sale value of $10,000.
Also approved was an agreement with the North Central Counties Consortium to give young people ages 16 to 24 education and work experience. Neiman said the city is seeking two people for office work and three to five for park and street maintenance.
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