Item 10 - 1994-95 Charges for RDA Affordable Housing Projects
,. AGENDA REPORT SUMMARY-
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TO: Honorable Chairman and Members of the Redevelopment Agency
FROM: James L. Bowersox, Executive Dir~
INITIATED BY: John D. Fitch, Assistant Executive Director4rt ~
Warren H. Shafer, Director of Redevelopment ervic ~
Pamela R. Colby, Redevelopment Project Administrator~
DATE: November 14, 1995
SUBJECI': 1994-95 Planning and General Administrative Charges for Redevelopment
Agency Affordable Housing Projects and Programs
ABSTRACI'
California Redevelopment law specifically authorizes agencies to charge the planning
and administration costs of their affordable housing programs to their Low- and
Moderate-Income Housing Fund. The Agency Board approved a methodology for calculating
this cost in 1993 and this is the third year of undertaking this calculation. Staff
has completed the calculation for FY 1994-95 and has identified a total of $416,784 in
staff, consultant and legal costs associated with the Agency's affordable housing
- program during that time frame. Of this amount, $166,141 was directly charged to the
Housing Fund. The balance of $250,643 was initially paid by the Agency's General Fund
and subsequently charged to the Agency's Housing Fund.
ENVIRONMENTAL REVIEW
This item is not subject to CEQA review.
FISCAL IMPACI'
There is no additional fiscal impact resulting from approval of the staff
recommendation. These planning and administrative costs were paid during FY 1994-95.
ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE
None,
RECOMMENDATION
It is recommended that the Redevelopment Agency adopt the attached resolution
confirming the necessity of expending Housing Funds to pay costs associated with
planning for and administering affordable housing projects and programs during
FY 1994-95.
ACI'ION
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AGENDA REPORT
CITY OF POW A Y
This report is included on the Con~nt Calender. There will be no separate discussion of the report prior to approval by the
City Council unless members of the Council. staff or public request it to be removed from the Consent CaLendar and
discussed separately. If you wish to have this report pulled for discussion. please fill out a slip indicating the report number
and give it to the City Clerk prior to the beginning of the City Council meeting.
TO: Honorable Chairman and Members Of~edeVelOPment Agency
FROM: James L. Bowersox, Executive Dire
INITIATED BY: John D. Fitch, Assistant Executive Directo~\~ . ~
Warren H. Shafer, Director of Redevelopment ervice
Pamela R. Colby, Redevelopment Project Administrator~
DATE: November 14, 1995
SUBJECT: 1994-95 Planning and General Administrative Charges for
Redevelopment Agency Affordable Housing Projects and
Programs
BACKGROUND
Sections 33334.3(d) and (e) of the California Health and Safety Code
specifically authorize redevelopment agencies to charge their Housing Funds
the cost of planning for and administering affordable housing projects and
programs. These costs must be directly related to specific affordable housing
projects and programs and must not be "disproportionate" to the direct costs
of said projects and programs.
The Agency Board approved a methodology for calculating these planning costs
in 1993 (Attachment "A"), and this is the third year of undertaking this
analysis and charging the Housing Fund for its share of said costs. Pursuant
to the approved methodology, staff has calculated the cost of planning for and
administering affordable housing projects and programs during FY 1994-95.
This report presents the findings of the subject analysis.
FINDINGS
Staff first identified those Housing Fund eligible planning/administration
costs charged to the Agency's General Fund during the course of the year. The
first cost component involves City and Agency staff time devoted to the
Agency's affordable housing projects and programs. These staff costs are
directly associated with those eligible projects and programs listed in
ACTION:
J
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- Agenda Report
November 14, 1994
Page 2
Attachment "B". Staff time is tracked on bi-weekly time sheets submitted to
and reviewed by Agency staff during the course of the year. Staff costs are
calculated by taking the actual number of hours each employee spent on
specific projects/programs, multiplied by the fully weighted hourly cost of
that employee, including benefits. The number derived is then multiplied by
appropriate overhead factors established by the HSI Cost Recovery Study
undertaken and approved in 1993, as updated by staff. The result of this
calculation for FY 1994-95 was the identification of staff costs totalling
$187,501. 93.
The second cost component identified are consultant services directly related
to the Agency's affordable housing projects and programs. These include
legal, financial, environmental, geotechnical, and relocation consultants who'
worked on Housing Fund eligible activities. The total cost of these
consultant services was $146,974.31 during FY 1994-95. Combining these two
cost components results in a total of $334,476.24. These cost were
transferred to the Agency's Housing Fund last month following the close of FY
1994-95.
There are other costs meeting the definition of planning and administration,
which were directly charged to the Housing Fund during FY 1994-95, which must
be identified through this process. A portion of the cost of administering
the lease agreement and managing Haley Ranch Estates has been identified by
the City's Finance Division as Housing Fund administration cost. These costs
are found in the Haley Ranch Estates (#1150) budget for FY 1994-95 and total
$45,203.85. Also, a portion of the cost of affordable housing consulting
services and the preparation of the Comprehensive Affordable Housing Strategy
by David Paul Rosen & Associates were also charged to the Housing Fund in the
amount of $26,022.57. These services specifically related to negotiating and
structuring affordable housing projects and programs and the preparation of a
study pursuant to the terms of the Smith II Judgement. The cost of
administering the Affordable Residential Rehabilitation Loan Program during FY
1994-95 was also charged to the Housing Fund in the amount of $94,914.76. The
total of these planning/administration costs already charged to the Housing
Fund during FY 1994-95 is $166,141.18.
Staff undertakes periodic analysis to confirm that the overall charges for
planning and administration are not disproportional to the actual amount spent
on producing, improving or preserving the community's supply of affordable
housing. The following reflects the relationship between direct costs and
planning/administration costs for the Agency's Housing Fund over the past
three years.
FY 1992-93 1,268,573 $204,007 16.1%
FY 1993-94 5,219,888 $327,749 6.3%
FY 1994-95 3,803,335 $416,784 11. 0%
Average 3,430,599 $316,180 9.2%
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Agenda Report
November 14, 1994
Page 3
Consistent with the methodology approved in 1993, staff averaged the
administration costs incurred over the past three years to confirm that said
costs are reasonable and not disproportionate. The average percentage of the
planning/administration costs in relation to direct costs is 9.2%. The
Department of Housing and Urban Development (HUD) allows recipient agencies to
charge 20% for administering Community Development Block Grant funded
projects. The Agency's cost of 9.2% is less than half that amount and
represents a reasonable and not disproportionate cost.
ENVIRONMENTAL REVIEW
This item is not subject to CEQA review.
FISCAL IMPACT
There is no additional fiscal impact resulting from approval of the staff
recommendation. These planning and administrative costs were paid during FY
1994-95.
ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE
None.
RECOMMENDATION
It is recommended that the Redevelopment Agency adopt the attached resolution
(Attachment "CO) confirming the necessity of expending Housing Funds to pay
costs associated with planning for and administering affordable housing
projects and programs during FY 1994-95.
Attachment: "A" - Planning and Administrative Charge Analysis
"B" - Affordable Housing Projects and Programs
"CO - Redevelopment Agency Resolution
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- ATTACHMENT "A"
POWAY REDEVELOPMENT AGENCY
LOfi- AND IIODERATE-INCOIfE HOUSING FUND
Planning and Administration Charge Analysis
Leaal Framework for Analysis:
Sections 33334.3(d) and (e) of the California Health and Safety Code set forth
specific provisions which govern the expenditures by the Redevelopment Agency
of Low- and Moderate-Income Housing Fund monies for the payment of planning
and general administrative costs of housing programs and activities. Section
33334.3(d) reads:
It is the intent of the Legislature that the Low- and Moderate-
Income Housing Fund be used to the maximum extent possible to
defray the costs of production, improvement, and preservation of
low- and moderate-income housing and that the amount of money
spent for planning and general administrative activities
associated with the development, improvement, and preservation of
that housing not be disproportionate to the amount actually spent
for the production, improvement, or preservation of that housing.
The agency shall determine annually that the planning and
administrative expenses are necessary for the production,
improvement, or preservation of low- and moderate-income housing.
Section 33334.3(e)(I) reads:
Planning and general administrative costs which may be paid with
moneys from the Low- and Moderate-Income Housing Fund are those
expenses incurred by the agency which are directly related to the
programs and activities authorized under subdivision (e) of
Section 33334.2 and are limited to the following: (a) costs
incurred for salaries, wages, and related costs of the agency's
staff or for services provided through interagency agreements, and
agreements with contractors, including usual indirect costs
related thereto; (b) costs incurred by a nonprofit corporation
which are not directly attributable to a specific project.
Section 33334.3(e)(2) provides that:
Legal, architectural, and engineering costs and other salaries,
wages, and costs directly related to the planning and execution of
a specific project which are authorized under subdivision (e) of
Section 33334.2 and which are incurred by a nonprofit housing
sponsor are not planning and administrative costs for the purposes.
of this section, but are instead project costs.
.. Due to this provision, many costs that would typically be considered direct
project costs must be identified as planning and administrative costs.
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Planning/Administration Analysis
Page 2 of 4
In addition, Section 33080.4(c) allows for costs associated with preparing the
portion of the Redevelopment Agency's annual report which sets forth
information regarding the Agency's housing activities to be charged to the
Housing Fund. Section 33418 requires that the Agency adequately fund its
monitoring activities to ensure compliance with applicable laws and agreements
related to housing affordable to persons and families of low or moderate
income, developed or otherwise made available by the Agency, pursuant to the
Law.
In summary, costs are eligible only to the extent that they are directly
related to housing programs and activities authorized under the Law and are
not disproportionate, in the aggregate, to the amount of Housing Monies
actually spent by the Agency for the costs of production, improvement or
preservation of housing. Legal Counsel has confirmed that the Agency should
demonstrate that planning and general administrative costs paid from the
Housing Fund are related to specific affordable housing programs, projects or
activities.
Annual Findinas Reauirement:
The Redevelopment Agency is required to make an annual finding that amounts
paid from the Housing Fund for planning and administrative costs are necessary
for the production, improvement or preservation of low and moderate income
housing. The Housing Fund is now being charged for the majority of costs
associated with planning and administration of affordable housing projects and
programs at the end of each fiscal year by way of an accounting entry. Staff
estimates a budget amount prior to each fiscal year at the time of the budget
preparation. This is followed up by an analysis at the end of each fiscal
year to calculate the actual costs associated with planning for and
administering affordable housing activities during the prior year.
ProDortionality Test Reauirement:
As previously noted, the planning and administrative costs charged to the
Redevelopment Agency's Housing Fund must not be disproportionate to the amount
expended for direct affordable housing program costs. This "proportional ity
test" must be undertaken in addition to the year-end analysis and annual
finding requirement.
While "proportionality" is not defined for the purpose of complying with this
legal requirement, Legal Counsel concluded that the Poway Redevelopment Agency
would be best served by "making its own affirmative determinations, based upon
its own particular facts and circumstances, regarding the appropriate
percentage of planning and administrative costs to be paid from the low- and
moderate-income housing fund." This may be followed up with a comparison to
other redevelopment agencies, and ultimately, with historical data.
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Time Frame for Prooortionality Test:
This determination cannot be reasonably made annually, due to the nature of
project or program development and implementation. Administrative and
overhead costs tend to be high during the planning stages of a program or
project. Therefore, confirming the proportionality of planning and
administrative charges must ultimately be determined over several years.
Legal Counsel determined that "the time periods referenced in any long-range
affordable housing plan of the Agency... are acceptable time periods within
which to meet the proportionality requirement." The Comprehensive Affordable
Housing Strategy was approved by the Redevelopment Agency on June 15, 1993 and
has been included within the Redevelopment and Housing Implementation Plan,
approved by the City Council/Redevelopment Agency on November 29, 1994. Both
of these documents were mandated by the State and are five year plans.
Because FY 1992-93 was the first year the Redevelopment Agency was subject to
this requirement, staff recommended, and the Redevelopment Agency previously
approved, using the five-year period which commenced on July 1, 1992 (FY 1992-
93) through June 30, 1997 (FY 1996-97). At the end of that time, staff will
undertake a comprehensive review of the administrative costs charged to the
Housing Fund during the previous five years to confirm that, in the aggregate,
these charges are proportional to the funds expended on direct affordable
housing projects and programs.
Beginning with Year 6, the analysis would consist of a "rolling year"
analysis. For example, the Year Six proportionality test would drop the Year
1 costs and add Year 6 costs; the Year 7 test would drop the Year 2 costs and
include the Year 7 costs. In essence, this analysis would be much like that
performed for the "excess surplus" analysis each year. Again, there is no
speCific definition within the law as to what constitutes a proportional
charge. However, staff will work with Special Legal Counsel to ensure that
the Redevelopment Agency complies with this requirement.
Fiscal Year 1994-95
Staff conducted the analysis to charge the Housing Fund for the actual cost of
administering and planning for affordable housing projects and programs during
FY 1993-94. City and Redevelopment Agency staff completed individual, per pay
period time sheets reflecting actual time devoted to each of the Agency's
affordable housing projects and programs, as applicable. With this
information, an individual calculation was undertaken for each involved staff
member. The appropriate hourly salary rate for each staff member was applied
to the total number of hours dedicated to each housing project and program.
The rate used was the fully weighted hourly wage of each employee, which
included the cost of retirement benefits, medical, dental, optical, workers'
compensation and life insurance.
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Planning/Administration Analysis
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Once staff costs were calculated for each housing project and program for each
staff member involved, the applicable overhead percentages, as developed in
the MSI study, were applied. The overhead rate of each staff member's home
department and the general administrative rate were applied, pursuant to the
overhead rates and methodology established by the MSI study.
In addition to staff costs being charged to the Housing Fund are costs
associated with legal, financial, geotechnical, environmental and other
related consultants used on affordable housing projects and programs. The
cost of these consultant services which have been charged to the Agency's
General Fund (80% monies) are tracked throughout the fiscal year and are
transferred to the Housing Fund through this year-end adjustment. Certain
consultant costs are charged directly to the Housing Fund during the course of
the year. These usually involve the larger consultant contracts for which a
separate Agency Board appropriation is made.
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Attachment "B"
Affordable Housina Projects and Proarams
1. Affordable Housing Assistance and Referral Program
2. Affordable Residential Rehabilitation Loan Program
3. Bowron Road Family Project
4. Breihan Family Project
5. Brookview Senior Project
6. Gateway Park Road Project
7. Habitat Project (Rockpile Site)
8. Haley Ranch Estates (Management and OPA Administration)
9. Mortgage Credit Certificate Program
10. Poway Royal Affordability Covenant Acquisition
11. Poway Villas Affordability Preservation
12. Other:
a. Redevelopment & Housing Advisory
b. Smith v City I
c. Smith v City II
d. AB 1290/SB 732 compliance
e. Housing Budget, HCD and Annual Report, Housing Fund Audit
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ATTACHMENT "CO
RESOLUTION NO. R-95-
A RESOLUTION OF THE POWAY REDEVELOPMENT AGENCY
FINDING THAT PLANNING AND GENERAL ADMINISTRATIVE COSTS INCURRED
WERE NECESSARY TO INCREASE, IMPROVE AND PRESERVE THE SUPPLY
OF AFFORDABLE HOUSING WITHIN THE CITY OF POWAY
WHEREAS, Section 33334.2 of the California Health and Safety Code
requires that not less than 20 percent of taxes which are allocated to the
Redevelopment Agency be used for the purpose of increasing, improving, and
preserving the community's supply of housing available at an affordable
housing cost to households with low and moderate incomes; and
WHEREAS, the Redevelopment and Housing Implementation Plan approved by
the Redevelopment Agency on November 29, 1994 outlines a balance of programs
and projects that will increase, improve and preserve the supply of housing
available at an affordable housing cost to households with low and moderate
incomes over the next five years; and
WHEREAS, Section 33334.3(d) of the California Health and Safety Code
provides that the Redevelopment Agency must determine annually that the
planning and administrative expenses are necessary for the production,
improvement or preservation of low- and moderate-income housing; and,
WHEREAS, the Poway Redevelopment Agency staff has completed a thorough
analysis to calculate the actual costs directly associated with the planning
and administration of affordable housing projects and programs during FY 1994-
95.
NOW, THEREFORE, the Poway Redevelopment Agency of the City of Poway does
resolve the following:
Section 1: The expenditure of monies from the Redevelopment
Agency's Low- and Moderate-Income Housing Funds to cover costs associated with
planning and administering affordable housing projects and programs is
necessary for the Agency to meet its obligation to increase, improve, and
preserve the supply of affordable housing available within the City of Poway.
Section 2: The expenditure of $416,784 from the Redevelopment
Agency's Low- and Moderate-Income Housing Fund was necessary to cover costs
incurred by the City and Agency directly associated with planning and
administering the Agency's affordable housing activities during Fiscal Year
1994-95.
Section 3: The amount of $416,784 represents the actual cost to
the Redevelopment Agency and City of planning and administering affordable
housing projects and programs during the 1994-95 fiscal year and said cost is
not disproportional to the Housing Fund monies expended on affordable housing
projects and programs.
Section 4: Housing Fund monies which were expended for planning
and administering affordable housing projects and programs which were
developed or offered outside the Paguay Redevelopment Project Area are of
benefit to said Project Area.
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~csolution No. R-95-
Page 2
PASSED, ADOPTED, AND APPROVED by the Redevelopment Agency of the City of
Poway, California, at a regular meeting thereof this 14th day of November,
1995.
Don Higginson, Chairman
ATTEST:
Marjorie K. Wahlsten, Secretary
STATE OF CALIFORNIA )
,
COUNTY OF SAN DIEGO )
I, Marjorie K. Wahlsten, Secretary of the Poway Redevelopment Agency, do
hereby certify under penalty of perjury that the foregoing Resolution No.
R-95- was duly adopted by the Redevelopment Agency at a meeting of said
Agency-held on the 14th day of November, 1995, and that it was so adopted by
the following vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
MarJorie K. Wahlsten, Secretary
Poway Redevelopment Agency
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