East Palo Alto City Council
January 25, 2022

East Palo Alto City Council January 25, 2022 Agenda Page 1 of 3

EAST PALO ALTO CITY COUNCIL

SPECIAL MEETING AGENDA
January 25, 2022, 6:00 p.m.

EPA Government Center
2415 University Ave, First Floor
East Palo Alto, CA 94303
NOTICE
This City Council meeting will be conducted in accordance with City of East Palo Alto Resolution adopted in accordance with Assembly Bill 361. All members of the City Council will participate in the meeting by video conference, with no physical meeting location available to the public.

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International numbers available: https://zoom.us/u/aMWYF4KT East Palo Alto City Council January 25, 2022 Agenda Page 2 of 3

1. CALL TO ORDER AND ROLL CALL

2. APPROVAL OF THE AGENDA

3. CLOSED SESSION

1. Public Employee Performance Evaluation (Government Code §54957) Title: City Manager
A. PUBLIC COMMENT ON CLOSED SESSION ITEMS
B. ADJOURNMENT INTO CLOSED SESSION
C. RECONVENE INTO OPEN SESSION
D. REPORT OUT OF CLOSED SESSION

4. SPECIAL PRESENTATIONS

1. Veolia Water Presentation

5. PUBLIC HEARINGS

1. Introduction of East Palo Alto Opportunity to Purchase Act ("EPA OPA") Ordinance Recommendation: Waive the first reading and introduce an Ordinance titled “East Palo Alto Opportunity to Purchase Act” (“EPA OPA”), adding Chapter 14.26 to the East Palo Alto Municipal Code.

6. ADJOURNMENT
This AGENDA is posted in accordance with Government Code Section 54954.2(a) This Notice of Availability of Public Records: All public records relating to an open session item which are not exempt from disclosure pursuant to the Public Records Act, that are distributed to the majority of the City Council will be available for public inspection at the City Clerk’s Office, 2415 University Avenue, East Palo Alto, CA at the same time that the public records are distributed or made available to the City Council. Such documents may also be available on the East Palo Alto website www.cityofepa.org subject to staff’s ability to post the documents prior to the meeting. Information may be obtained by calling (650) 853-3100.

The City Council meeting packet may be reviewed by the public in the Library or the City Clerk's Office. Any writings or documents pertaining to an open session item provided to a majority of the City Council less than 24 hours prior to the meeting, shall be made available for public inspection at the front counter at the City Clerk's Office, 2ND Floor, City Hall, 2415 University Avenue, East Palo Alto, California 94303 during normal business hours. Information distributed to the Council at the Council meeting becomes part of the public record. A copy of written material, pictures, etc. should be provided for this purpose.

East Palo Alto City Council Chambers is ADA compliant. Requests for disability related modifications or accommodations, aids or services may be made by a person with a disability to the City Clerk's office at (650) 853-3127 no less than 72 hours prior to the meeting as required by Section 202 of the Americans with Disabilities Act of 1990 and the federal rules and regulations adopted in implementation thereof.

East Palo Alto City Council January 25, 2022 Agenda Page 3 of 3

DECLARATION OF POSTING
This Notice is posted in accordance with Government Code §54954.2(a) or §54956. Members of the public can view electronic agendas and staff reports by accessing the City website. Under penalty of perjury, this Agenda was posted to the public at least 24 hours prior to the meeting.

POSTED: January 21, 2022
ATTEST:

James Colin
Acting City Clerk

UPCOMING CITY COUNCIL MEETINGS
• Tuesday, February 1, 2022 - 6:30 p.m. – Regular Council meeting • Tuesday, February 15, 2022 – 6:30 p.m. – Regular Council meeting

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: January 25, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Jaime M. Fontes, City Manager
BY: James Colin, Executive Assistant
SUBJECT: Veolia Water Presentation
Recommendation
Receive the presentation from Rich Perez, VW-Project Manager at Veolia, North America.

Attachments

1. Water Restrictions 2022

4.1 Packet Pg. 4
Veolia North America
East Palo Alto, CA
www.eastpaloaltowater.com
Water Restrictions
January 25, 2022

4.1.a
Packet Pg. 5
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
State of California Act SB 998
● 2017 - 2018 The Water Shutoff Protection Act SB 998 was enacted
● SB 998 sets the rules for water providers to restrict water service to customers
● February 1, 2020 date of required compliance
● The City of East Palo Alto is in compliance with SB 998

4.1.a
Packet Pg. 6
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
Act SB 998 - Compliance
SB 998 provisions are incorporated into Veolia’s
Discontinuation of Service Policy found on our payment
portal located under Customer Service and Billing, choose Payment Policies.
https://www.eastpaloaltowater.com/pages/customer-service/payment-policies/

4.1.a
Packet Pg. 7
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
SB 998 / Veolia DoSP Key Points (Workflow)
• Veolia makes courtesy attempt to contact account holder ○ Phone Call
○ Email
○ Door hangers
• At day 45 past due date, a written notice is mailed to the account holder

• Day 61 past due date, we will restrict water service
• Late fees apply after due date ($5 or 1.5%)
• Fees apply for water restoration ($60)

4.1.a
Packet Pg. 8
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
State of California EO N-42-20
• On April 2, 2020
The Governor issued Executive Order N-42-20 prohibiting water restrictions to residences and critical infrastructure due to COVID - 19
• Since this time, no customers have had water restrictions • On January 1, 2022
Executive Order N-42-20 lapsed allowing water restrictions to begin

4.1.a
Packet Pg. 9
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
How can customers avoid
water restrictions?

4.1.a
Packet Pg. 10
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
Payment Arrangements
• All resident customers, who have fallen behind on payments should call the office and make payment arrangements
• Policy
○ 50% of amount owed initially
○ Monthly installments on remainder
• Payment Arrangements can be set up prior to any late fees Residents can always call the office during normal business hours Monday - Friday, 7:30am to 3:30pm for assistance at 650-322-2083

4.1.a
Packet Pg. 11
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
Veolia’s Financial Responsibility
• Veolia has an obligation to collect billed revenue to keep water rates as low as possible
• State law does not allow rate revenue to be used to
subsidize non-payment for customers
• Disconnect notices and water restrictions are
responsible tools needed in the utility collections
process

4.1.a
Packet Pg. 12
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
Current Past Due Totals

Totaling $592,305.88

4.1.a
Packet Pg. 13
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
State of California Arrearage Payment Program
• Funding to pay water bills from residential and
commercial customers accrued between March 4,
2020 and June 15, 2021.
• Late fees waived for these water bills
• Veolia in partnership with the City of East Palo Alto successfully applied for these reimbursement funds
• $225,280.76 in customer water bills reimbursement

4.1.a
Packet Pg. 14
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
Arrearage Reimbursed (Aging Report)
The arrearage reimbursement will effectively eliminate the debt in the aging buckets below
The previous total aging balance will be reduced from
$592,305.88 to roughly $375,000

4.1.a
Packet Pg. 15
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
Timeline to Return to Water Restrictions
● February 1, 2022
We will begin to notify customers with unpaid bills which are more than 45 days late and not covered by the State Program
● 15 day opportunity for customers to set up payment plan ● Early March, first water restrictions will begin

4.1.a
Packet Pg. 16
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
How can resident customers make payment?
• Online - With customer account sign up or one-time pay • By Mail - Remit payment to address indicated on bill
• By Phone - 650-322-2083 (choose option #2)
Residents can always call the office during normal business hours Monday - Friday, 7:30am to 3:30pm for assistance.

https://www.eastpaloaltowater.com/

4.1.a
Packet Pg. 17
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
www.eastpaloaltowater.com

4.1.a
Packet Pg. 18
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation) www.eastpaloaltowater.com
Contact us with questions.
• www.eastpaloaltowater.com (Payment Portal)
• (650) 322-2083 (Office)
• [email protected] (Customer Service Email)

4.1.a
Packet Pg. 19
Attachment: Water Restrictions 2022 (2078 : Veolia Water Presentation)

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: January 25, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Jaime M. Fontes, City Manager
BY: Rachel Horst, Housing and Economic Development Manager Karen Camacho, Housing Project Manager
SUBJECT: Introduction of East Palo Alto Opportunity to Purchase Act ("EPA OPA") Ordinance
Recommendation
Waive the first reading and introduce an Ordinance titled “East Palo Alto Opportunity to Purchase Act” (“EPA OPA”), adding Chapter 14.26 to the East Palo Alto Municipal Code.

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Priority No. 6: Create a Healthy and Safe Community
Background
In June 2019, the City Council directed staff to apply for a Partnership for the Bay’s Future Challenge Grant for Housing Protection and Preservation (“Challenge Grant”) to achieve three main goals: (1) Establishing a sustainable funding source for housing preservation; (2) launching a preservation model centered on a Community Land Trust (“CLT”) to acquire, rehabilitate, and redevelop properties; and (3) designing and supporting the passage of a local preservation ordinance- a Tenant Opportunity to Purchase Act/Community Opportunity to Purchase Act (“TOPA/COPA policy”).

After receiving a Challenge Grant award, in January 2020, City staff began researching and developing an East Palo Alto Opportunity to Purchase Act (“EPA OPA,” or “Ordinance”).

Figure 1 lists the major milestones that have occurred in the OPA Process:

Figure 1
EPA OPA Milestones

5.1 Packet Pg. 20
Date Description
June 4, 2019
Council adopted Resolution No. 5128, authorizing the City Manager to submit an application to the Partnership for the Bay’s Future for a Challenge Grant for Housing Protection and Preservation (“Challenge Grant”).

November 2019
The City was awarded a Challenge Grant. Challenge Grant Fellow began work in February 2020 and continued through 2020 and 2021.

January 2021
City Council adopted as one of its Council Priorities, “Advancing the Concept of TOPA/COPA and Other Homeownership
Opportunities.”
July 20, 2021
Staff provided an update on Challenge Grant progress to City Council and received authorization to apply for a Partnership for the Bay’s Future Breakthrough Grant.

July 2021 –
September 2021
Nine Affinity Group meetings (67 participants) and two Focus Group meetings (19 participants) were conducted to gather community input. Participants consisted of homeowners, tenants, landlords, and real estate agents.

October 5, 2021
Policy & Action City Council item to provide a report on OPA progress and seek direction on development of an ordinance. City staff were directed to bring back a proposed OPA Ordinance for hearing.

November 16,
2021
Public hearing for OPA Ordinance. City Council directed staff to hold a community meeting on OPA and return to the next City Council meeting with an updated Ordinance.

December 1,
2021
Community meeting via Zoom on OPA with 276 participants and 72 speakers.

December 3 & 6,
2021
Staff hosted virtual office hours to provide residents and stakeholders with an additional opportunity to ask questions or express concerns.

December 7,
2021
Public hearing for OPA. Staff presented on recommended
changes to the Ordinance based on City Council direction and extensive community feedback. City Council took over two hours of public comment from 128 speakers and continued the item to December 22.

December 22,
2021
Public Hearing and First Reading of OPA Ordinance. Staff proposed several amendments to the Ordinance based on

5.1 Packet Pg. 21
extensive public feedback since the first draft was published for consideration at the November 16, 2021 City Council meeting.1 January 13 & 14,
2022
Staff hosted accessible office hours to receive further community input.

This staff report addresses City Council direction to staff at the December 22 Public Hearing to:

1.) return with an amended Ordinance for consideration at the January 18, 2022 meeting;

2.) provide an analysis of the OPA Ordinance by the consulting firm David Rosen & Associates; and

3.) provide further clarification on Qualified Nonprofits and foreclosures.

Analysis
Changes to OPA Ordinance
The Ordinance can be found in Attachment 1. Staff made changes to the Ordinance based on the following City Council direction:

1. Exempt properties from the Ordinance that are owned by East Palo Alto residents.

2. Exempt households with emergency circumstances from the Ordinance.

3. Break down the 30-day Statement of Interest period into two phases of 15 days each, requiring Potential Eligible Purchasers to express interest in exercising their rights under the Ordinance within the first 15 days after receiving a Notice of Intent to Sell, followed by a Statement of Interest 15 days thereafter (if applicable).

4. Allow for shortening of the OPA timelines with the consent of both parties in cases where there is only one Potential Eligible Purchaser.

5. Shorten the timelines overall, with the goal of a 90-day maximum timeline for single family dwellings.

Each of these Ordinance changes is discussed in detail below.

1. Exempt properties from the Ordinance that are owned by East Palo Alto residents.

Updated Subsection 14.26.040.A.2

2. Non-Owner-Occupied Residential Property owned by an East Palo Alto resident, when the Owner has occupied a Residential Property within East Palo Alto as the Owner’s Principal Residence for more than one (1) year. This exemption shall not apply when any Residential Property is owned by:
a) A real estate investment trust, as defined in Section 856 of the Internal Revenue 1 The full December 22, 2021 public hearing item can be viewed at:
http://eastpaloalto.iqm2.com/Citizens/FileOpen.aspx?Type=1&ID=1410&Inline=True

5.1 Packet Pg. 22
Code;
b) A corporation; or
c) A limited liability company in which at least one member is a corporation.

The above language exempts properties where the owner is an East Palo Alto resident. To qualify as an East Palo Alto resident for this exemption, the owner must have a principal residence at another property in East Palo Alto for more than one year. This subsection uses the definition of investor-owned properties in CA Civil Code Section 1947.12 (AB 1482) to further clarify that this exemption applies only when both properties are owned by a natural person.

2. Exempt East Palo Alto residents with emergency circumstances.

Updated Subsection 14.26.040.B.10
A transfer of a Residential Property having no more than four (4) Dwelling Units made for the purpose of either: (a) paying for imminently necessary health care expenses of an Owner of the Residential Property, or (b) an emergency circumstance placing the Owner in financial hardship and at imminent risk of foreclosure or bankruptcy and the Owner has occupied the Residential Property as the Owner’s Principal Residence during the prior year. For purposes of this subsection only, “Owner” shall be limited to a natural person having an undivided interest in the Residential Property of at least fifty percent (50%). An Owner may claim this Exempt Transfer within one year of having vacated the Residential Property where the Owner demonstrates the existence of the conditions set forth in (a) or (b) of this subsection.

The prior transfer exemption included health emergencies only-- specifically, sale of the property for the purpose of paying for “imminently necessary” health care expenses.

City Council must be aware that an emergency exemption clause in the Ordinance has the potential to be exploited as a loophole and undermine the Ordinance objectives of preventing displacement and creating affordable homeownership and rental opportunities. However, staff believes that this new proposed subsection has the necessary restrictions and can keep the intended limited involvement of the City by still allowing the exemption to be self-certified by the owner without demanding an administrative certifications process that would increase the implementation costs of the Ordinance and defeat the purpose of an emergency exemption submitted in good faith.

To prevent any kind of abuse of this clause, staff also believes that the one-year residence requirement and the restriction to one year after an Owner moves out of the property are necessary.

The Administrative Guidelines would need to require property owners not only to expressly state the nature of the emergency but also to allege in their self-certification that they would not sell the residential property but for the emergency circumstances that they face.

3. Require Potential Eligible Purchasers to express interest in exercising their rights under the Ordinance within the first 15 days after receiving a Notice of Intent to Sell, followed by a Statement of Interest 15 days thereafter (if applicable).

Updated Section 14.26.080.B

5.1 Packet Pg. 23
Statement of Interest. Within fifteen (15) days of receiving the Owner’s Notice of Intent to Sell, a Potential Eligible Purchaser shall notify the Owner, at the email address provided by the Owner in the Notice of Intent to Sell, of the Potential Eligible Purchaser’s intent to submit a Statement of Interest, in order to be eligible to submit a Statement of Interest. Prior to the expiration of the Notice Period set forth in Paragraph A of this Section, any Potential Eligible Purchaser defined in Section 14.26.70 may deliver a Statement of Interest to the Owner of the Residential Property (“Statement of Interest”). The Statement of Interest shall notify the Owner of the Potential Eligible Purchaser’s interest in exercising the Right of First Offer and/or Right of First Refusal under this Chapter.

Potential Eligible Purchasers who do not provide any notification to the Owner within 15 days of receipt of the Notice of Intent to Sell-- either by submitting a Statement of Interest directly, or by notifying the Owner via email that they intend to submit a Statement of Interest-- waive their right to submit a Statement of Interest.

4. Allow shortening of timelines with consent of both parties in cases where there is only one Potential Eligible Purchaser.

Updated Section 14.26.130.D
Any agreement between the Owner and a Potential Eligible Purchaser to shorten the time periods provided for exercise of any right afforded under this Chapter is prohibited unless all other Potential Eligible Purchasers have waived their rights under this Chapter. Notwithstanding the foregoing, any Potential Eligible Purchaser may affirmatively indicate that they have no interest in a Residential Property prior to the expiration of any deadlines and in accordance with the Administrative Guidelines.

Nothing in this Paragraph shall prohibit an agreement to extend the deadlines set forth herein.

5. Shorten the timelines overall, with the goal of a 90-day maximum timeline for single family dwellings.

Proposed Changes
As noted above, the Statement of Interest period has been split into two stages of 15 days each, allowing the Owner to proceed to list or market and sell the property to any third party if the Potential Eligible Purchasers indicate no interest in purchasing within the first 15 days.

In the timeline amendments below, the Right of First Refusal period for single family dwellings is reduced from 10 days to 5 days (see Figures 2 and 3), and for multifamily dwellings of 2 or more it is reduced from 30 days to 20 days (see Figure 4). This reflects stakeholder input to shorten the Right of First Refusal period.

The time to close for single family dwellings is reduced from 40 days to 30 days (see Figure 2). There is a 60-day extension to close if a Potential Eligible Purchaser indicates they are receiving a commercial loan, as loan approval and release of funds to a borrower typically takes 90-120 days (see Figure 3). For multifamily, time to close is kept the same, as loans typically take between 90-120 days depending on the property size (see Figure 4).

Note that the amendments to the Ordinance ensure that all properties owned by

5.1 Packet Pg. 24
East Palo Alto residents are exempt, and these timelines therefore only apply to properties owned by non-East Palo Alto residents and corporate or investor entities.

Figure 2
EPA OPA Timelines for Non-Exempt Single-Family Dwellings (Tenant as Potential Eligible Purchaser)
Statement of Interest
Time for Tenant to submit a statement indicating
interest in purchasing.
30 days
15 days (additional 15 days
if applicable)
Initial Offer
Time for tenant to submit an Offer to Purchase.
30 days
Right of First Refusal/Offer to Purchase
Time for Owner to send a copy of Third-Party
Purchaser’s Offer.
0-2 days
Right of First Refusal/Match 3rd Party Offer
Time for Tenant to match the Third-Party Purchaser’s
Offer.
10 days
5 days
Close
Time for the Tenant and the Owner to close the
transaction.
40 days
30 days
Total 30 – 112 days
15 – 97 days
Figure 3
EPA OPA Timelines for Non-Exempt Single-Family Dwellings (Qualified Nonprofit or City as Potential Eligible Purchaser) Statement of Interest
Time for QNP or City to submit a statement indicating
interest in purchasing.
30 days
15 days (additional 15 days if
applicable)
Initial Offer
Time for QNP or City to submit an Offer to Purchase.
30 days
Right of First Refusal/Offer to Purchase
Time for Owner to send a copy of Third-Party
Purchaser’s Offer.
0 – 2 days
Right of First Refusal/Match 3rd Party Offer
Time for QNP or City to match the Third-Party
Purchaser’s Offer.
10 days
5 days
Close
Time for the QNP or City and the Owner to close the
transaction.
90 days
30 days (60-day extension if
applicable)
Total 30 – 162 days
15 – 127 days (extension
included)
Figure 4
EPA OPA Timelines for Non-Exempt Multi-Family Dwellings (Qualified Nonprofit or City as Potential Eligible Purchaser) Statement of Interest 30 days

5.1 Packet Pg. 25
Time for QNP or City to submit a statement indicating
interest in purchasing.
15 days (additional 15 days if
applicable)
Disclosure Package
Time for Owner to send Potential Eligible Purchasers
a disclosure package with information about the
property.
0 – 5 days
Initial Offer
Time for QNP or City to submit an Offer to Purchase.
60 days (2-3 units)
90 days (4+ units)
Right of First Refusal/Offer to Purchase
Time for Owner to send a copy of Third-Party
Purchaser’s Offer.
0 – 2 days
Right of First Refusal/Match 3rd Party Offer
Time for QNP or City to match the Third-Party
Purchaser’s Offer.
30 days
20 days
Close
Time for the QNP or City and the Owner to close the
transaction.
90 days (2-3 units)
120 days (4+ units)
Total 30 – 217 days (2-3 units)
15 – 207 days (2-3 units)
30 – 277 days (2-3 units)
15 – 267 days (4+ units)
Updated Section 14.26.090.B
Acceptance of Offer of Purchase. Upon acceptance of an offer to purchase a Residential Property made pursuant to Paragraph A of this Section, the Potential Eligible Purchaser shall make reasonable and good faith efforts to close the transaction. A Potential Eligible Purchaser shall have thirty (30) days to close the transaction for the sale of a Single-Family Dwelling. A Qualified Nonprofit and/or the City shall have ninety (90) days to close the transaction for the sale of a two to three (2-3) unit Multi-Family Dwelling, and one hundred and twenty (120) days to close the transaction for the sale of a four or more (4+) unit Multi-Family Dwelling. The deadline to close a transaction for the sale of a Single-Family Dwelling shall be extended for an additional sixty (60) days if the Potential Eligible Purchaser provides written documentation that its lender will require a commercial loan for the purchase of the property (for a total of 90 days to close). Nothing in this Paragraph shall prevent the Owner and the Potential Eligible Purchaser from agreeing to further extend the deadline to close the transaction.

Updated Section 14.26.100.C
Time to Exercise Right of First Refusal. The Owner shall provide any Potential Eligible Purchaser that submits a Statement of Interest and an offer at least five (5) days to accept the Offer to Purchase for a Single-Family Dwelling, or at least twenty (20) days to accept the Offer to Purchase of a two or more (2+) unit Multi-Family Dwelling. The acceptance of an Offer to Purchase by any Potential Eligible Purchaser extinguishes any Right of First Refusal of other Potential Eligible Purchasers.

Updated Section 14.26.100.D

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Time to Close. Upon acceptance of the Offer to Purchase, the Potential Eligible Purchaser shall have at least thirty (30) days to close the transaction for the sale of a Single-Family Dwelling, or a total of ninety (90) days if the Potential Eligible Purchaser provides written documentation that its lender will require a commercial loan for the purchase of the property; at least ninety (90) days to close the transaction for the sale of a two or three (2-3) unit Multi-Family Dwelling; and one hundred and twenty (120) days to close the transaction for the sale of a four or more (4+) unit Multi-Family Dwelling.

Nothing in this Paragraph shall prevent the Owner and the Potential Eligible Purchaser from agreeing to further extend the deadline to close the transaction.

East Palo Alto Market
According to MLS data (August 2021), the average amount of days that an East Palo Alto single-family residential property remains on the market (from listing to closing) is approximately 66 days. With the proposed amendments, EPA OPA provides no more than a 97-day process if the owner rejects the Tenant’s initial offer, and a 62-day process if the owner accepts the initial offer.

The purpose of these timelines is to give Potential Eligible Purchasers meaningful time to organize, express interest, submit an offer, secure financing, and to close, while also balancing the Owner’s need to sell. If the Potential Eligible Purchasers do not exercise their rights within these timelines, the Owner may proceed to sell on the open market. Note that nothing in the Ordinance prohibits both parties from agreeing to reduce or increase the closing timeline.

Additional Recommended Changes to the Ordinance
In addition to the above, staff recommend the following changes to the Ordinance to achieve consistency and fulfill the intent of key provisions:

1. Add language (Section 14.26.110E) that explicitly allows parties to agree to a nonrefundable deposit as is typically agreed upon in real estate transactions.

Updated Section 14.26.110.E
Deposit. The Owner shall not require the Potential Eligible Purchaser to pay a deposit of more than three percent (3%) of the contract sales price to make a contract. The deposit is refundable in the event of a good faith failure of the Potential Eligible Purchaser to perform under the contract unless otherwise provided in the contract.

2. Remove language from the section on Termination of Right of First Offer (Section

14.26.090) to clarify that an Owner may list and market a residential property and conditionally accept Third-Party Offers upon 1.) rejection of an offer by a Potential Eligible Purchaser or 2.) upon expiration of the Notice Period.

Updated Section 14.26.090.C
Termination of Right of First Offer. Upon (1) rejection of all offers to purchase made within the Notice Period, or (2) the expiration of the Notice Period, or (3) the failure to close the transaction within the time period set forth in Paragraph B of this Section, the Owner may list and market for sale the Residential Property and may solicit and

5.1 Packet Pg. 27
conditionally accept offers from a Third-Party Purchaser, subject to the requirements of Section 14.26.100.

3. Add definition of Non-Exempt to clarify which types of properties and transfers are subject to the Ordinance.

Updated Section 14.26.020
“Non-Exempt” means a residential property or a transfer that is not exempt under Section 14.26.040 of this Chapter.

4. Consolidate paragraphs and update language in Section 14.26.070 (“Tenant, Qualified Nonprofit and City Opportunity to Purchase”) to clarify which residential properties the Ordinance applies to.

These changes were made to paragraphs B-D and reflect updates made elsewhere in the Ordinance, including expanded exemptions. In addition to utilizing the newly-added “NonExempt” definition, subsections were added to this section to further specify the residential property types subject to the Ordinance.

Economic Analysis of OPA
As directed by City Council, an analysis of OPA by the David Rosen & Associates consulting firm accompanies the updated Ordinance and addresses the following:
• Trends in the local and regional real estate market;
• Capital resources required for nonprofits to acquire single family dwellings; • Calculation of any potential loss in property tax revenue due to purchase of single-family dwellings by nonprofits; and
• 1031 Exchanges.

The analysis by David Rosen & Associates is provided as Attachment 2. Findings from the analysis include:
• The residential market in East Palo Alto has seen significant housing price appreciation in recent years, particularly since the Great Recession, with a 261% increase in single family home sales prices from 2012-2021. A lack of housing supply and continued growth of the Bay Area economy drive housing sales prices and rents in East Palo Alto, and these trends are expected to continue.
• The potential property tax revenue decrease associated with the purchase of (nonexempt) single-family homes and condominiums by nonprofits in a “worst case” scenario is estimated at $67 million, or 1.8% of the City’s total assessed valuation, over 5 years. However, this “worst case” calculation assumes that all non-exempt single family dwellings in East Palo Alto are sold to nonprofits and that all of those units are exempt from all property taxes as qualifying low-income rental units. This is offset by an increase in assessed valuation in the City from the resale of existing owner-occupied units, estimated at $138 million over the next five years, in addition to $560 million to $800 million over the next five years estimated from the City’s pipeline of market-rate

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units.
• The total subsidy required to purchase and make affordable at 80% AMI or below all non-exempt single-family dwellings and condominiums in East Palo Alto sold over the next five years is estimated to be $97 million to create owner housing and $115 million to create renter housing. [Per-unit costs at 50%, 80%, and 120% AMI are summarized in Table 4 of Attachment 2.] Lowering the income targeting to 50% AMI increases the subsidy required to $131 million to create affordable owner housing and $145 million to create affordable renter housing.
• 1031 Exchanges allow for deferment of capital gains and related federal income tax liability and only apply to sale of an investment property and replacement purchase of another like-kind investment property of equal or greater value. Since 1031 Exchange time limits are measured from when the property to be sold (“relinquished property”) closes, only East Palo Alto residents who are selling one investment property and purchasing a replacement investment property in East Palo Alto are affected by the OPA. The Ordinance’s timelines allow sufficient time to identify and acquire a replacement property, which must be completed within 180 days.

Qualified Nonprofits (“QNPs”)
The City Council requested clarification at the December 22 public hearing on the definition of Qualified Nonprofits (“QNPs”) and the process by which QNPs will be selected if an OPA Ordinance is adopted.

Staff previously recommended language in the Ordinance that sets a baseline for nonprofit housing organizations to apply for certification as QNPs and exercise the right of first offer and right of first refusal under EPA OPA. As currently defined in the Ordinance, eligible nonprofit housing organizations are 501(c)(3) organizations that demonstrate capacity to acquire, provide, and manage affordable housing and a commitment to preventing displacement and community engagement.

The Ordinance states that QNPs must follow an application process outlined in the Administrative Guidelines and that all QNPs must be certified by the City Council. This process is designed to maintain transparency in the selection of QNPs, as development of the Administrative Guidelines will be an extensive public process following the potential adoption of an OPA Ordinance in East Palo Alto, with refinement over time.

Staff propose language for the Administrative Guidelines in Attachment 3. This language may be updated throughout the process of developing the Administrative Guidelines. Staff do not recommend placing this language in the Ordinance due to the fact that City Council would be unable to refine or otherwise alter this section pertaining to QNPs without amending the full Ordinance.

The below chart, which was discussed at the October 5, 2021 and November 16, 2021 City Council meetings, compares TOPA/COPA programs in other cities and their QNP criteria with those proposed for East Palo Alto. Note that staff has added a five-year development experience requirement to these recommendations.

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Qualified Nonprofit Criteria Comparisons
Washington, DC TOPA
(1980)[1]
San Francisco COPA (2019)[2] East Palo Alto OPA
• Right of First Offer and
Right of First Refusal given
to tenants; assignment of
rights to any party is at the
sole discretion of tenant(s)
• Commitment to affordable
housing preservation and antidisplacement
• Evidence of relationships with
community orgs (experience
with at least 3 neighborhoodbased or tenant counseling orgs)
• Demonstrated financial and
legal capacity to acquire and
manage any multi-family
residential building in the City
• Requisite of development
experience (experience
acquiring or partnering with
organizations that acquired at
least 2 residential buildings
within the last 5 years)
• QNP certification valid for 3
years with renewal if there is no
information raising doubts
about an existing nonprofit
organization’s entitlement to
certification as a QNP
• 501(c)(3) or California
cooperative corporation that
demonstrates capacity to
acquire, provide, and manage
affordable housing for low,
very-low, and extremely lowincome households
• Commitment to affordable
housing and preventing
displacement
• Commitment to community
engagement and experience
working in East Palo Alto or
with East Palo Alto-based
organizations
• Five-year track record of
development experience; can
partner with another
organization to meet this
experience requirement
• Annual certification of QNPs
with approval of City Council
• QNP certification valid for 5
years
• City Manager or designee will
investigate complaints
alleging QNP failure to comply
[1] Subchapter IV. Opportunity to Purchase. | D.C. Law Library (dccouncil.us) [2] COPA - Final Program Rules-09-03-2019.pdf (sfmohcd.org)

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with requirements, and may
recommend Council limit,
suspend, or revoke
organization’s certification as
QNP
Foreclosures
Current state law covers financial emergencies due to foreclosure proceedings. SB 10792, which is in effect until January 1, 2026, allows for residents living in 1 to 4-unit buildings facing foreclosure to have the right of first offer. SB 1079 requires that a notice of sale under a mortgage or deed of trust (i.e. foreclosure process) also contain a specific notice to a tenant about their right to purchase a property containing from 1 to 4 single-family residences.

Aside from SB 1079, residents undergoing a foreclosure process may also use the Foreclosure Intervention Housing Preservation Program (FIHPP), which provides $500 million in loans and grants to nonprofits purchasing and rehabilitating 1 to 25-unit buildings at foreclosure auction, in the foreclosure process, or at risk of foreclosure. “At risk of foreclosure” can mean 90-day mortgage delinquency, delinquency on 2 or more property tax payments, that the owner is in bankruptcy, that there is tenant-initiated litigation over lack of habitability, that local government found the building to be partially or fully inhabitable, or more.3 Due to current and future state regulations on foreclosures, the City must exempt Ordinance applicability on the transfer by foreclosure sale or deed in lieu of foreclosure. The Ordinance states that the exemption set forth on foreclosures does not supersede any rights to purchase afforded to Potential Eligible Purchasers under the California Civil Code Sections 2924(f)-(h), 2924(m)-(n), or 2929.3 (or SB 1079).

Next Steps
If directed, staff will return for the second reading of the Ordinance at the next regular City Council meeting, as early as February 1, 2022.

Fiscal Impact
There is no fiscal impact associated with this staff report.

Public Notice
The public was provided notice via publication in the Palo Alto Daily News on January 7, 2022, and by making the agenda and report available on the City’s website and at the San Mateo Co.

Library located at 2415 University Avenue, East Palo Alto.

Environmental
The action being considered does not constitute a “Project” within the meaning of the 2 See Senate Bill No. 1079 on Residential Property: Foreclosure, at https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB1079. 3 CACLTN Overview of FIHPP program presentation, August 17, 2021.

5.1 Packet Pg. 31
California Environmental Quality Act (CEQA), pursuant to CEQA Guideline section 15378 (b)(5), in that it is a government administrative activity that will not result in direct or indirect changes in the environment.

Attachments

1. Ordinance

2. David Rosen & Associates EPA OPA Analysis

3. Qualified Nonprofit Criteria for Administrative Guidelines

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1 ORDINANCE NO. ___

AN ORDINANCE OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO
ADDING CHAPTER 14.26 OF THE EAST PALO ALTO MUNICIPAL CODE

AUTHORIZING THE EAST PALO ALTO OPPORTUNITY TO PURCHASE
ACT
WHEREAS, the City Council finds that East Palo Alto is experiencing a shortage of affordable housing, especially for extremely low-income, very low-income, low-income and moderate-income residents, and a displacement crisis; and WHEREAS, rapid displacement is evidenced in East Palo Alto by high rates of eviction, increasing rents, and increasing home values; and WHEREAS, there is a disproportionate impact of displacement, homelessness, and unmet affordable housing and homeownership needs in East Palo Alto borne by African American, Latinx, and Pacific Islander communities of color; and WHEREAS, sixty percent (60%) of East Palo Alto’s population are renters, and over half of these renters are cost-burdened, meaning they spend over thirty percent (30%) of their monthly income on rent; and
WHEREAS, according to the Bay Area Equity Atlas and the Urban Displacement Project, seventy-two percent (72%) of low-income households in East Palo Alto live in gentrifying neighborhoods; and
WHEREAS, due to state law, tenants living in single-family homes and tenants living in buildings built after 1988 are not protected by rent stabilization (although the Just Cause for Eviction provision still applies); tenants in rent-stabilized units are not protected from displacement by owner-move in; and when a tenant moves out, the rent for that unit can be raised to market value; and
WHEREAS, according to the American Community Survey (2015-2019) and San Mateo County Income Limits, the median household income in East Palo Alto of $67,087 is less than half the county’s median household income, and most East Palo Alto households fall into the “extremely low-income” to “very low-income” category, or 30- 50% AMI, making residents highly susceptible to dramatic shifts in the housing market; and

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 2 WHEREAS, according to the Center for Responsible Lending, during the foreclosure crisis from 2004-2008, African Americans and Latinxs in California were more than twice as likely as non-Hispanic Whites to lose their homes to foreclosure; and WHEREAS, there is a concentration of properties in East Palo Alto owned by individual and entity investors and the majority of these investors are not residents of the City of East Palo Alto; and
WHEREAS, historically, East Palo Alto residents, both owners and renters, have been denied opportunities to build wealth through property ownership due to discriminatory housing policies, including the practice of redlining that impacted longer term residents and continues to impact successive generations of East Palo Alto residents; and
WHEREAS, it is a necessary and important public purpose to provide relief for these economic and social ills arising from the housing challenges facing East Palo Alto residents; and
WHEREAS, approximately 5.8% of properties in East Palo Alto are owned by East Palo Alto residents with a primary residence elsewhere in the city; and WHEREAS, a limited exemption for these local residents who own other properties within East Palo Alto will promote the purpose of providing relief for these economic and social ills experienced by residents of East Palo Alto; and WHEREAS, Tenant and Community Opportunity to Purchase Act programs have been adopted in a number of jurisdictions including Washington DC and San Francisco to protect residents’ ability to stay in a neighborhood in a cost effective manner; and WHEREAS, the City Council desires to prevent further displacement of East Palo Alto households, to supply a variety of affordable rental and ownership housing options, and to protect the health, safety and general welfare of the public through an opportunity to purchase program; and
WHEREAS, this action is exempt from the California Environmental Quality Act ("CEQA") under the following, each as a separate and independent basis, including but not limited to, the following: CEQA Guidelines Section 15378 (regulatory actions).

Section 15061 (b) (3) (no significant environmental impact), and Section 15183 (actions consistent with the general plan and zoning.)

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO DOES ORDAIN AS FOLLOWS:

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 3 SECTION 1. RECITALS
The above recitals are true and correct and incorporated herein by reference.

SECTION 2. AMENDMENT TO THE EAST PALO ALTO

MUNICIPAL CODE
The City Council hereby adds Chapter 14.26 (“East Palo Alto Opportunity to Purchasing Act”) to the East Palo Alto Municipal Code in Title 14 (“Housing”) to read as follows:

Chapter 14.26
East Palo Alto Opportunity to Purchase Act

14.26.010 Title and Purpose
A. This Chapter shall be referred to as the “East Palo Alto Opportunity to Purchase Act” or “EPA OPA” program.

B. The purpose of this Chapter is to confer upon Tenants, Qualified Nonprofits, and the City of East Palo Alto (“Potential Eligible Purchasers”) a Right of First Offer and a Right of First Refusal upon the transfer or sale of Residential Property as defined herein to prevent displacement of lower-income tenants, to facilitate ownership for residents, and to create more affordable housing opportunities in East Palo Alto.

14.26.020 Definitions
“Absentee Owner(s)” means an owner or owners of a residential property who do not occupy the residential property as the owner’s or owners’ principal residence. “Accessory Dwelling Unit (ADU)” means a separate dwelling unit providing complete independent living facilities for one or more persons containing living, sleeping, kitchen and sanitation facilities which are defined as a full bathroom (tub/shower, sink and, a toilet) located on the same lot as the main dwelling unit. An existing single-family residence may be converted to accessory dwelling unit(s) in conjunction with the development of a new main dwelling unit on the site and in conformity with the development standards for a new accessory unit as set forth in Chapter 18.96. Subject to the restrictions contained in Chapter 18.96, an accessory dwelling unit may be either attached to, or detached from or incorporated into the main dwelling unit. An Accessory Dwelling Unit also includes an efficiency unit, as defined in Health and Safety Code Section 17958.1 or a manufactured home, as defined in Health and Safety Code Section 18007, located on the same lot as the main dwelling.

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 4 “Administrative Guidelines” means any requirements for implementation and administration of this Chapter adopted by the City Council or designee in accordance with Section 14.26.170.A of this Chapter.
“50% AMI Income Household” means households whose income does not exceed fifty percent (50%) of the area median income, adjusted for family size and as published annually by the City of East Palo Alto.
“Appraised Value” means the value of the property subject to this Chapter, as of the date of the appraisal, based on an objective, independent property valuation, performed according to professional appraisal industry standards. “Bona Fide Offer to Purchase” means an offer to purchase a property subject to this Chapter, or the interest in the property that is either:

For a price and other material terms that are at least as favorable as those accepted by a purchaser in an arm’s length third-party contract; or,
In the absence of an arm’s length third-party contract, an offer to purchase with a price and other material terms comparable to that at which a willing seller and a willing buyer would sell and purchase the property, or the appraised value. “The City” means the City of East Palo Alto, including any departments within the City that are assigned any responsibilities under this Chapter. “Condominium” means an estate in real property consisting of an undivided interest in common in a portion of a parcel of real property, together with a separate interest in space in a residential structure located on the real property in compliance with Civil Code Section 783. A condominium may include, in addition, a separate interest in other portions of the real property.
“Day or Days” means calendar day(s) unless otherwise stated. “Dwelling Unit” means a structure or the part of a structure that is used as a residence that provides complete, independent living facilities including permanent provisions for living, sleeping, eating, cooking and sanitation.
“Duplex” means a single building that contains two dwelling units or two dwelling unit on a single parcel. This use is distinguished from accessory dwelling units and junior accessory dwelling units, which are accessory residential units. “Junior Accessory Dwelling Unit (JADU)” means a dwelling unit that is no more than 500 square feet in size and contained entirely within a single-family residence.

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 5 “Low-Income Households” are those households whose income does not exceed sixty percent (60%) of the area median income, adjusted for family size and as published annually by the City of East Palo Alto
“Listing or Marketing” means adding the property on Multiple Listing Service (MLS) or any other private or public online database, or adding or disseminating information about the property on paper or digitally, with the intent of informing prospective ThirdParty Purchasers or their representatives about the opportunity to purchase, promoting the property, or receiving communications from prospective buyers. “Median-Income Households” are those households whose income does not exceed eighty percent (80%) of the area median income, adjusted for family size and as published annually by the City of East Palo Alto.
“Moderate-Income Households” are those households whose income does not exceed one hundred and twenty percent (120%) of the area median income, adjusted for family size and as published annually by the City of East Palo Alto. “Multi-Family Dwelling” means any property in East Palo Alto with two or more dwelling units.
“Non-Exempt” means a residential property or a transfer that is not exempt under Section 14.26.040 of this Chapter.
“Owner” means any natural person, corporation, association, partnership, joint venture, limited liability company, trustee, business entity and its respective agents, or any other entity, who is the owner of record of a residential property. “Owner-Occupied Single-Family Dwelling” means a single-family dwelling that is occupied by the owner(s) as the owner’s or owners’ principal residence. “Owner-Occupied Duplex” means a duplex that is occupied by the owner(s) as the owner’s or owners’ principal residence.
“Owner-Occupied Triplex” means a triplex that is occupied by the owner(s) as the owner’s or owners’ principal residence.
“Potential Eligible Purchaser” means the qualified entity (Tenants, Qualified Nonprofits, or the City) purchasing a property under this Chapter. “Principal Residence” means a residential dwelling that is occupied and is the usual place of return of a natural person. A dwelling will qualify as a primary residence when:
(1) the person has lived in the dwelling for more than fifty percent (50%) of the time in the year prior to the proposed sale; and (2) the person acknowledges the dwelling as the

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 6 person’s primary residence by voter registration, address on tax returns, homeowners exemption, and/or mailing address.
“Purchaser(s)” means subsidized Tenants, Qualified Nonprofits, or the City who are purchasing a Residential Property under this Chapter.
“Qualified Nonprofit” means an organization that is exempt from federal income tax under 26 USC Section 501(c)(3), or a California cooperative corporation that has the capacity to acquire, provide and manage affordable housing for low, very low, and extremely low income households, has a commitment to prevent displacement, has a demonstrated commitment to community engagement, and is certified by the City Council or designee pursuant to Section 14.26.050 of this Chapter via an application process as set forth in the Administrative Guidelines.
“Rent” means the consideration, including security deposit, cleaning deposit and any other deposits, bonus, benefit or gratuity demanded or received for or in connection with the use or occupancy of rental units and housing services. Rent includes monies and the fair market value of goods or services rendered to or for the benefit of the landlord under the rental agreement.
“Residential Property” means any property containing one or more dwelling units and located in the City of East Palo Alto.
“Single-Family Dwelling” means a property, building, structure or dwelling unit, or portion of a property, building, structure, or dwelling unit principally designed for the residential habitation of one household, identified by one parcel number, and having only one kitchen and one set of common areas, or, where there are two or more kitchens, with all secure entrances leading to the same set of interior common areas. “Subsidized Purchaser” is any Tenant, Qualified Nonprofit, or City receiving public or private subsidy to support a purchase made pursuant to this Chapter. “Tenant” means a renter, tenant, subtenant, lessee or sublessee of a rental unit, or successor to a renter's interest, or any group of tenants, subtenants, lessees, or sublessees of any rental unit, or any other person entitled to the use or occupancy of such rental unit. “Third-Party Purchaser” means any person or entity that has entered into a bona fide contract of sale for a Residential Property prior to an Owner giving the Potential Eligible Purchaser(s) an opportunity to purchase at a price and terms that represent a Bona Fide Offer to Purchase.
“Triplex” means a single building that contains three dwelling units or three dwelling unit on a single parcel. This use is distinguished from accessory dwelling units and junior accessory dwelling units, which are accessory residential units.

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 7 14.26.030 Applicability
This Chapter shall apply to the sale or transfer of all Residential Property in the City of East Palo Alto unless otherwise exempted herein.

14.26.040 Exemptions
A. Exempt Residential Property. The following types of Residential Property are not subject to the requirements of this Chapter:

1. Owner-Occupied Single-Family Dwellings, including those with an Accessory Dwelling Unit(s) (inclusive of any Junior Accessory Dwelling Unit) located on the same parcel, when the Owner has occupied the SingleFamily Dwelling or the ADU as the Owner’s Principal Residence for more than one (1) year.

2. Non-Owner-Occupied Residential Property owned by an East Palo Alto resident, when the Owner has occupied a Residential Property within East Palo Alto as the Owner’s Principal Residence for more than one (1) year. This exemption shall not apply when any Residential Property is owned by:
a. A real estate investment trust, as defined in Section 856 of the Internal Revenue Code;
b. A corporation; or
c. A limited liability company in which at least one member is a corporation.

3. Owner-Occupied Condominiums when the Owner has occupied the Condominium as the Owner’s Principal Residence for more than one (1) year.

4. Any Owner-Occupied Duplex with or without any Accessory Dwelling Unit(s) (inclusive of any Junior Accessory Dwelling Unit) located on the same parcel when the Owner has occupied any Dwelling Unit on the property as the Owner’s Principal Residence for more than one (1) year.

5. Any Owner-Occupied Triplex with or without any Accessory Dwelling Unit(s) (inclusive of any Junior Accessory Dwelling Unit) located on the same parcel when the Owner has occupied any Dwelling Unit on the property as the Owner’s Principal Residence for more than one (1) year.

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 8 6. Residential Property owned by the local, state, or federal government.

7. Residential Property subject to resale price control under Chapter 18.37 of East Palo Alto’s Municipal Code.

8. Residential Property owned by and operated as a hospital, convent, monastery, extended care facility, convalescent home, or dormitories owned by educational institutions.

B. Exempt Transfers. The following transfers of Residential Property are not subject to the requirements of this Chapter:

1. An inter vivos transfer, whether or not for consideration, between spouses, domestic partners, parents and children, siblings, and/or grandparents and grandchildren.

2. A transfer for consideration by a decedent’s estate if the consideration arising from the transfer will pass from the decedent’s estate to, or solely for the benefit of, charity.

3. A transfer of legal title or an interest in an entity holding legal title to a Residential Property pursuant to a bona fide deed of trust or mortgage, and thereafter any transfer by foreclosure sale or deed in lieu of foreclosure pursuant to a bona fide deed of trust or mortgage. This exemption does not supersede any rights to purchase afforded to Potential Eligible Purchasers under the California Civil Code Sections 2924(f)-(h), 2924(m)-(n), or 2929.3.

4. A transfer of bare legal title into a revocable trust, without actual consideration for the transfer, where one or more transferors is a current beneficiary of the trust.

5. A transfer by devise, descent, or operation of the law upon the death of a natural person.

6. A transfer pursuant to court order or court-approved settlement.

7. Any transfer to a public agency, including but not limited to a transfer by eminent domain or under threat of eminent domain.

8. Any transfer of a fractional interest in a Residential Property that is less than fifty percent (50%) of an undivided interest in the Residential

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 9 Property.

9. Any transfer in which the transferee receives a low-income housing credit under 28 U.S.C. § 42.

10. A transfer of a Residential Property having no more than four (4) Dwelling Units made for the purpose of either: (a) paying for imminently necessary health care expenses of an Owner of the Residential Property, or (b) an emergency circumstance placing the Owner in financial hardship and at imminent risk of foreclosure or bankruptcy and the Owner has occupied the Residential Property as the Owner’s Principal Residence during the prior year. For purposes of this subsection only, “Owner” shall be limited to a natural person having an undivided interest in the Residential Property of at least fifty percent (50%). An Owner may claim this Exempt Transfer within one (1) year of having vacated the Residential Property where the Owner demonstrates the existence of the conditions set forth in (a) or (b) of this subsection.

C. Transfer Exemption Procedures. The Owner shall submit a Certificate of Exemption signed under penalty of perjury to the City after deciding to sell and before marketing the property self-certifying one of the exemptions described in

14.26.040.B. A Certificate of Exemption must be accompanied by supporting documents as set forth in the Administrative Guidelines. The City shall make the template Certificate of Exemption accessible on the City website. This section shall not be construed to or used in a manner that unreasonably delays an Owner’s valid and lawful transfer of a real property interest under Transfers Exempted.

14.26.050 Qualified Nonprofits
A. Certification, Term, and Renewal. To effectuate the purpose of this Chapter, the City Council shall certify and recertify Qualified Nonprofits via an application process as set forth in the Administrative Guidelines. A nonprofit organization’s certification as a Qualified Nonprofit shall be valid for five (5) years. The City Manager or designee shall solicit new applications for Qualified Nonprofit status at least once each calendar year, at which time existing Qualified Nonprofits shall be eligible to apply for renewed certification. A list of Qualifying Nonprofits shall be published on the City’s website.

B. Disqualification of Qualified Nonprofits. The City Manager or designee shall promptly investigate any complaint alleging that a Qualified Nonprofit has failed to comply with this Chapter. If after providing the Qualified Nonprofit with notice and opportunity to respond, the City Manager or designee determines that an organization listed as a Qualified Nonprofit has failed to comply with the requirements of this

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 10 Chapter, the City Manager or designee shall bring a recommendation to City Council to limit, suspend, or revoke that organization’s certification as a Qualified Nonprofit.

14.26.060 Assignment of Rights
A. A Tenant living in a Non-Exempt Single-Family Dwelling with Absentee Owner(s) may assign rights under this Chapter to a Qualified Nonprofit.

B. A Qualified Nonprofit assignee according to Paragraph A of this Section shall sign and submit a “Statement of Rights and Obligations” to the Tenant. The content of the statement shall be set forth in the Administrative Guidelines.

C. The assignment of rights described in Paragraph A of this Section may occur at any time in the process, but must occur during the process provided in Sections

14.16.080 and 14.26.090.

D. Qualified Nonprofit assignees or the assignor shall not accept any payment or reward in exchange for the assignment of rights under this section. Continuing to rent the Single-Family Dwelling at an affordable rate shall not be considered payment or reward for purposes of this section.

14.26.070 Tenant, Qualified Nonprofit and City Opportunity to Purchase A. Before the Owner of a Residential Property may list or market that property for sale to any purchaser, the Owner shall give the Potential Eligible Purchaser(s) specified in Paragraphs B, C, and D of this Section an opportunity to purchase at a price and terms that represent a Bona Fide Offer to Purchase.

1. The Owner is not required to give the Potential Eligible Purchaser(s) specified in Paragraphs B, C, and D of this Section an opportunity to purchase at a price and terms that represent a Bona Fide Offer to Purchase when the Owner has received an unsolicited offer unless the Owner takes any action to accept the unsolicited offer.

B. Process for Tenant Opportunity to Purchase:

1. This Section applies to Tenant-Occupied Single-Family Dwellings and Condominiums with Absentee Owners that do not reside in East Palo Alto as a Principal Residence.

2. Potential Eligible Purchasers. Potential Eligible Purchasers under this Paragraph B includes Tenants, Qualified Nonprofits, and the City. Rights and

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 11 priorities are given the order of (1) Tenants, (2) Qualified Nonprofits, and (3) the City, as described in Paragraphs B(5) and B(6).

3. Notice of Intent to Sell. The Owner under this Paragraph B must provide all Potential Eligible Purchasers as specified in Paragraph B(2) with a Notice of Intent to Sell. The City shall make the template Notice of Intent to Sell accessible on the City website.

4. Statement of Interest. All Potential Eligible Purchasers as specified in Paragraph B(2) are allowed to submit a Statement of Interest to Purchase. The City shall make the template Statement of Interest accessible on the City website.

5. Right of First Offer.
a. In the event that a Tenant submits a Statement of Interest in response to the Notice of Intent to Sell, said statement shall be given priority over any Statement of Interest submitted by a Qualified Nonprofit or the City. Nothing prohibits the Tenant(s) from assigning their Right of First Offer or Right of First Refusal to a Qualified Nonprofit after submitting a Statement of Interest.
b. In the event that Qualified Nonprofit(s) and no Tenant submits a Statement of Interest in response to the Notice of Intent to Sell, said statement(s) shall be given priority over any statement submitted by the City.
c. In the event that no Tenant or Qualified Nonprofit submits a Statement of Interest, any Statement of Interest submitted by the City shall be considered.

6. Right of First Refusal.
a. In the event that the Owner rejects all offer(s) submitted by Potential Eligible Purchasers and receives a Third-Party Purchaser Bona Fide Offer to Purchase, the Owner must notify all the Potential Eligible Purchasers who timely submitted a Statement of Interest and an offer, and provide the Potential Eligible Purchasers an opportunity to submit a matching offer, giving priority in the order described in Paragraph B(2). b. A Qualified Nonprofit can be conferred a Right of First Offer and Right of First Refusal for a Tenant-Occupied Single-Family Dwelling with an Absentee Owner(s) if a Tenant (1) assigns in writing the Tenants’ Right

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 12 of First Refusal to the Qualified Nonprofit, or (2) executes a written waiver of the Tenants’ Right of First Refusal; or (3) no Tenant submits a Statement of Interest pursuant to Section 14.26.080.
c. The City can be conferred a Right of First Offer and a Right of First Refusal for a Tenant-Occupied Single-Family Dwelling with Absentee Owner(s) if a Tenant (1) executes a written waiver of the Tenants’ Right of First Refusal; or (2) no Tenant or Qualified Nonprofit submits a Statement of Interest pursuant to Section 14.26.080.

C. Process for Qualified Nonprofit or City Opportunity to Purchase:

1. This Section applies to the following properties with an Owner(s) who does not reside in East Palo Alto as a Principal Residence:
a. Non-Tenant Occupied Single Family Dwellings and Condominiums with Absentee Owner(s);
b. Duplexes and Triplexes, with or without tenants, with Absentee Owner(s); and
c. Multi-Family Dwellings, with four (4) or more units, with or without tenants.

2. Potential Eligible Purchasers. Potential Eligible Purchasers under this Paragraph C includes Qualified Nonprofits and the City. Rights and priorities are given the order of (1) Qualified Nonprofits and (2) the City, as described in Paragraphs D(5) and D(6).

3. Notice of Intent to Sell. The Owner under this Paragraph C is required to provide all Potential Eligible Purchasers with a Notice of Intent to Sell.

4. Statement of Interest. All Potential Eligible Purchasers as specified in Paragraph C(2) are allowed to submit a Statement of Interest.

5. Right of First Offer.
a. In the event that any Qualified Nonprofit submits a Statement of Interest in response to the Notice of Intent to Sell, said statement(s) shall be given priority over any statement submitted by the City. b. In the event that no Qualified Nonprofit submits a Statement of Interest, any Statement of Interest submitted by the City shall be considered, and the City may proceed to the Right of First Offer process.

6. Right of First Refusal.

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 13 a. In the event that the Owner rejects the offer(s) submitted by all Potential Eligible Purchasers and receives a Third-Party Purchaser Bona Fide Offer to Purchase, the Owner must notify all the Potential Eligible Purchasers, who timely submitted a Statement of Interest and an offer, as defined herein in Paragraph (C)(2) and give priority in the order described.
b. In the event that the Qualified Nonprofits do not submit a match to the Bona Fide Offer to Purchase, the City’s match will stand.

14.26.080 Notice of Intent to Sell; Statement of Interest A. Notice of Intent to Sell. An Owner of a Non-Exempt Residential Property shall provide all Potential Eligible Purchasers notice of their intent to sell prior to listing or marketing a Residential Property for sale (“Notice of Intent to Sell”). The Notice of Intent to Sell shall be provided at least thirty (30) days before listing or marketing the Residential Property (“Notice Period”). The Notice of Intent to Sell shall be sent to each Potential Eligible Purchaser as set forth in the Administrative Guidelines, and shall include the following:

1. A statement that the Owner intends to sell the Residential Property.

2. A statement describing the rights of Potential Eligible Purchasers under this Chapter and stating the deadlines for exercising those rights.

3. Instructions for submitting a Statement of Interest pursuant to Paragraph B of this Section.

B. Statement of Interest. Within fifteen (15) days of receiving the Owner’s Notice of Intent to Sell, a Potential Eligible Purchaser shall notify the Owner, at the email address provided by the Owner in the Notice of Intent to Sell, of the Potential Eligible Purchaser’s intent to submit a Statement of Interest, in order to be eligible to submit a Statement of Interest. Prior to the expiration of the Notice Period set forth in Paragraph A of this Section, any Potential Eligible Purchaser defined in Section

14.26.070 may deliver a Statement of Interest to the Owner of the Residential Property (“Statement of Interest”). The Statement of Interest shall notify the Owner of the Potential Eligible Purchaser’s interest in exercising the Right of First Offer and/or Right of First Refusal under this Chapter.

C. Disclosure Package. Within five (5) days of receiving a Statement of Interest, the Owner must provide a disclosure package that includes documents and information set forth in the Administrative Guidelines, and at minimum, an itemized

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 14 list of annual income and expenses, including but not limited to rent and other income collected, and costs of management, insurance, utilities, maintenance, and repairs.

D. Effect of Statement of Interest. Receipt of a timely Statement of Interest and disclosure package shall extend the Notice Period by thirty (30) days for Single Family Dwellings; sixty (60) days for two or three (2-3) unit Multi-Family Dwellings; and ninety (90) days for four or more (4+) unit Multi-Family Dwellings. During this extended Notice Period, Potential Eligible Purchasers may submit an offer to purchase the property pursuant to Section 14.26.090.

E. Prohibition on Listing or Marketing Property During Notice Period. The Owner of a Residential Property shall be prohibited from listing or marketing the Residential Property for sale prior to the expiration of the Notice Period.

14.26.090 Right of First Offer
A. Right of First Offer. A Potential Eligible Purchaser that submits a Statement of Interest shall have the right to make an offer to purchase a Residential Property prior to the listing or marketing of the Residential Property (“Right of First Offer”). The Potential Eligible Purchaser may deliver to the Owner of the Residential Property an offer to purchase the property at any time prior to the expiration of the Notice Period set forth in Section 14.26.080.E. The Owner may accept or reject any offer to purchase received from a Potential Eligible Purchaser following the steps set forth in Section 14.26.070.

B. Acceptance of Offer to Purchase. Upon acceptance of an offer to purchase a Residential Property made pursuant to Paragraph A of this Section, the Potential Eligible Purchaser shall make reasonable and good faith efforts to close the transaction. A Potential Eligible Purchaser shall have thirty (30) days to close the transaction for the sale of a Single-Family Dwelling. A Qualified Nonprofit and/or the City shall have ninety (90) days to close the transaction for the sale of a two to three (2-3) unit Multi-Family Dwelling; and one hundred and twenty (120) days to close the transaction for the sale of a four or more (4+) unit Multi-Family Dwelling. The deadline to close a transaction for the sale of a Single-Family Dwelling shall be extended for an additional 60 days if the Potential Eligible Purchaser provides written documentation that its lender will require a commercial loan for the purchase of the property (for a total of 90 days to close). Nothing in this Paragraph shall prevent the Owner and the Potential Eligible Purchaser from agreeing to further extend the deadline to close the transaction.

C. Termination of Right of First Offer. Upon (1) rejection of all offers to purchase made within the Notice Period, or (2) the expiration of the Notice Period, the Owner may list and market for sale the Residential Property and may solicit and conditionally accept offers from a Third-Party Purchaser, subject to the requirements

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 15 of Section 14.26.100.

14.26.100 Right of First Refusal
A. Disclosure of Offer to Purchase. An Owner that takes any action to accept an Bona Fide Offer to Purchase from a Third-Party Purchaser shall disclose that offer to any Potential Eligible Purchaser that has submitted a Statement of Interest and an offer within 15% of the offer received by the Owner from the Third Party Purchaser, and shall provide said Potential Eligible Purchaser a Right of First Refusal pursuant to the requirements of this Chapter (“Right of First Refusal”). Within two (2) days of receipt of a Third-Party Purchaser Bona Fide Offer to Purchase, the Owner shall disclose to each Potential Eligible Purchaser that submits a Statement of Interest and an offer all material terms of any Bona Fide Offer to Purchase of the Residential Property, together with all commercially reasonable disclosures, in substantially the same form and having substantially the same content as would be provided to any prospective Third-Party Purchaser. Any written offer received by the Owner shall be provided to said Potential Eligible Purchasers who have submitted a Statement of Interest and an offer; provided, however, that any confidential information not necessary to comply with the requirements of this Paragraph shall be redacted from such offers.

B. Right of First Refusal. Any Potential Eligible Purchaser that submits a Statement of Interest and an offer may exercise a Right of First Refusal and accept the Bona Fide Offer to Purchase of the Residential Property within the time period set forth in Paragraph C of this Section. To exercise its Right of First Refusal, the Potential Eligible Purchaser must accept all material terms of the Offer to Purchase except for the time to close as described in Paragraph D of this Section and the deposit amount as described in Section 14.26.110.E; provided, however, the financing of the Potential Eligible Purchaser’s purchase shall not be considered a material term of the Offer to Purchase so long as it does not affect the net value of the Sale to the Owner.

C. Time to Exercise Right of First Refusal. The Owner shall provide any Potential Eligible Purchaser that submits a Statement of Interest and an offer at least five (5) days to accept the Offer to Purchase for a Single-Family Dwelling, or at least twenty (20) days to accept the Offer to Purchase of a two or more (2+) unit MultiFamily Dwelling. The acceptance of an Offer to Purchase by any Potential Eligible Purchaser extinguishes any Right of First Refusal of other Potential Eligible Purchasers.

D. Time to Close. Upon acceptance of the Offer to Purchase, the Potential Eligible Purchaser shall have at least thirty (30) days to close the transaction for the

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 16 sale of a Single-Family Dwelling, or a total of ninety (90) days if the Potential Eligible Purchaser is a Qualified Nonprofit and/or the City and provides written documentation that its lender will require a commercial loan for the purchase of the property; at least ninety (90) days to close the transaction for the sale of a two or three (2-3) unit Multi-Family Dwelling; and one hundred and twenty (120) days to close the transaction for the sale of a four or more (4+) unit Multi-Family Dwelling.

Nothing in this Paragraph shall prevent the Owner and the Potential Eligible Purchaser from agreeing to further extend the deadline to close the transaction.

E. Rejection of Offer or Failure to Close. If each Potential Eligible Purchaser entitled to receive an Offer to Purchase rejects or fails to accept such Offer to Purchase within the time set forth in Paragraph C of this Section or if a Potential Eligible Purchaser that accepts an Offer to Purchase fails to close the transaction within the time set forth in Paragraph D of this Section, the Owner may immediately proceed with the sale or transfer of the Residential Property to a Third-Party Purchaser.

F. Notwithstanding any other provision of this section, conditional sales agreements between an Owner and a Third-Party Purchaser are permitted so long as the agreement is subject to the contingency that no Potential Eligible Purchaser exercises a Right of First Refusal conferred by this Chapter.

14.26.110 Contract Negotiation
A. Bargaining in Good Faith. The Potential Eligible Purchaser and Owner shall bargain in good faith. The following constitute prima facie evidence of bargaining without good faith:

1. The failure of an Owner to offer the Potential Eligible Purchaser a price or term at least as favorable as that offered to a third party, without a reasonable justification for so doing;

2. The failure of an Owner to make a contract with the Potential Eligible Purchaser which substantially conforms with the price and terms of a thirdparty contract within the time periods specified in this Chapter, without a reasonable justification for so doing; or

3. The intentional failure of a Potential Eligible Purchaser or an Owner to comply with the provisions of this Chapter.

B. Reduced Price. If the Owner sells or contracts to sell the Residential Property to a Third-Party Purchaser for a price more than fifteen percent (15%) less than the price

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 17 offered to the Potential Eligible Purchaser or for other terms which would constitute bargaining without good faith, the sale or contract is void and the Owner shall comply anew with all requirements of this Chapter as applicable.

C. Financial Assurances. The Owner may not require the Potential Eligible Purchaser to prove financial ability to perform as a prerequisite to entering into a contract. The Owner may not require the Potential Eligible Purchaser to pay the purchase price in installments unless the Owner provides deferred purchase money financing on terms reasonably acceptable to the Potential Eligible Purchaser. The Owner may require the Potential Eligible Purchaser to prove that the Potential Eligible Purchaser, either alone or in conjunction with a third party, has comparable financial ability to the Third-Party Purchaser before the Owner will be required to grant deferred purchase money financing to the Potential Eligible Purchaser on the same terms and conditions agreed between the Owner and the Third-Party Purchaser. If the Potential Eligible Purchase can prove comparable financial ability alone, the Owner may not require the Potential Eligible Purchaser to secure a third-party guarantor. This proof cannot be required as a prerequisite to contracting. It may be required only as a prerequisite to the Owner granting deferred purchase money financing at settlement.

D. Transfers of Interest in a Partnership or Corporation and Master Leases. In the event of a transfer of interest in a partnership or corporation or in the event of a master lease or agreement that is considered a sale but which does not involve a transfer of record title to the real property, the Owner shall be bargaining in good faith if the Owner offers the Potential Eligible Purchaser the opportunity to acquire record title to the real property or offers the Potential Eligible Purchaser the opportunity to match the type of transfer or agreement entered into with the third party. With respect to either type of offer, all provisions of this Chapter apply.

E. Deposit. The Owner shall not require the Potential Eligible Purchaser to pay a deposit of more than three percent (3%) of the contract sales price to make a contract.

The deposit is refundable in the event of a good faith failure of the Potential Eligible Purchaser to perform under the contract unless otherwise provided in the contract.

14.26.120 Long-Term Affordability and Tenant Relocation Assistance in Properties Purchased Under this Chapter
A. For Qualified Nonprofits, City, and Subsidized Purchaser(s)

1. All Residential Properties purchased under this Chapter, except for SingleFamily Dwellings purchased with no subsidy, shall be subject to rental affordability restrictions and restrictions on the resale value of a given property as defined in this subsection.

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 18 2. In exchange for the rights conferred under this Chapter, Subsidized Purchasers shall sign and submit an initial Statement of Rights and Obligations, available on the City website, agreeing to maintain the Residential Property as permanently affordable and be bound to this effect.

This Statement of Rights and Obligations shall be submitted at the same time as the Statement of Interest as specified in subsection 14.26.080.B.

B. Rental Units. If the average rental rate of the units, which shall be based on the existing tenancies of the non-purchasing Tenants in the properties upon purchase, exceeds a rent affordable to 50% AMI households, the new Owner shall rent each vacant unit to 50% AMI income households until the 50% AMI rental rate average is achieved.

Future rental rates of any vacant units shall not exceed a rent affordable to Low-Income Households.

C. Ownership Units. The sales price shall be calculated based on Chapter 18.37 of the East Palo Alto Municipal Code and the inclusionary housing guidelines. The sales price for any vacant units shall be set at an affordable price to Median Income Households and to Moderate Income Households, with the first vacant unit restricted to Median Income Households. The resale or transfer of ownership units shall be subject to long-term affordability covenants consistent with Chapter 18.37.100 of the East Palo Alto Municipal Code.

D. Permanent affordability standards shall remain in force for 99 years and are renewed at year 100. This shall be evidenced by one of the following:

1. A restrictive covenant placed on the deed to the Residential Property that runs with the land and is enforceable by the City against the purchasers and their successors;

2. A Community Land Trust lease, which is a 99-year renewable land lease with affordability and Owner-occupancy restrictions; or

3. Affordability covenants in land leases or other recorded documents not specifically listed in this subsection, which run with the land and are enforceable.

E. The sale of a Residential Property pursuant to this Chapter shall not impair the rights of any Tenant under Chapter 14.04 of the East Palo Alto Municipal Code or any other applicable state law or local ordinance. Further, any Tenant who resides in any unit at the time of the sale of a Residential Property under this Chapter shall not be subject to eviction based on their failure to meet income restrictions or other eligibility requirements imposed by this Section.

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 19 F. All covenants created in accordance with this section shall be recorded with the San Mateo County’s Recorders Office.

G. Required Filing to Certify Compliance with Affordability Restrictions. In the case that permanent affordability restrictions materialize as a covenant enforceable by the City, the Owner(s) of the Residential Property shall file a document every three (3) years with the City in which the Owner(s) affirmatively state the rents for each unit in the Residential Property.

14.26.130 Prohibited Conduct
A. The sale or transfer of any Residential Property subject to this Chapter and not exempt pursuant to Section 14.26.040 is prohibited unless the Owner complies with Section 14.26.040.C. Any change of Ownership of real property as defined in Revenue & Taxation Code § 64(c) shall be considered a sale or transfer of Real Property for purposes of this Chapter.

B. A Tenant or Potential Eligible Purchaser shall not sell any right afforded to them under this Chapter or sell a waiver of any such right.

C. An Owner shall not (1) coerce a Potential Eligible Purchaser to waive their rights under this Chapter; (2) retaliate against or harass a Tenant seeking to exercise their rights under this Chapter; or (3) engage in conduct intended to prevent a Tenant from exercising their rights under this Chapter.

D. Any agreement between the Owner and a Potential Eligible Purchaser to shorten the time periods provided for exercise of any right afforded under this Chapter is prohibited unless all other Potential Eligible Purchasers have waived their rights under this Chapter. Notwithstanding the foregoing, any Potential Eligible Purchaser may affirmatively indicate that they have no interest in a Residential Property prior to the expiration of any deadlines and in accordance with the Administrative Guidelines.

Nothing in this Paragraph shall prohibit an agreement to extend the deadlines set forth herein.

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 20 14.26.140 Confidentiality
Any information exchanged between an Owner(s) and Potential Eligible Purchasers under this Chapter that is intended to facilitate the sale of property including, but not limited to, disclosures, any intent to sell, and terms and conditions of an offer of sale, shall be kept confidential to the greatest extent permitted by law. This Section shall not prohibit disclosure of information necessary to effectuate the purpose of this Chapter to any Owner, Tenant, or Qualified Organization, or to the City of East Palo Alto or its agents or contractors, nor shall this Chapter be construed to limit disclosure of information in response to a lawfully issued subpoena or court order.

14.26.150 Enforcement
A. Owner Certification. By no later than thirty (30) days after any Sale, the Owner(s) shall record with the San Mateo County’s Recorder's Office, through the escrow company that facilitates the sale of the property, a signed declaration, under penalty of perjury, affirming that the Sale of that Property substantially complied with the requirements of this Chapter and will also instruct the escrow company to file a copy of the Owner Certification with the City. The City will publish all such addresses on its website.

B. The City Attorney, any non-exempt Owner subject to the provisions of this Chapter, and/or any Potential Eligible Purchaser may bring a civil action to enforce this Chapter and shall be entitled to the remedies set forth in this section to the greatest extent permitted by law.

C. A prevailing party in any action to enforce this Chapter shall be entitled to civil damages and damages according to proof and reasonable attorneys’ fees and costs. Any court of competent jurisdiction may enforce the affordability requirements of this Chapter, when applicable. Any court of competent jurisdiction may enjoin a transfer or sale of Property, or rescind a sale of Property, where the Owner failed to comply with requirements of this Chapter, and may order that an Owner comply with the requirements of this Chapter. Civil damages may include:

1. Any violation of the requirements of this Chapter shall be subject to a civil penalty not to exceed $1,000 per day of violation. Each failure to provide the required notice or disclosure under this Chapter shall be considered a separate violation for each unit on a Property.

2. If the Owner’s violation was knowing or willful, mandatory civil penalties equal to ten percent (10%) of the sale price for a first violation; twenty percent (20%) for the second, and thirty percent (30%) for each thereafter.

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 21 D. Suspension or Disqualification of Qualified Nonprofits. The City shall promptly investigate any complaint alleging that a Qualified Nonprofit has failed to comply with Section 14.26.150 of this Chapter. If, after providing the Qualified Nonprofit with notice and opportunity to be heard, the City determines that a Qualified Nonprofit has failed to comply with this Chapter, the City may suspend or revoke a Qualified Nonprofit’s certification.

14.26.160 Financial Assistance
A. For the consideration and approval of the City Council, the City Manager or designee shall develop guidelines for providing financial assistance to allow for the acquisition of Residential Property pursuant to this Chapter. Financial assistance may be provided to Potential Eligible Purchasers. Nothing in this provision commits the City Council to providing a specified level of funding for the acquisition of Residential Property under this Chapter.

B. The provision of financial assistance under Paragraph A of this Section to any Tenant who acquires an interest in a Residential Property pursuant to this Chapter must be conditioned on the Tenant’s agreement to reside at the Residential Property for at least three (3) years. The City Manager or designee is authorized to impose a lien on said Residential Property to enforce the requirements of this Section.

14.26.170 Implementation
A. The City Council shall adopt Administrative Guidelines necessary to implement the requirements of this Chapter and may adopt additional rules and guidelines for purposes of administering this Chapter. The provision of Sections

14.26.010 through 14.26.160 shall take effect ninety (90) days after the City Council adopts Administrative Guidelines. Thereafter, the City Council may delegate to the City Manager the authority to amend the Administrative Guidelines as needed.

B. The City shall annually post and update the City’s website with information on the East Palo Alto Opportunity to Purchase Act process, including information about sales and rights under this Chapter.

C. The City Manager or designee shall develop all online and printed forms and databases Qualified Nonprofit list and registry, and other administrative services to ensure efficient management of the program.

SECTION 3. CALIFORNIA ENVIRONMENTAL QUALITY ACT

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 22 This Ordinance is not subject to CEQA because it is not a “project” which would have a direct physical change or a reasonably foreseeable indirect physical change on the environment pursuant to California Environmental Quality Act ("CEQA") Guidelines section 15378. Even if it were a project subject to CEQA review, this project would be exempt from CEQA Guideline Section 15378 (regulatory actions), Section 15061(b)(3) (no significant environmental impact), and Section 15183 (actions consistent with the general plan and zoning).

SECTION 4. SEVERABILITY.

If any section, subsection, sentence, clause, phrase, or word of this Ordinance is for any reason held to be invalid by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed and adopted this Ordinance, and each and all provisions hereof, irrespective of the fact that one or more provisions may be declared invalid.

SECTION 5. EFFECTIVE DATE.

This Ordinance shall take effect and be in full force thirty (30) days after the date of its adoption. However, the requirements of this Ordinance shall not be enforced until July 1, 2022.

SECTION 6. PUBLICATION.

The City Clerk is hereby directed to cause publication of this Ordinance as required by Government Code Section 36933.

This Ordinance was introduced at the______________ meeting of the City Council of the City of East Palo Alto.

PASSED AND ADOPTED this _____ day of ______________, 2022 by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

______________________________

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) 23 Ruben Abrica, Mayor
ATTEST: APPROVED AS TO FORM:
___________________________ _______________________________ City Clerk Rafael E. Alvarado Jr., City Attorney

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Attachment: Ordinance (2077 : East Palo Alto Opportunity to Purchase Act) January 14, 2022
Via email
To: Patrick Heisinger, Rachel Horst
From: Nora Lake-Brown, David Rosen
Subject: Research Regarding Potential Effects of TOPA
This memorandum summarizes the information and analysis conducted by DRA related to the potential economic effects of an Opportunity to Purchase (OPA) ordinance on the housing market and property tax base in the City of East Palo Alto. The purpose of the review is to inform the City Council on potential fiscal and economic effects of OPA on the City.

Summary of Findings and Conclusions
• Single-family home prices, rents and the price of rental units in East Palo Alto are established by housing supply and demand within the regional housing market.

Housing demand is strong in many areas of the country, across California, and especially in the Bay Area where rising home prices are spurred on by the continued growth of the Silicon Valley economy.
• The supply of new housing in the Bay Area has not kept pace with demand, and these forces are expected to continue into the near future. EPA’s proposed OPA must be viewed in the context of these forces. The ordinance does not limit sales prices on single-family homes or any unit. If the home’s tenants are not able to complete a purchase at market price within a set time frame, the home may be sold to any buyer.
• The OPA affects a small proportion of single-family homes in EPA. Buyers will clearly identify those home sales that are covered by the ordinance and those that are not, just like they identify school districts, transit, and other factors influencing their decision to buy. High market demand makes the market very efficient in adjusting to regulatory changes. The OPA should have no effect on prices for home sales not covered by the ordinance. Since price is not limited, DRA also believes the ordinance will have no effect on sales prices for units covered by the ordinance. Changes in interest rates, employment, wages, buyer demand and supply of homes for sale—all factors beyond the control of any city—are the key determinants of market price.

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Attachment: David Rosen & Associates EPA OPA Analysis (2077 : East Palo Alto Opportunity to Purchase Act) Patrick Heisinger, Rachel Horst
January 14, 2022

• DRA’s “worst case” estimate of the loss in property tax assessment in the City from the purchase of absentee-owned homes and condos by nonprofits under OPA over the next five years is $67 million, or approximately 1.8% of the City’s total assessed valuation of $3.7 billion. This worst-case scenario is highly unlikely because:
o It assumes all absentee-owned homes sold in the next five years are purchased by non-profits and receive a total exemption of property taxes as affordable rental units. Creation of affordable ownership units will result in these units being assessed at affordable prices rather than market prices, resulting in a reduction but not total elimination in the property taxes generated by these units.
o The subsidy required to cover the “gap” between market home price and affordable home prices will be large and few funds are available for such purchases. DRA estimates the total subsidy required to purchase and make affordable at 80% AMI or below all absentee-owned single-family dwellings and condos sold over the next five years at $97 M to create owner housing and $115 M to create renter housing. Lowering the income targeting to 50% AMI increases the subsidy required to $131 M to create affordable owner housing and $145 M to create affordable renter housing. o Subsidizing units purchased under OPA is not an allowable or competitive activity for any of the more than $23 billion in funding sources available for homeless and affordable housing in California in 2022 reviewed by DRA for this assignment. This will limit the number of these purchases and minimize the effect on the City’s tax base. Subsidizing absentee-owned units purchased under OPA will require identification of new local government or foundation funding sources. DRA estimates a realistic number of units to be purchased by nonprofits and subsidized at no more than 2 to 3 units per year.

1. Residential Market Context

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Attachment: David Rosen & Associates EPA OPA Analysis (2077 : East Palo Alto Opportunity to Purchase Act) Patrick Heisinger, Rachel Horst
January 14, 2022

On a national level, the US has been experiencing high housing price growth, which is expected to continue in the years to come. According to Freddie Mac in July 21:

High house price growth has been supported by increased demand due to low mortgage rates, disposable after-tax income that has risen during the current recession and a major shortage of housing supply relative to our population. The increase in house price growth will be less transitory than the increase in consumer prices, as the U.S. housing market will continue to struggle with a shortage of available housing for many months to come. 1
Housing price appreciation has been even more pronounced in California and particularly the Bay Area due to the growth of the technology economy following the Great Recession and further spurred on by the COVID-19 pandemic.

Table 1 shows the growth in the median single-family home price in East Palo Alto and selected Counties since the recovery began in 2012.

Table 1
Appreciation in Single-Family Median Home Prices for Existing Homes East Palo Alto, Selected Bay Area Counties and California 2012 to 2021
Dec. 2012 Dec. 2020 Nov. 2021
Percent Increase
2012 to
2020
2020 to
2021
2012 to
2021
East Palo Alto $285,000 $938,000 $1,030,000 229% 10% 261% San Mateo County $775,000 $1,700,000 $2,222,500 119% 31% 187% Santa Clara County $681,000 $1,375,000 $1,692,500 102% 23% 149% San Francisco County $864,795 $1,581,000 $1,900,000 83% 20% 120% California $365,840 $717,930 $782,490 96% 9% 114%
Sources: Compass Bay Area Market Reports (East Palo Alto); California Association of Realtors (counties, California
1 http://www.freddiemac.com/research/forecast/20210715_quarterly_economic_forecast.page

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Attachment: David Rosen & Associates EPA OPA Analysis (2077 : East Palo Alto Opportunity to Purchase Act) Patrick Heisinger, Rachel Horst
January 14, 2022

We are currently in a rising interest rate environment, which factors into the demand and supply of housing equation by influencing the cost of money, financing, and financing proceeds. For investors who are paying all cash, interest rates are immaterial. In fact, in a rising rate environment, all cash buyers are even more advantaged against first time homebuyers who are buying for themselves as owner occupants.

2. Potential Loss in Assessed Valuation from Absentee-Owned Units Purchased by Nonprofit Housing Corporations
DRA evaluated the potential loss in the City’s assessed property valuation associated with the purchase of absentee-owned single-family homes and condominiums by nonprofit housing corporations pursuant to the OPA.

2.1. Purchase of a single-family home by a non-profit housing corporation does not necessarily mean the City will lose the full amount of property tax revenues it receives from that home.
 Affordable rental units owned by qualifying nonprofit organizations and restricted to low income households with incomes at or below 80% of area median income (AMI) are eligible for a property tax exemption2.
 Affordable owner units sold by nonprofit corporations and restricted for at least 30 years as affordable to low income households at 80% of AMI or below are eligible for a property tax assessment that takes the affordability restrictions into consideration3. This means the property is assessed at the affordable home sales price rather than market value. DRA calculated affordable home prices by 2021 income level, which are summarized in Table 2 for single-family homes and Table 3 for condominiums. Detailed assumptions for this calculation are 2 https://www.boe.ca.gov/proptaxes/pdf/pub149.pdf
3 https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=RTC&sectionNum=402.1

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Attachment: David Rosen & Associates EPA OPA Analysis (2077 : East Palo Alto Opportunity to Purchase Act) Patrick Heisinger, Rachel Horst
January 14, 2022

contained in Appendix Table A-1 for single-family homes, and Table A-2 for condominiums.
 Special assessments will continue to be paid on all units, regardless of assessed value or exemption status.

Table 2
Affordable Home Prices by Income Level and Unit Bedroom Count Single-Family Homes
City of East Palo Alto
2021
50% AMI 80% AMI 120% AMI
1 Bedroom $207,600 $380,100 $610,200
2 Bedroom $234,500 $428,700 $687,500
3 Bedroom $261,300 $476,900 $764,500
4 Bedroom $280,500 $513,400 $824,000
5 Bedroom $299,400 $549,600 $883,100
Source: DRA.

Table 3
Affordable Home Prices by Income Level and Unit Bedroom Count Condominiums
City of East Palo Alto
2021
50% AMI 80% AMI 120% AMI
1 Bedroom $150,900 $323,400 $553,600
2 Bedroom $179,900 $374,100 $632,900
3 Bedroom $208,100 $423,700 $711,300
Source: DRA.

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Attachment: David Rosen & Associates EPA OPA Analysis (2077 : East Palo Alto Opportunity to Purchase Act) Patrick Heisinger, Rachel Horst
January 14, 2022

2.2 DRA estimates a potential “worst case” loss of assessed value over 5 years of $67 million, representing only 1.8% of the City’s total assessed valuation.

DRA’s estimates are based on the following assumptions and data:
• An average of 28 absentee-owned single-family homes and 4 absentee-owned condos sold per year, which equals the average sales rate for all absentee-owned single-family homes and condos in the City between 2017 and 2021 based on analysis of parcel-specific data from Property Radar. This is an increase from the rate of 8 absentee-owned homes and 4 condos sold per year during the 2007 to 2011 period.

Using total absentee-owned units overestimates the result because non-owner occupied units owned by East Palo Alto residents are exempt from the OPA.
• The weighted average assessed values for absentee-owned singlefamily homes and condos in East Palo Alto in December 2021 of approximately $408,000 and $504,000, respectively, are derived from Property Radar data. The average assessed value by unit bedroom count is summarized for single-family homes in Table 4.

Table 4
Average Assessed Value of Absentee-Owned Single-Family Homes1 City of East Palo Alto
December 1, 2021
Total Assessed
Value No. of Units
Average
Assessed Value
1 Bedroom $3,974,848 6 $662,475
2 Bedroom $14,428,751 54 $267,199
3 Bedroom $35,337,100 99 $356,940
4 Bedroom $22,664,495 35 $647,557
5 Bedroom $7,868,800 13 $605,292
6 Bedroom $908,147 2 $454,074
Weighted Ave. -- -- $408,000

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1 Excludes single-family homes Property Radar identifies units as “owner-occupied.” Sources: Property Radar; City of East Palo Alto; DRA.
• Assuming 100% of the absentee-owned homes are sold to nonprofits and are paying no property taxes as qualifying low-income rental units.

This worst case scenario is highly unlikely because:
o
o There are insufficient capital subsidies available to assist nonprofits to purchase all of the absentee-owned homes coming on the market, as discussed further in Section 3.
o Homes purchased by nonprofits and resold as affordable ownership units would not be exempt from property taxes but would pay property taxes based on affordable sales prices.

2.3 The increase in assessed valuation in the City from the resale of existing owner-occupied units is estimated at $183 million over the next five years, vastly outweighing the potential loss of assessed value from absentee-owned units.

DRA estimates the increase in assessed valuation from the resale of existing owner-occupied single-family homes and condos as follows:
• An average of 53 owner-occupied single-family homes and 9 owneroccupied condos sold per year, which equals the average sales rate for owner-occupied single-family homes and condos in the City between 2017 and 2021 based on analysis of parcel-specific data from Property Radar.
• The weighted average assessed values for owner-occupied singlefamily homes and condos in East Palo Alto in December 2021 of approximately $451,000 and $575,000, respectively, derived from Property Radar data.

2.4 In addition, DRA estimates that assessed valuation in the City will increase by another $560 million to $800 million over the next five years

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(approximately) as the existing pipeline of market-rate housing is built out.

This estimate is based on the following assumptions:
• Approximately 800 market-rate units in the City’s development pipeline;
• Average assessed valuation ranging from $700,000 to $1,000,000 per unit, based on 2021 average sales prices for existing condominiums and single-family homes in East Palo Alto. These assumed prices underestimate the actual increase in value as average new home prices are expected to be well above existing home sales prices.

3. Capital Subsidy Resources Necessary for Nonprofits to Purchase Single-Family Homes
Substantial capital resources will be required for nonprofit housing corporations to purchase existing absentee-owned single-family homes and/or condos for the purposes of creating affordable rental or owner units. Under the OPA, nonprofits will be required to pay market rate prices. DRA calculated subsidy requirements using an “affordability gap” methodology which compares the amount households at various income levels can pay for housing and the estimated cost of purchasing absentee-owned single-family homes at market prices under the OPA.

3.1. DRA estimates the five-year capital subsidy required to purchase and subsidize absentee-owned single-family homes and condos to create affordable owner or renter housing as follows4
:
50% AMI 80% AMI 120% AMI
Owner $131 M $97 M $52 M
Renter $145 M $115 M $65 M
4 Assumes all units are converted to affordable owner or renter units at the target income level.

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These estimates are based on the following assumptions:
• An average of 28 absentee-owned single-family homes and 4 absentee-owned condos sold per year, equal to the average sales rate for absentee-owned single-family homes in the City between 2017 and 2021.
• DRA calculated per unit affordable home prices (as described in Section

2.1 above) and renter supportable mortgages by income level and unit bedroom count. DRA then calculated a weighted average affordable home price and renter supportable mortgage by income level using the distribution of absentee-owned homes by unit bedroom count shown above in Table 4. Detailed assumptions for the calculation of affordable single-family and condo home prices and supportable rental mortgages by income levels are shown in Appendix Tables A-1, A-2, A-3 and A-4. • The weighted average owner and renter per unit affordability gaps to purchase and “buy down” the affordability of these units by income level and tenure are shown in Table 5.
• An average market purchase price of $1,106,000 for single-family homes and $783,000 for condos based on the average sales prices for resale of existing units in East Palo Alto during 2021 from Property Radar.

Table 5
Weighted Average Per Unit Affordability Gaps by Income Level City of East Palo Alto
2021
Very Low
Income
50% AMI
Low Income
80% AMI
Moderate
Income
120%
SFD Owner $847,700 $633,500 $348,300
Condo Owner $613,000 $427,000 $178,000
Renter $905,700 $721,700 $411,700

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January 14, 2022

3.2. Traditional sources of funding for affordable housing may not be used to subsidize units purchased under the TOPA. This will materially limit the number of sales to nonprofit housing corporations.
• California has an unprecedented level of funding available to tackle the problem of homelessness and lack of affordable housing in the State. • The State Department of Housing and Community Development (HCD) has approximately $1.2 billion in funding remaining under Proposition 1, which authorized $4 billion in general obligation (GO) bonds for housing in 2018. This amount includes funding for the programs listed below, but excludes the Affordable Housing and Sustainable Communities program, which receives ongoing funding subject to Cap and Trade Auction Revenues. None of these funds may be used for OPA homes.

Multifamily Housing Program $394 M
Veterans Housing and Homelessness Prevention Program (VHHP) $129 M Infill Infrastructure Grants (IIG) $124 M
Serna Farmworker Housing Program $96 M
No Place Like Home $496 M
• The California State Budget includes more than $22 billion in funds for housing and homelessness over the next two years. Funding for FY 2021-2022 includes the following programs, which also may not be used to purchase TOPA homes:

Local Homelessness Programs $1.0 B
Dept. of Social Services Homelessness Programs $2.0 B
Rental Assistance (Payment of Overdue Rent) $5.2 B
HCD Pipeline Projects $1.75 B
Project HomeKey $1.45 B
Affordable Housing Preservation $500 M
Infill Infrastructure Grant $300 M
• The California Tax Credit Allocation Committee (CTCAC) awarded more than $511 M in 9% and 4% Low Income Housing Tax Credits to projects in California in 2020. LIHTC’s also are not available for OPA homes. • The purchase and subsidization of units by nonprofits under the OPA does not qualify for the any of the above funding sources and would

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require identification of new local government and/or foundation resources.

4. 1031 Exchanges
Under Section 1031 of the United States Internal Revenue Code, a taxpayer may defer recognition of capital gains and related federal income tax liability on the exchange of certain types of real property through a process known as a 1031 exchange.5

4.1 1031 Exchanges only apply to sale of an investment property and replacement purchase of another like-kind investment property of equal or greater value (e.g. sale of one rental property and purchase of another rental property).

4.2 1031 Exchange time limits are measured from when the property to be sold (“relinquished property”) closes. Therefore, sale of a property by an East Palo Alto resident under a 1031 Exchange will not be affected by OPA timelines unless they also are purchasing a replacement investment property in East Palo Alto.

4.3 For East Palo Alto residents selling one investment property and purchasing another investment property in East Palo Alto, the OPA timeline is adequate to complete a 1031 Exchange.
• Measured from when the relinquished property closes, the Exchangor has 45 days to nominate (identify) potential replacement properties and a total of 180 days (including the 45-day nominating period) to acquire the replacement property. The 97-day to 127-day time limits proposed for OPA fits within this 180-day time frame.
5 See https://www.law.cornell.edu/uscode/text/26/1031

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4.3 1031 Exchanges comprise a small percentage (less than 5%) of residential transactions nationally.
• According to a 2020 study by the National Association of Realtors, among residential NAR members, 1031 Exchanges comprised an average of less than 5% of sales transactions, with half of members reporting no such transactions.

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Appendix Tables

5.1.b
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Attachment: David Rosen & Associates EPA OPA Analysis (2077 : East Palo Alto Opportunity to Purchase Act) Table A-1
Affordable Home Sales Price Calculations, Owner Housing Single-Family Homes
City of East Palo Alto
2021
Assumptions
2021 HUD Median Household Income, San Mateo County $149,600 2021 HUD VLI Limit, Household Size of Four $91,350
2021 HUD Effective Median Income, HH Size of Four $182,700 Used in Calculations $182,700
Affordable Housing Expense As a % of Income 30%
No. of Bedrooms Studio 1 Bedroom 2 Bedroom 3 Bedroom
Household Size 1 Persons 2 Persons 3 Persons 4 Persons
Household Size Income Adjust. Factor 70% 80% 90% 100%
Owner-Paid Utility Allowance (1) $188 $208 $265 $324
Monthly HOA Fee/Maint. Cost $200
Monthly Property Insurance $100
Property Tax Rate (% of AV) 1.00%
Mortgage Interest Rate 5.50%
Term (Years) 30
Downpayment (% of Sales Price) 10.00%
Per Unit Affordable Sales Price by Unit Bedroom Count
Studio 1 Bedroom 2 Bedroom 3 Bedroom
50% AMI
Annual Income Limit $63,945 $73,080 $82,215 $91,350
Affordable Monthly Housing Expense $1,599 $1,827 $2,055 $2,284 Less: Monthly Utility Allowance ($188) ($208) ($265) ($324) Less: HOA/Maintenance Expense ($200) ($200) ($200) ($200) Less: Property Insurance ($100) ($100) ($100) ($100)
________ ________ ________ ________
Available for Principal, Interest, Taxes $1,111 $1,319 $1,490 $1,660 Less: Property Taxes 1.20% $217 $258 $292 $325
Supportable Mortgage Before Prop. Taxes $195,671 $232,305 $262,421 $292,362 Assumed Assessed Value at Sale 90.00% $217,413 $258,116 $291,579 $324,847 Available for Mortg. Principal and Interest $894 $1,061 $1,198 $1,335 Supportable Mortgage $157,380 $186,845 $211,068 $235,150 Plus: Downpayment @ 10.00% $17,490 $20,760 $23,450 $26,130 Affordable Sales Price (Rounded) $174,900 $207,600 $234,500 $261,300 80% AMI
Annual Gross Income $102,312 $116,928 $131,544 $146,160 Affordable Monthly Housing Expense $2,558 $2,923 $3,289 $3,654 Less: Monthly Utility Allowance ($188) ($208) ($265) ($324) Less: HOA/Maintenance Expense ($200) ($200) ($200) ($200) Less: Property Insurance ($100) ($100) ($100) ($100)
________ ________ ________ ________
Available for Principal, Interest, Taxes $2,070 $2,415 $2,724 $3,030 Less: Property Taxes 1.20% $405 $473 $533 $593
Supportable Mortgage Before Prop. Taxes $364,572 $425,334 $479,756 $533,649 Assumed Assessed Value at Sale 90.00% $405,080 $472,593 $533,062 $592,943 Available for Mortg. Principal and Interest $1,665 $1,942 $2,191 $2,437 Supportable Mortgage $293,229 $342,100 $385,872 $429,219 Plus: Downpayment @ 10.00% $32,580 $38,010 $42,870 $47,690 Affordable Sales Price (Rounded) $325,800 $380,100 $428,700 $476,900 120.0% of AMI
Annual Gross Income $153,468 $175,392 $197,316 $219,240 Affordable Monthly Housing Expense $3,837 $4,385 $4,933 $5,481 Less: Monthly Utility Allowance ($188) ($208) ($265) ($324) Less: HOA/Maintenance Expense ($200) ($200) ($200) ($200) Less: Property Insurance ($100) ($100) ($100) ($100)
________ ________ ________ ________
Available for Principal, Interest, Taxes $3,349 $3,877 $4,368 $4,857 Less: Property Taxes 1.20% $655 $759 $855 $950
Supportable Mortgage Before Prop. Taxes $589,832 $682,824 $769,300 $855,423 Assumed Assessed Value at Sale 90.00% $655,369 $758,693 $854,778 $950,470 Available for Mortg. Principal and Interest $2,694 $3,118 $3,513 $3,907 Supportable Mortgage $474,407 $549,202 $618,755 $688,025 Plus: Downpayment @ 10.00% $52,710 $61,020 $68,750 $76,450 Affordable Sales Price (Rounded) $527,100 $610,200 $687,500 $764,500 (1) For single-family detached units. Source: San Mateo County Housing Authority, effective 3/1/21 Source: DRA

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Attachment: David Rosen & Associates EPA OPA Analysis (2077 : East Palo Alto Opportunity to Purchase Act) Table A-2
Affordable Home Sales Price Calculations, Owner Housing Condominium Units
City of East Palo Alto
2021
Assumptions
2021 HUD Median Household Income, San Mateo County $149,600 2021 HUD VLI Limit, Household Size of Four $91,350
2021 HUD Effective Median Income, HH Size of Four $182,700 Used in Calculations $182,700
Affordable Housing Expense As a % of Income 30%
No. of Bedrooms Studio 1 Bedroom 2 Bedroom 3 Bedroom
Household Size 1 Persons 2 Persons 3 Persons 4 Persons
Household Size Income Adjust. Factor 70% 80% 90% 100%
Owner-Paid Utility Allowance (1) $155 $168 $212 $262
Monthly HOA Fee/Maint. Cost $600
Monthly Property Insurance $100
Property Tax Rate (% of AV) 1.00%
Mortgage Interest Rate 5.50%
Term (Years) 30
Downpayment (% of Sales Price) 10.00%
Per Unit Affordable Sales Price by Unit Bedroom Count
Studio 1 Bedroom 2 Bedroom 3 Bedroom
50% AMI
Annual Income Limit $63,945 $73,080 $82,215 $91,350
Affordable Monthly Housing Expense $1,599 $1,827 $2,055 $2,284 Less: Monthly Utility Allowance ($155) ($168) ($212) ($262) Less: HOA/Maintenance Expense ($600) ($600) ($600) ($600) Less: Property Insurance ($100) ($100) ($100) ($100)
________ ________ ________ ________
Available for Principal, Interest, Taxes $744 $959 $1,143 $1,322 Less: Property Taxes 1.20% $146 $188 $224 $259
Supportable Mortgage Before Prop. Taxes $131,035 $168,901 $201,307 $232,833 Assumed Assessed Value at Sale 90.00% $145,594 $187,668 $223,675 $258,703 Available for Mortg. Principal and Interest $598 $771 $919 $1,063 Supportable Mortgage $105,392 $135,848 $161,913 $187,270 Plus: Downpayment @ 10.00% $11,710 $15,090 $17,990 $20,810 Affordable Sales Price (Rounded) $117,100 $150,900 $179,900 $208,100 80% AMI
Annual Gross Income $102,312 $116,928 $131,544 $146,160 Affordable Monthly Housing Expense $2,558 $2,923 $3,289 $3,654 Less: Monthly Utility Allowance ($155) ($168) ($212) ($262) Less: HOA/Maintenance Expense ($600) ($600) ($600) ($600) Less: Property Insurance ($100) ($100) ($100) ($100)
________ ________ ________ ________
Available for Principal, Interest, Taxes $1,703 $2,055 $2,377 $2,692 Less: Property Taxes 1.20% $333 $402 $465 $527
Supportable Mortgage Before Prop. Taxes $299,935 $361,930 $418,641 $474,120 Assumed Assessed Value at Sale 90.00% $333,262 $402,145 $465,157 $526,800 Available for Mortg. Principal and Interest $1,370 $1,653 $1,912 $2,165 Supportable Mortgage $241,241 $291,104 $336,717 $381,339 Plus: Downpayment @ 10.00% $26,800 $32,340 $37,410 $42,370 Affordable Sales Price (Rounded) $268,000 $323,400 $374,100 $423,700 120.0% of AMI
Annual Gross Income $153,468 $175,392 $197,316 $219,240 Affordable Monthly Housing Expense $3,837 $4,385 $4,933 $5,481 Less: Monthly Utility Allowance ($155) ($168) ($212) ($262) Less: HOA/Maintenance Expense ($600) ($600) ($600) ($600) Less: Property Insurance ($100) ($100) ($100) ($100)
________ ________ ________ ________
Available for Principal, Interest, Taxes $2,982 $3,517 $4,021 $4,519 Less: Property Taxes 1.20% $584 $688 $787 $884
Supportable Mortgage Before Prop. Taxes $525,195 $619,420 $708,186 $795,894 Assumed Assessed Value at Sale 90.00% $583,550 $688,245 $786,873 $884,327 Available for Mortg. Principal and Interest $2,398 $2,829 $3,234 $3,635 Supportable Mortgage $422,419 $498,205 $569,600 $640,145 Plus: Downpayment @ 10.00% $46,940 $55,360 $63,290 $71,130 Affordable Sales Price (Rounded) $469,400 $553,600 $632,900 $711,300 (1) For single-family detached units. Source: San Mateo County Housing Authority, effective 3/1/21 Source: DRA

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Attachment: David Rosen & Associates EPA OPA Analysis (2077 : East Palo Alto Opportunity to Purchase Act) Table A-3
Affordable Rents and Supportable Mortgage By Income Level City of East Palo Alto
2021
Assumptions
2021 HUD Median Household Income, San Mateo County $149,600 2021 HUD VLI Limit, Household Size of Four $91,350
2021 HUD Effective Median Income, HH Size of Four $182,700 Used in Calculations $182,700
Affordable Housing Expense As a % of Income 30%
No. of Bedrooms Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom 5 Bedroom Household Size 1.0 Persons 1.5 Persons 3.0 Persons 4.5 Persons 6.0 Persons 7.5 Persons Household Size Income Adjust. Factor 70% 75% 90% 104% 116% 128% Tenant-Paid Utility Allowance, San Mateo Co. Hsg. Author. (1) Condos/Apts. $92 $110 $148 $186 $224 $264
Annual Operating/Maintenance Expenses Per Unit $8,000
Vacancy Rate 5.00%
Mortgage Interest Rate 6.50%
Mortgage Amortization (Years) 30
Debt Coverage Ratio 1.15
Per Unit Supportable Mortgage Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom 4 Bedroom 50% of Median
Annual Income Limit $63,945 $68,513 $82,215 $95,004 $105,966 $116,928 Affordable Monthly Housing Expense $1,599 $1,713 $2,055 $2,375 $2,649 $2,923 Less: Monthly Utility Allowance ($59) ($70) ($95) ($124) ($151) ($184) _________ _________ _________ _________ _________ _________ Affordable Monthly Rent $1,540 $1,643 $1,960 $2,251 $2,498 $2,739 Annual Gross Rental Income Per Unit $18,480 $19,716 $23,520 $27,012 $29,976 $32,868 Less: Vacancy (Underwriting) ($924) ($986) ($1,176) ($1,351) ($1,499) ($1,643) Annual Operating/Maintenance Expenses Per Unit ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) _________ _________ _________ _________ _________ _________ Net Operating Income Per Unit $9,556 $10,730 $14,344 $17,661 $20,477 $23,225 Available for Debt Service $8,310 $9,331 $12,473 $15,358 $17,806 $20,195 Supportable Mortgage Per Unit $109,600 $123,000 $164,400 $202,500 $234,800 $266,300

80.0% of AMI
Annual Income Limit $102,312 $109,620 $131,544 $152,006 $169,546 $187,085 Affordable Monthly Housing Expense $2,558 $2,741 $3,289 $3,800 $4,239 $4,677 Less: Monthly Utility Allowance ($59) ($70) ($95) ($124) ($151) ($184) _________ _________ _________ _________ _________ _________ Affordable Monthly Rent $2,499 $2,671 $3,194 $3,676 $4,088 $4,493 Annual Gross Rental Income Per Unit $29,988 $32,052 $38,328 $44,112 $49,056 $53,916 Less: Vacancy (Underwriting) ($1,499) ($1,603) ($1,916) ($2,206) ($2,453) ($2,696) Annual Operating/Maintenance Expenses Per Unit ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) _________ _________ _________ _________ _________ _________ Net Operating Income Per Unit $20,489 $22,449 $28,412 $33,906 $38,603 $43,220 Available for Debt Service $17,816 $19,521 $24,706 $29,484 $33,568 $37,583 Supportable Mortgage Per Unit $234,900 $257,400 $325,700 $388,700 $442,600 $495,500 120% of Median
Annual Income Limit $153,468 $164,430 $197,316 $228,010 $254,318 $280,627 Affordable Monthly Housing Expense $3,837 $4,111 $4,933 $5,700 $6,358 $7,016 Less: Monthly Utility Allowance ($92) ($110) ($148) ($186) ($224) ($264) _________ _________ _________ _________ _________ _________ Affordable Monthly Rent $3,745 $4,001 $4,785 $5,514 $6,134 $6,752 Annual Gross Rental Income Per Unit $44,940 $48,012 $57,420 $66,168 $73,608 $81,024 Plus: Miscellaneous Income ($187) ($200) ($239) ($276) ($307) ($338) Less: Management Fee/Expense ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) Annual Operating/Maintenance Expenses Per Unit ($1,499) ($1,603) ($1,916) ($2,206) ($2,453) ($2,696) _________ _________ _________ _________ _________ _________ Net Operating Income Per Unit $38,998 $42,210 $52,049 $61,201 $68,983 $76,743 Available for Debt Service $33,912 $36,705 $45,260 $53,218 $59,985 $66,733 Supportable Mortgage Per Unit $447,100 $483,900 $596,700 $701,600 $790,900 $879,800 (1) For condos and apartment units. Source: San Mateo County Housing Authority, effective 3/1/21 Source: DRA

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Attachment: David Rosen & Associates EPA OPA Analysis (2077 : East Palo Alto Opportunity to Purchase Act) Table A-4
Utility Allowances
San Mateo County
East Palo Alto ADU Analysis
2021
No. of Bedrooms Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom Apartment/Condo/Duplex
Heating
Natural Gas $17 $21 $24 $26 $29
Electric $16 $19 $24 $29 $34
Cooking
Natural Gas $4 $4 $6 $8 $10
Electric $7 $8 $11 $15 $18
Water Heating
Natural Gas $8 $9 $13 $18 $22
Electric $15 $18 $23 $28 $33
Other Electric $21 $25 $37 $52 $66
Water $69 $71 $90 $111 $133
Trash $27$0 $27$0 $27$0 $27$0 $27$0
_____ _____ _____ _____ _____
Total--All Electric $59 $70 $95 $124 $151
Total--Natural Gas (& Other Electric) $50 $59 $80 $104 $127 Assumed Tenant-Paid Utilities (1) $59 $70 $95 $124 $151 Assumed Owner-Paid Utilities (2) $155 $168 $212 $262 $311 Single-Family Detached
Heating
Natural Gas $25 $30 $34 $38 $42
Electric $34 $40 $47 $54 $61
Cooking
Natural Gas $4 $4 $6 $8 $10
Electric $7 $8 $11 $15 $18
Water Heating
Natural Gas $10 $12 $17 $22 $27
Electric $19 $22 $29 $35 $42
Other Electric $32 $40 $61 $82 $103
Water $69 $71 $90 $111 $133
Trash $27 $27 $27 $27 $27
_____ _____ _____ _____ _____
Total--All Electric $92 $110 $148 $186 $224
Total--Natural Gas (& Other Electric) $71 $86 $118 $150 $182 Assumed Tenant-Paid Utilities (1) $92 $110 $148 $186 $224 Assumed Owner-Paid Utilities (2) $188 $208 $265 $324 $384 (1) Assumes tenant pays electrict heating, cooking and water heating, and other electric. (2) Assumes owners pay electric heating, cooking, water heating, other electric, water, sewer and trash.

Source: Housing Authority of the County of San Mateo, effective 3/01/2021

5.1.b
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Attachment: David Rosen & Associates EPA OPA Analysis (2077 : East Palo Alto Opportunity to Purchase Act) Proposed Language for Administrative Guidelines – Certification of Qualified Nonprofits
Pursuant to Chapter 14.26.050 of the East Palo Alto Municipal Code, the City Council shall certify and recertify Qualified Nonprofits via an application process as set forth in the Administrative Guidelines.

This application process for Qualified Nonprofits shall, at a minimum, require nonprofit organizations to meet the following threshold eligibility criteria by demonstrating the following:
a. The organization is exempt from federal income tax under 26 USC Section 501(c)(3), or a California cooperative corporation; b. The organization has capacity to acquire, provide and manage affordable housing for extremely low, very low, and low income households; c. The organization has a commitment to the provision of affordable housing for extremely low, very low, low, and moderate income residents, and to preventing the displacement of such residents;
d. The organization has a commitment to community engagement and experience working in East Palo Alto directly or with East Palo Alto-based organizations;
e. The organization has at least five (5) years of experience acquiring and developing affordable residential properties, or is partnering with another organization to acquire and develop, affordable residential properties.

5.1.c
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Attachment: Qualified Nonprofit Criteria for Administrative Guidelines (2077 : East Palo Alto Opportunity to Purchase Act)