DATE: November 18, 2024
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
Marlene Subhashini, Assistant City Manager
FROM: Sofia Mangalam, Community Development Director
Nori Jabba, Housing Coordinator
DEPARTMENT: Community Development
SUBJECT: CONTRACT AMENDMENTS TO AGREEMENTS WITH HIP
HOUSING AFFORDABLE VENTURES (HHAV) FOR PROPERTY
MANAGEMENT SERVICES FOR CITY-OWNED RENTAL
HOUSING
RECOMMENDATION
It is recommended that the City Council approve resolutions:
1. Approving Contract Amendment No. 1 to the Agreement with HIP Housing Affordable Ventures (HHAV) for Property Management Services for Workforce Housing in an amount not to exceed $60,040 to increase the agreement total from $36,960 to $97,000 and other revisions; and authorizing the Mayor to execute the amendment; and
2. Approving Contract Amendment No. 2 to the Agreement with HHAV for Property Management Services for the Existing Unit Purchase Program Units (EUPP) for a deduction of $109,600 to lower the contract maximum from $167,600 to $58,000 and other revisions; and authorizing the Mayor to execute the amendment.
EXECUTIVE SUMMARY
The City of Foster City owns 28 units of Below Market Rate (BMR) housing, including:
1. Six (6) units in four (4) properties located at 631/633 Comet Drive; 833/835 Comet
Drive (two duplexes), 833 Gull Avenue (single-family home), and 398 Chesapeake Avenue (single-family home). These units are commonly referred to as the Existing Unit Purchase Program (EUPP units).
2. 22 units at 501 Pilgrim Drive, commonly referred to as Workforce Housing.
HHAV provides property management services for both City-owned rental properties via two (2) separate agreements, one (1) for EUPP properties and one (1) for Workforce Housing. Staff has reviewed both contracts and seeks Council approval of amendments to the contracts to make the terms consistent, update the contract contacts, account for additional HHAV fees and payments for repairs and maintenance per the annual operating budget for each property, and update tasks, preferences, fees, and leasing guidelines in the scope of work, fee schedules, and leasing guidelines (Attachment #1, and Attachment #2).
BACKGROUND/ANALYSIS
EUPP Units
The City purchased the six (6) EUPP units over time: 631/633 Comet Drive and 833 Gull Avenue in 1997, 833/835 Comet Drive in 2008, and 398 Chesapeake Avenue in 2009.
The units are deed-restricted until 2066 to those with very low, low, or moderate incomes. Since they were purchased, they have served very low- and low-income families, and there has been very little turnover in the units over the years.
Workforce Housing
The 22-unit Workforce Housing property contains five (5) moderate-income two- bedroom units, five (5) low-income units, four (4) very low-income units, and eight (8) workforce units, one (1) of which is for the on-site property manager. The eight (8) units are rented at low-income rates, and one (1) unit is occupied by an on-site property manager who is an HHAV employee (State law requires an on-site property management employee for apartment developments of 16 or more units).
1. Contract Amendment No. 1 to the Agreement with HHAV for Property Management Services for Workforce Housing (See Attachment # 1) The agreement with HHAV for property management services was approved by the City Council on November 1, 2021 (City Resolution No. 2021- 159) and included services for set-up, initial lease-ups, move-ins, compliance, annual recertification and reporting, and property management. The agreement included a fee schedule consisting of $100 for setup fees and $500 initial lease-up fees ($13,200), and $23,760 for compliance and property management, a contract maximum of $36,960 (Attachment #3 for 2021 Contract for Workforce Housing).
On March 7, 2022, HHAV and staff presented a proposed budget and projected cash flow for Workforce Housing. The City Council adopted City Resolution No. 2022-22 authorizing the Finance Director to make the corresponding budget appropriations in the Workforce Housing Fund 139. Subsequently, on April 18, 2022, the City Council, via City Resolution No. 2022-42, approved an amendment to the revenue and expenditure budget for the remainder of FY 21-22. Budgets for FY 22-23, 23-24, and 24-25 were subsequently approved. However, a corresponding amendment to the agreement with HHAV was not executed.
Now that the property is fully operational and has been occupied for one year, the contract also needs to be amended to reflect the current and anticipated invoices billed by HHAV for annual property management fees, repairs, and maintenance, as well as to cover emergency repairs or other expenses. The proposed amendment also updates the scope of work to include additional work that HHAV performs to ensure the smooth operation of the buildings.
Table 1: Estimated Maximum Expenditures per the Updated Scope of Work Description Estimated Maximum
Repairs and Maintenance $35,000
Lease-Up Fees $2,000
Property Management Fees $50,000
Miscellaneous, Project Management, and Other
Expenses
$10,000
Total $97,000 per fiscal year
Staff recommends the following updates to the contract in Amendment No. 1 to the Property Management Agreement Services for Workforce Housing (Attachment # 1):
1. Contract Maximum and Fees: Increase the contract amount by $60,040 to a total for the Agreement of $97,000 per fiscal year for HHAV fees and property operations.
2. Term: Change the contract term from no termination date to a term of two (2) years with an option for renewal. Staff recommends this change because the current best practices include having a specific contract termination date to help ensure competitive pricing and services.
3. Notices: Update the contacts in the Notice section of the Agreement to reflect staff changes at HHAV and the City of Foster City.
4. Exhibits:
Exhibit A, Scope of Work: Clarify the services provided and create consistency for all City-owned BMR rental units.
Exhibit B, Consultant Fees: Reflect current rates, include all types of work billed, and provide for future rate increases.
Exhibit C, Insurance: no changes
Exhibit D, Lease Guidelines: add this Exhibit to be consistent with the EUPP Housing Agreement.
2. Contract Amendment No. 2 to the Agreement with HHAV for Property Management Services for EUPP Units
(Attachment #2)
The Agreement with HHAV for property management services for six (6) EUPP units was approved on February 24, 2021, and Contract Amendment No. 1 was approved by the City Council on March 18, 2024 (Attachments #5 and #6). It should be noted that HHAV has provided property management services for these units since its acquisition (1997, 2008, and 2009), and the Agreement was revised in 2021 to comply with the City’s current standard Agreement.
The Agreement and Contract Amendment No. 1 include monthly fees for property management services, emergency repairs, and project management services for projects over $10,000, such as a rehabilitation project. On March 18, 2024, Contract Amendment No.1 increased the contract maximum from $45,000 to $167,660 to cover emergency repair work for 833 and 835 Comet Drive. Now, the majority of the repair work has been completed, and the contract amount needs to be revised.
Table 2 shows anticipated expenditures for HHAV based on the Fee Schedule and Scope of Work (Attachment #2, Exhibits, Exhibit A-2 and B-2) Table 2: Estimated Maximum Expenditures per the Updated Scope of Work Description Estimated Maximum
Property Management Fees $18,000
Repairs and Maintenance $30,000
Miscellaneous, project management,
and other expenses
$10,000
Total $58,000 per fiscal year
Staff recommends the following changes in Contract Amendment No. 2 (Attachment #2, Exhibit A) for the EUPP units:
1. Contract Maximum and Fees: Reduce the contract maximum from $167,600 to $58,000, a reduction of $109,600. The fees included in the contract reflect HHAV monthly fees and operations fees. However, the units will need substantial maintenance and upgrades in the next fiscal year due to normal property aging and wear and tear.
Staff will prepare an Asset Report for the EUPP units in the coming months in preparation for the FY 25-26 budget and may recommend an adjusted contract maximum at that time with one-time expenses included.
2. Term: Change the contract term from one (1) year to two (2) years with an option for renewal.
3. Notice: Update the contacts in the Notice section of the contract to reflect staff changes at HHAV and the City of Foster City.
4. Exhibits:
a. Exhibit A-2, Scope of Work: Clarify the services provided and make the Scope of Work consistent for all City-owned BMR rental properties. b. Exhibit B-2, Consultant Fees: Clarify HHAV monthly fees and fees for operations and make the format of the Fee Schedule consistent for City-Owned properties. c. Exhibit C, Insurance: No changes
d. Exhibit D, COVID-19 Attachment, not included in the 2021 Agreement, not applicable: Delete
e. Exhibit F-1, Leasing Guidelines: recommended changes are summarized below For the HHAV contract for the EUPP units, staff is proposing an amendment to update the preferences listed in Exhibit F, Leasing Guidelines, to be consistent with City Resolution No. 2023-3, which prioritizes supportive housing consistent with the Housing Element 2023-31, Policy H-E-1-a, Existing Unit Purchase Program – Opportunities for Supportive Housing:
H-E-1-a Existing Unit Purchase Program – Opportunities for Supportive Housing.
Implement the tenant preferences adopted in January 2023 for the Existing Unit Purchase Program so that when vacancies occur, housing providers have an opportunity to propose renting the unit to provide supportive housing for people with disabilities and if no acceptable proposals are received, then continue to maintain the existing units owned by the City as rentals for large very low and low income families.
Responsible Agency: Community Development Department, City Council Timeframe: As vacancies occur
Quantified Objectives: One (1) unit converted to supportive housing by 2031 Performance Metric(s): Number of units converted to supportive housing Funding Source: Affordable Housing Fund
In January 2023, the City Council adopted City Resolution No. 2023-3 to add supportive housing providers as the first preference priority for the EUPP units. Staff is recommending amendments to Exhibit F-1, Lease Guidelines, to revise the preferences to reflect updated preferences to comply with the 2023-2031 Housing Element.
California Environmental Quality Act
The approval of the amendments to the HHAV agreements is not subject to review under the California Environmental Quality Act (CEQA) pursuant to Public Resources Code Section 21000, et seq. and the CEQA Guidelines (14 Cal. Code Regs. §§ 15000 et. seq.), including without limitation, Public Resources Code section 21065 and California Code of Regulations 15378 as this is not a “project” that may cause a direct, or reasonably foreseeable indirect, physical change in the environment.
FISCAL IMPACT
There is no fiscal impact associated with the two (2) requested contract amendments as there are funds available in corresponding Funds 122 and 139.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Smart Planning, Development, and the Local Economy
ATTACHMENTS:
Attachment 1 – Resolution for Contract Amendment No. 1 for Workforce Housing Attachment 2 – Resolution for Contract Amendment No. 2 for EUPP Units Attachment 3 - Contract Amendment No. 1 for Workforce Housing Attachment 4 - Contract Amendment No. 2 for EUPP Units
Attachment 5 – 2021 Agreement for Property Management for Workforce Housing Attachment 6 – FY 24-25 Budget for Fund 139 Workforce Housing Attachment 7 – 2021 Agreement for Property Management for EUPP Units Attachment 8 – Amendment No. 1 to Agreement for Property Management for EUPP Units
Attachment 9 – FY 24-25 Budget for Fund 122 LMIHF