CITY OF EAST PALO ALTO
OFFICE OF THE CITY MANAGER
2415 UNIVERSITY AVENUE
EAST PALO ALTO, CA 94303
Policy & Action
Item: #14D
City Council Agenda Report
Date: February 5, 2019
To: Honorable Mayor and Members of the City Council
Via: Sean Charpentier, Interim City Manager
From: Hanson Hom, Interim Community Development Director Victor Ramirez, Rent Stabilization Program Administrator Patrick Heisinger, Housing Projects Manager
Subject: Award a Contract in the Amount of $125,000 to EPACANDO and the Bay Area Affordable Homeownership Alliance to Administer the City’s Below Market Rate (BMR) Program
Recommendation
Adopt a resolution authorizing the City Manager to enter into a three-year contract with the joint partnership of EPACANDO and the Bay Area Affordable Homeownership Alliance (BAAHA), in a form to be approved by the City Attorney, in an amount not to exceed $125,000 to administer the City’s Below Market Rate (BMR) Program.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority #3: Increase Organizational Effectiveness and Efficiency Priority #5: Improve Communication and Enhance Community Engagement Affordable Housing Strategy
Background
The City’s current stock of Below Market Rate (BMR) homeownership units consists of approximately 105 homes that were created either as a result of former Redevelopment Agency assistance or market rate developer obligations to create inclusionary units. These homeownership units typically have a resale restriction agreement between the City (as the successor to the former Redevelopment Agency) and the homeowner. The resale restriction agreement regulates the price at which the homeowner may resell the property and gives the City an option to purchase the home if the homeowner wishes to sell.
Effective management and stewardship of the BMR Program portfolio requires several levels of oversight, including monitoring and enforcement of complex compliance requirements, facilitation of refinancing activities, and numerous customary real estate transactions (resales, refinances, subordinations, loan payoffs, etc.). In some instances, the City holds multiple promissory notes and deeds of trust because the City provided down payment assistance loans, closing cost loans, and purchase price assistance loans. The homeowner’s specific obligations will depend upon the form of Resale Agreement that the former Redevelopment Agency used with each project.
Since 2011, when the City eliminated several positions that supported the City’s affordable housing programs, the units in the BMR Program have not been monitored in a comprehensive fashion. When owners of the inclusionary homes need assistance with a refinance, loan subordination, or to sell their unit to an income eligible purchaser, the City’s ability to facilitate the transaction is limited. The City’s participation is often exceedingly inefficient due to staffing constraints and the use of outside legal counsel.
The Affordable Housing Strategy, approved by City Council on October 16, 2018, described the City’s goal of “Add(ing) Capacity for Stewardship and Monitoring of the City’s Affordable Housing Assets.” The approved actions included the implementation of a Request for Proposals (RFP) process to identify a partner entity to administer (in a consultant role) all aspects of the existing BMR Program. This partner would become the BMR Program Administrator (Consultant).
On October 22, 2018, the City issued the RFP and received responses from two qualified entities. Please see Attachment 2 for a copy of the RFP.
The two firms that responded to the City’s RFP and submitted proposals were: 1) Hello Housing and 2) a joint proposal from EPACANDO and the Bay Area Affordable Homeownership Alliance (BAAHA). Please see Attachment 3.
Analysis
Both proposals were of high quality, and either entity could likely perform adequately in the role. However, based on the City’s current specific needs, Staff recommends that the City award the Consultant role to the partnership of EPACANDO/BAAHA. The primary reasons for this recommendation fall into the categories of Scoring, Cost/Compensation, and Staffing/Start-Up Readiness.
Scoring
The RFP featured very simple scoring criteria. Respondents could receive up to 50 points for experience and 50 points for demonstrating their capacity to perform. The Table below has the ranking based on the review of the proposals by City Staff.
Proposal Hello Housing EPACANDO/BAAHA
Points for Experience 45 40
Points for Capacity to Perform 40 47
Total 85 87
Cost/Compensation
The proposal from Hello Housing included a compensation schedule that greatly exceeded the compensation schedule in the EPA CAN DO/BAAHA proposal. The chart below outlines how each proposal compares based on cost and the level of work that the City described in the original RFP:
Item Hello
Housing
EPACANDO/
BAAHA
%
Difference
Contract Set-Up $15,000 $10,000 50%
Annual Compliance Fee Per File $200 $180 11%
Monthly Fee to Cover Inquiries $1,000 NA NA
Thorough Review of Each BMR File $450 Set up NA
Fee per Resale (With Waitlist) $8,500 $1,500 467%
Fee per Resale (No Waitlist) $5,000 $1,500 233%
Marketing per Project on Website $3,000 NA NA
Per Lottery Fee $5,000 NA NA
Per Refinance Fee $850 $500 70%
Payoffs $625 $500 25%
Enforcement Activities (Estimate per Case) $2,750 $550 400% Cost Per Workshop $1,000 $150 567%
Per Hour Fees $125 - $275 $55 - $110 127-150%
There are three categories of costs: start up costs, annual fixed costs, and annual variable costs based on tasks.
The proposals also detailed the anticipated costs of a “start-up” phase and the expected costs to the City in the first year of the contract, as follows:
Item Est.
Amount
Hello
Housing
EPACANDO/
BAAHA
Contract Set Up NA $15,000 $10,000
Annual Fee to Cover Inquires ($1,000/month) NA $12,000 NA Annual Per Unit Compliance (assumes 98
units) 98 $19,600 $17,640
Number of Refinances Per Year 6 $5,100 $3,000
Number of Resale’s Per Year 3 $15,000 $4,500
Number of Loan Payoff’s Per Year 4 $2,500 $2,000
Enforcement Cases Per Year 4 $11,000 $2,200
Estimated Cost to Administer Program Year 1 $80,200 $39,340 The total proposed three-year contract amount of $125,000 reflects the proposed expected costs outlined by EPACANDO/BAAHA for Year 1, with a multiplier of three. The proposed total is intended to allow enough funding to account for reasonable costs that may not be fully anticipated at this time, but will be approved by Staff prior to any payment. The actual cost per year will vary depending on tasks required.
Staffing/Start-Up Readiness
The EPACANDO/BAAHA proposal featured a clear understanding of specific strategies, tools, and capacity building that would be extremely useful to the City. As such, the EPACANDO/BAAHA proposal scored very well (47 points awarded) in the “Capacity to Perform” section.
EPACANDO/BAAHA propose to hire a full-time employee that would be housed at EPACANDO’s offices in East Palo Alto. Once established, this key contact would provide a great benefit to community members seeking information and access to BMR Program services.
The EPACANDO/BAAHA proposal also stressed the importance of researching each BMR unit to determine which units had a City deed restriction recorded against the property.
Further, this proposal outlined how the Consultant would create electronic files and a separate database for the City to track BMR Program files moving forward. Finally, this proposal included the development of key policy documents such as Program Guidelines.
By contrast, the proposal submitted by Hello Housing provided a focused perspective on administering a BMR Program after initial systems have been established. Due to the City’s current needs for start-up activities, capacity-building, and development of comprehensive records, staff recommends that the City select the proposal submitted by EPACANDO/BAAHA.
Proposed Scope of Work and Contract Terms
Please see Attachment 1, Exhibit A-1, Proposed Scope of Work for BMR Program Administration Consultant Services, which includes the full Scope of Work and Contract Terms. A review of basic deal terms is described below:
Term: Three years from date when the contract is fully executed by all parties.
Extension of Term: The City Manager shall have the option to extend the term of the agreement for two additional periods(s) of one year each commencing upon the expiration of the initial or extended term.
However, additional budget authority in excess of the $125,000 will require City Council approval.
Contract Amount: Not to exceed $125,000, including a 15% contingency.
Reporting Requirements: Submit quarterly reports that describe and summarize activities occurring each period, including the number of inquiries, refinance and resale actions, and other relevant information.
By assuming the role of BMR Program Consultant, EPACANDO/BAAHA will manage the many activities required to ensure effective stewardship of the units in the BMR Program.
Therefore, they will be compensated through the City contract for establishing and maintaining a robust program, conducting annual monitoring and reporting, acting as the main point of contact, and dealing with public inquiries. In addition, it is customary for BMR Program Administration to establish nominal processing fees for transactions related to purchase and/or sale of BMR Program units. These transaction fees would be charged to buyers, sellers, and owners, as appropriate, for services provided by EPACANDO/BAAHA.
Fiscal Impact
Staff is proposing that the agreement with EPACANDO/BAAHA ultimately will be funded with Housing TOT (F207) and Successor Agency funds (F926, F927, and F928). The initial split between the funds will be 25/75, respectively. In future years, the allocation between Housing TOT and Housing Successor Funds will be based upon verification of the location of current, remaining BMR units.
Staff will be conducting an analysis as part of the annual Budget process to determine a longterm funding strategy for all housing activities and will return to the City Council with future recommendations.
Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at 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 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. Resolution and
• EXHIBIT A-1 Proposed Scope of Work for BMR Program Administration Consultant Services
• EXHIBIT A-2 Compensation Schedule for BMR Program Administration Consultant Services
2. Request for Proposal for Administration of the City’s Existing Below Market Rate Program
3. Proposal Submitted by EPACANDO and BAAHA
RESOLUTION NO. ____
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO
AUTHORIZING THE CITY MANAGER TO ENTER INTO A CONTRACT WITH
EPACANDO AND BAY AREA AFFORDABLE HOMEOWNER ALLIANCE FOR THE ADMINISTRATION OF THE CITY’S BELOW MARKET RATE PROGRAM FOR A TOTAL CONTRACT NOT TO EXCEED $125,000
WHEREAS, the City of East Palo Alto (City) has generated affordable units through its Below Market Rate (BMR) Program, wherein BMR for-sale units are typically made available to eligible households; and
WHEREAS, the City is responsible for management and stewardship of the BMR Program; and
WHEREAS, the Affordable Housing Strategy, approved by City Council on October 16, 2018, described the City’s goal of “Add(ing) Capacity for Stewardship and Monitoring of the City’s Affordable Housing Assets,” including the implementation of a Request for Proposals (RFP) process to identify a partner entity to administer (in a consultant role) all aspects of the existing BMR Program; and
WHEREAS, the City of East Palo Alto issued an RFP on October 22, 2018 to identify a consultant to administer the City’s BMR Program activities; and WHEREAS, the City received two proposals in response to the RFP for BMR Program administration services; and
WHEREAS, City staff reviewed and recommended for selection the proposal submitted by EPACANDO and the Bay Area Affordable Homeownership Alliance (BAAHA).
NOW, THEREFORE BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY authorizes the City Manager to execute a threeyear contract in an amount not to exceed $125,000 with EPACANDO/BAAHA, in a form to be approved by the City Attorney, to administer the City’s BMR Program in accordance with the terms referenced in Exhibit A-1 Proposed Scope of Work for BMR Program Administration Consultant Services and Exhibit A-2 Compensation Schedule for BMR Program Administration Consultant Services attached hereto. [SIGNATURES FOLLOW ON NEXT PAGE]
ATTACHMENT 1
PASSED AND ADOPTED this 5th day of February 2019, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
SIGNED:
Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:
María Buell, City Clerk Rafael E. Alvarado Jr., City Attorney EXHIBIT A-1
Proposed Scope of Work for BMR Program Administration Consultant Services Activity Description Completion
Date
Acting as the Main Point of
Contact for the City’s Below
Market Rate Programs
CONTRACTOR shall have direct personal
contact with East Palo Alto homeowners (and
renters)—in our local offices, or in public venues
in workshop format, or in their homes—to
provide a range of housing-related information
and counseling services. CONTRACTOR will
also establish a webpage that will provide
detailed information to the public.
On-Going
One-Time Set-Up
Title Research
CONTRACTOR will pull a property profile to
check Owner of Record, Liens, DOTs, judgments
and compare to most recent City documents.
June 30,
2019
Auditing and Updating
Case Files
CONTRACTOR will: review and index all
documents, enter all relevant data for each file
(and images of all key documents) into
HomeKeeper database system, and initiate
actions to find and scan any missing documents.
June 30,
2019
Program Handbook
Creation
CONTRACTOR shall create a handbook that
includes a responsibility matrix, workflow, and
step by step procedures and processing steps for
all aspects of the program.
June 30,
2019
Notification to Program
Participants
CONTRACTOR shall send a mailer to notify
owners of existing BMR units that the City is
now contracting with CONTRACTOR and that
the CONTRACTOR shall be the mail point of
contact for all inquiries.
June 30,
2019
Annual Compliance Monitoring
Monitoring of Existing
Portfolio
CONTRACTOR shall verify occupancy and any
other compliance requirements, by requesting
information via telephone and mail and, if
necessary, home visits.
Annually
Enforcement Activities
CONTRACTOR will facilitate all enforcement
activities that may arise from the annual
monitoring process.
When
Necessary
Refinances
CONTRACTOR will answer questions regarding
acceptable fist loan products for a refinance,
required documentation needed and time line
expectations for lenders and owners.
CONTRACTOR will coordinate with Title
Companies and lenders and will prepare escrow
instructions, subordination agreements, and
request for notice of defaults and route to the City
for signatures.
When
Necessary
Activity Description Completion
Date
New Sales and Resales
Processing New Sales and
Resales
CONTRACTOR shall establish a waiting list (or
other comparable mechanism acceptable to the
City) that will serve as the pipeline for potential
buyers when BMR units are resold, as well as a
pre-qualified list of lenders. CONTRACTOR
shall create a resale application, coordinate with
listing and buyer agents to explain program
guidelines that a qualified buyer will have to meet,
and that the program is being properly disclosed.
CONTRACTOR shall pre-screen applications.
CONTRACTOR shall prepare all documents
including notes, deed restrictions, and escrow
instructions and track files through all states of the
escrow process.
When
Necessary
Property Inspection and
Evaluation
CONTRACTOR shall coordinate property
inspection and price evaluation and then advise
interested parties on what the maximum
affordable price for the home is.
When
Necessary
Management of BMR
Sales
CONTRACTOR shall coordinate with owners or
listing agents to explain program guidelines,
responsibility matrix, and timeline. Answer
questions from the public and pre-screen
applications and forward completed applications
to the City for approval.
When
Necessary
Post Purchase Activities
CONTRACTOR shall send a survey to new
owners of BMR units regarding the satisfaction of
the participant on their experience from
application through close of escrow.
When
Necessary
EXHIBIT A-2
Compensation Schedule for BMR Program Administration Consultant Services Item CONTRACTOR
FEE
Estimated
Annual
Volume
Estimated 3-
Year Cost
Contract Set-Up $10,000 NA $10,000
Annual Compliance Fee Per File $180 100 $54.000
Inquiries NA*
Thorough Review of Each BMR File NA**
Fee per Resale (Program-driven) $1,500 3 $13,500
Fee per Resale (Buyer-driven) $3,000 1 $9,000
Marketing per Project on Website NA
Per Lottery Fee NA
Per Refinance Fee $500 4 $6,000
Payoffs $500 1 $1,200
Enforcement Activities (Estimate per Case)*** $550 2 $1,100 Cost Per Workshop $300 2 $1,800
Per Hour Fees $55 - $110 48 $12,096
Contingency (15%) $16,304
Estimated Three-year Total $125,000
*Inquiries are covered by monthly fee
**File review is included in “Contract Set Up”
***Excluding fees for specialist services such as attorney or eviction service RESOLUTION NO. 5080
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO
AUTHORIZING THE CITY MANAGER TO ENTER INTO A CONTRACT
WITH EPACANDO AND BAY AREA AFFORDABLE HOMEOWNER
ALLIANCE FOR THE ADMINISTRATION OF THE CITY'S BELOW MARKET RATE PROGRAM FOR A TOTAL CONTRACT NOT TO EXCEED $125,000 WHEREAS, the City of East Palo Alto (City) has generated affordable units through its Below Market Rate (BMR) Program, wherein BMR for-sale units are typically made available to eligible households; and
WHEREAS, the City is responsible for management and stewardship of the BMR Program; and
WHEREAS, the Affordable Housing Strategy, approved by City Council on October 16,2018, described the City's goal of "Add(ing) Capacity for Stewardship and Monitoring of the City's Affordable Housing Assets," including the implementation ofa Request for Proposals (RFP) process to identify a partner entity to administer (in a consultant role) all aspects of the existing BMR Program; and WHEREAS, the City of East Palo Alto issued an RFP on October 22,2018 to identify a consultant to administer the City's BMR Program activities; and WHEREAS, the City received two proposals in response to the RFP for BMR Program administration services; and
WHEREAS, City staff reviewed and'recommended for selection the proposal submitted by EP ACANDO and the Bay Area Affordable Homeownership Alliance (BAAHA).
NOW, THEREFORE BE IT RESOLVED THAT THE CITY COUNCIL OF
THE CITY OF EAST PALO ALTO HEREBY authorizes the City Manager to execute a three-year contract in an amount not to exceed $125,000 with EPACANDO/BAAHA, in a form to be approved by the City Attorney, to administer the City's BMR Program in accordance with the terms referenced in Exhibit A-I Proposed Scope of Work for BMR Program Administration Consultant Services and Exhibit A-2 Compensation Schedule for BMR Program Administration Consultant Services attached hereto. [SIGNATURES FOLLOW ON NEXT PAGE]
PASSED AND ADOPTED this 5th day of February 2019, by the following vote:
AYES: MOODY, WALLACE-JONES, ABRICA, GAUTHIER, ROMERO
NOES: NONE
ABSENT: NONE
ABSTAIN: NONE
:J.~ J'C2
i a Gauth· ,Mayor
EXHIBIT A-l
Proposed Scope of Work for BMR Program Administration Consultant Services Activity Description Completion
Date
CONTRACTOR shall have direct personal contact
with East Palo Alto homeowners (and renters )-in
Acting as the Main Point of our local offices, or in public venues in workshop Contact for the City's Below format, or in their homes-to provide a range of On-Going Market Rate Programs housing-related information and counseling services. CONTRACTOR will also establish a
webpage that will provide detailed information to
the public.
CONTRACTOR will pull a property profile to June 30, Title Research check Owner of Record, Liens, DOTs,judgments 2019 and compare to most recent City documents.
CONTRACTOR will: review and index all
Auditing and Updating documents, enter all relevant data for each file June 30, ~ (and images of all key documents) into 2019 ~ Case Files 1 HomeKeeper database system, and initiate actions ~,
00. to find and scan any missing documents. ~ CONTRACTOR shall create a handbook that .§ ~ Program Handbook includes a responsibility matrix, workflow, and June 30, ~ Creation step by step procedures and processing steps for 2019 1:1 0 all aspects ofthe program.
CONTRACTOR shall send a mailer to notify
Notification to Program owners of existing BMR units that the City is now June 30, Participants contracting with CONTRACTOR and that the 2019 CONTRACTOR shall be the mail point of contact , '. for all inquiries.
CONTRACTOR shall verify occupancy and any
Monitoring of Existing other compliance requirements, by requesting AnriUally bJl Portfolio information via telephone and mail and, if .9 J.. necessary, home visits. c:> ... CONTRACTOR will facilitate all enforcement .... 1:1 When c:> Enforcement Activities activities that may arise from the annual ~ Necessary ~ monitoring process. ~ CONTRACTOR will answer questions regarding ~ = acceptable fist loan products for a refinance, ~
a required documentation needed and time line
c:>
U expectations for lenders and owners. When -~ Refinances CONTRACTOR will coordinate with Title := Necessary 1:1 Companies and lenders and will prepare escrow ~ instructions, subordination agreements, and
request for notice of defaults and route to the City
for signatures.
Activity Description Completion
Date
CONTRACTOR shall establish a waiting list (or
other comparable mechanism acceptable to the
City) that will serve as the pipeline for potential
buyers when BMR units are resold, as well as a
pre-qualified list of lenders. CONTRACTOR
shall create a resale application, coordinate with
Processing New Sales and listing and buyer agents to explain program When Resales guidelines that a qualified buyer will have to meet, Necessary and that the program is being properly disclosed.
rJ'.l
CONTRACTOR shall pre-screen applications.
.; CONTRACTOR shall prepare all documents rJ'.l including notes, deed restrictions, and escrow ~ instructions and track files through all states of the "CI
==
escrow process. «
rJ'.l CONTRACTOR shall coordinate property ~
-« Property Inspection and inspection and price evaluation and then advise When
00. Evaluation interested parties on what the maximum Necessary ~ Z affordable price for the home is.
CONTRACTOR shall coordinate with owners or
listing agents to explain program guidelines,
Management of BMR responsibility matrix, and timeline. Answer When Sales questions from the public and pre-screen Necessary applications and forward completed applications
to the City for approval.
CONTRACTOR shall send a survey to new
Post Purchase Activities owners of BMR units regarding the satisfaction of When the participant on their experience from Necessary
application through close of escrow.
EXHIBIT A-2
Compensation Schedule for BMR Program Administration Consultant Services CONTRACTOR Estimated Estimated 3-
Item FEE Annual Year Cost
Volume
Contract Set-Up $10,000 NA $10,000
Annual Compliance Fee Per File $180 100 $54.000
Inquiries NA*
Thorough Review of Each BMR File NA**
Fee per Resale (Program-driven) $1,500 3 $13,500
Fee per Resale (Buyer-driven) $3,000 1 $9,000
Marketing per Project on Website NA
Per Lottery Fee NA
Per Refinance Fee $500 4 $6,000
Payoffs $500 1 $1,200
Enforcement Activities (Estimate per Case)*** $550 2 $1,100 Cost Per Workshop $300 2 $1,800
Per Hour Fees $55 - $110 48 $12,096
Contingency (15%) $16,304
Estimated Three-year Total $125,000
*Inquiries are covered by monthly fee
**File review is included in "Contract Set Up"
***Excluding fees for specialist services such as attorney or eviction service