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Prepared by the Community Development Department, November 2024City of Foster City Asset Management Report: Workforce Housing
2024
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Contents1. Executive Summary ..............................................................................................................22. Property Overview.................................................................................................................23. Initial Lease-up.....................................................................................................................44. Rents and Revenue ...............................................................................................................55. Financial Analysis .................................................................................................................66. Questions.............................................................................................................................0 2024 Workforce Housing Asset Management Report Foster City Community Development Department 2 | P a g e
1. Executive SummaryOn August 10, 2022, the City purchased the newly constructed 22 units at 501 Pilgrim Drive from Summerhill Homes for $7 million. This property was acquired as part of the Below-Market Rate (BMR) inclusionary requirement for the Pilgrim-Triton development andorkforce Housing with priority employees, classroom teachers employed by San Mateo-Foster City School District, San Mateo Union High School District, or the San Mateo Community College District, and those who live and/or work in Foster City.The building was fully leased in November 2023. This report marks theAsset Management ReportWorkforce Housing property and provides. -up reports every three (3) years. 2. Property Overview The .7-acre, 22-unit Workforce Housing development consists of three three-story buildingsattached but with separate entrances. Fig 1: Location Map showing Workforce Housing
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Table 1. Workforce Housing Property BuildingsBuildingNumber of units Building OneFive (5) units Building Two11 unitsBuilding ThreeSix(6) unitsThe development consists of one-bedroom units, one-bedroom units with dens, and two-bedroom units. Two ground- Parking and Electric Vehicle Charging The property includes 22 parking spaces, consisting of nine (9) garage spaces and 13 outdoor spaces in a designated parking lot. Two (2) of the garage spaces are ADA spaces, and one (1) of the outdoor lot spaces is a van-accessible ADA space. There are also six (6) public parking spaces along Pilgrim Drive and 15 public parking spaces along Triton Drive that can be used for guest parking. The site also has two (2) electric vehicle charging spaces, one (1) of which is ADA-van-accessible, on Triton Drive. The electric vehicle charging stations were installed in 2024. Amenities and Location The property is located .4 miles from City Hall, about a 10-minute walk between Triton Drive and Pilgrim Drive. Amenities: all units include a deck, a washer and dryer, and LG appliances. The property includes a shared bicycle storage room and a shared barbecue area. A public park adjacent to the development was built as part of the Pilgrim-Triton development. Property Management The City competitively bid the property management contract in 2021 and selected HIP Housing agreement includes set-up, initial lease-ups, move-ins, these tasks include $13,200 for Set-up and lease-up fees and $23,760 for Compliance and property management. There is an additional $20,000 for repairs and maintenance. The property includes eight (8) workforce units that are rent-restricted but not income-restricted and 14 below-market-rate (BMR) units that are rent-restricted and income-restricted. It also includes an on-site property manager, which is required by state law for developments of 15 or more units. Rents were set by the City Council in 2022 Table 2 DesignationSize# of UnitsCurrent Rent(50% AMI)1-Bed 3$1,400 2-Bed1$1,800Low Income1-Bed 4$2,200Low Income2-Bed1$2,800Moderate Income (120% AMI) 2-Bed5$3,100Workforce 1-Bed 2$2,200 2024 Workforce Housing Asset Management Report Foster City Community Development Department 4 | P a g e
Workforce Low 1-Bed-Den3$2,5001-Bed-Den1$1,600Workforce Low2-Bed2$2,800The City pays for sewer, common area electricity, and common area water usage. Tenants pay for their share of trash collection, water usage, and water heating through Utility Billing Systems (UBS), a third-party utility billing company. UBS then reimburses the City for these costs, with a service charge deduction, and charges a utility billing service fee paid for by the tenants. Tenants also pay their own accounts for internet, telephone, television, and electricity usage. Preferences The property has the preferences listed below in Table 3. The current tenant mix (5) city employees, three (3) and two (2) teachers. Table 3. Preferences for 501 Pilgrim Drive Preference Applies toPreferenceNumber of Tenants 1 Workforce OnlyMobility-related disability for units 103 and 104 only22 Workforce OnlyFirst Responder City Employee 33 Workforce & BMRs Other City Employee24 Workforce & BMRs Classroom teacher in the Foster City Elementary School District, the Foster City-San Mateo High School District or the San Mateo County Community College District25 Workforce & BMRs Those who live and work in Foster City at the time of their application66 Workforce & BMRs Those who live in Foster City at the time of their application 37 Workforce & BMRs Those who work in Foster City at the time of their application08 Workforce & BMRs 43. Initial Lease-up The initial lease-up of the building took over one (1) year due to several factors. eight units by the end of 2022. , then re-opened the lottery in early 2023 and November 2023. Moderate-income units proved challenging to rent due to the higher rental rate, The waitlist now has over 1,000 names city employees (for BMR units). 2024 Workforce Housing Asset Management Report Foster City Community Development Department 5 | P a g e
4. Rents and Revenue The property's rents, which were set by the City Council in 2022, have remained constant at the current rates. The rent roll is currently $52,200 per month and $626,400 per year at full occupancy. Table 4 below along with the maximum chargeable rent. Table 4 Designation SizeMaximum Chargeable Rent (2024)Current Rent (50% AMI)1-Bed $1,728$1,400 2-Bed$1,907$1,800 Low Income1-Bed $2,903$2,200 Low Income2-Bed$3,229$2,800 Moderate Income (120% AMI) 2-Bed$4,322$3,100 Workforce 1-Bed $4,925$2,200 Workforce 1-Bed-Den$4,925$2,500 1-Bed-Den$4,925$1,600 Workforce Low 2-Bed$5,162$2,800 In addition to rent revenue, the City receives proceeds from the following sources from the Workforce Housing property: Utility reimbursements from Utility Billing Services—The third-party services provider bills tenants for water usage for their units, trash collection, and gas water heating. UBS collects these funds and reimburses the City monthly. The amount varies from month to month depending on water usage and heating but averages about $2,200 per month. These revenues Key replacements—If a tenant loses their keys, the City charges $100 for a digital fob and $15 for a traditional key. related to purchasing keys. Late fees—The City charges $30 a month for late rent payments and $50 a month for late payment plan payments. The City does not charge for late utility payments. However, the Utility Billing System charges a $10 late fee but does not pass this on to the City. especially since the building has been fully leased for about one (1) year, several factors have impacted revenues, including: Several tenants are delinquent in paying utility bills through Utility Billing Systems. As of September 18, 2024, tenants owe a balance of $4,554 with $2,312 late 30 to 90 days or more. One tenant alone owed nearly $1,800 of the balance owed. As of October 21, 2024, the balance owed was down to $3,683.96 with $1,917.25 less than 30 days overdue and one tenant owing $1920.79. One (1) tenant has a balance owed of more than $4,000 in rent and is on a payment plan. 2024 Workforce Housing Asset Management Report Foster City Community Development Department 6 | P a g e
Units vacated after occupancy tend to have a turnover period of about 60 days. While this is 5. Financial AnalysisWorkforce Housing Fund (Fund 139) is a Special Revenue fund in the City’s dedicated to managing expenses and revenues related to the operation and management of Workforce housing. Below is a snapshot of the revenues and expenses. On April 18, 2022, the City Council, via Resolution 2022-from the Workforce Housing to the Capital Asset and Acquisition Replacement Fund (CAARF or Fund 326). -2025, the City has budgeted $357,208 for operating expenses for the Workforce Housing property. Full occupancy revenue is projected at $626,400, or $595,080, with a 5% anticipated vacancy rate. between operating cost and revenue provides for the replenishment of CAARF . Since the building was fully occupied in November 2023, we have experienced four (4) move-outs, all of which have been or are expected to be A review of expenses vs. revenues shows that the Workforce Housing is performing and include contingencies While revenues have exceeded expenses yearly since acquisition, maintenance and repair expenses have been higher than planned. As discussed in the previous section, the City has paid several unforeseen expenses associated with property operations, including , plumbing, appliance replacements, early repainting, and so on. Now that the property has been fully leased and operational for one (1) s expenses, repairs, and maintenance and will modify the FY25-26 budget to accommodate line-item adjustments based on actual experience in prior years. The City pays for sewer, common area electricity, and common area water usage. Tenants pay for their share of trash collection, water usage, and water heating through a third-party utility billing company that reimburses the City for these costs and charges a utility billing fee that is paid for by the tenants. Figure 1 shows the Annual Budget Appropriation for the Workforce Housing property. Figures 2 and 3 below present a comparison of revenues and expenditures since the acquisition. In each year, revenues exceed expenses, except FY 23-24, in which $557,446 was transferred to CAARF towards replenishment of the purchase price for the building. This amount is shown as an expense and comprises the net revenue generated by the asset. For the current FY , the revised budget includes carryover of $16,047 for the installation of the two (2) electric vehicle charging stations, which have now been completed in the prior year. 2024 Workforce Housing Asset Management Report Foster City Community Development Department 7 | P a g e
While expenses were welllate 2023, so revenues were less than projected. Stalso determined that a substantial contingency was (2) years of full occupancy to account for issues and anomalies with building systems and other unforeseen expenses, as summarized above.While revenues were under budget due to the lengthy lease-up process, the building has been fully occupied since November 2023, except for turnovers. For the 2024-revenues to be closer to budget. The budget includes a 5% vacancy rate. There have been four turnovers to date. In FY 23-24 and FY24-originally budgeted $386,187 and $341,161 in Fund 139, respectively, as shown in (see Fig. 1 below), corresponding to numerous budget line items, including utilities, repairs, and maintenance, contracts, equipment replacement charges, insurance, pest control, and other costs related to operations. Following the City Council’s approval of a budget carryover for$16,047 for the electric vehicle charging project, FY 2024-25 budget was revised (see Figures 2 and 3).Fig 1. Annual Budget Appropriation for FY 24-25
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Fig. 3 Budget vs. Actual ($) Workforce Housing - Fund 139 Revenue & Expenses2021-22 Actual2021-22 Budget2022-23 Actual2022-23 Budget2023-24 Actual2023-24 Budget2024-25 ActualYTD2024-25 Revised BudgetRevenues4,6120292,300677,458632,613625,640207,647676,262USE OF MONEY & PROPERTY 1120 284,360 615,110 611,213601,540 200,996 637,451 INTEREST - INVESTMENT 1120 3,762 601 19,3152,040 0 5,900 RENTS AND CONCESSIONS00286,288624,433600,298599,500203,096631,551Rent Discount-Manager's Unit Rent Discount 00 -5,690 -9,924 -8,4000 -2,100 0 OTHER REVENUES 00 7,940 62,348 21,40024,100 6,651 38,811 NSF CHECK PROCESSING000075000MISCELLANEOUS REVENUES007,94062,34821,32524,1006,65138,811OTHER FINANCING SOURCES 4,5000 0 0 00 0 0 Expenses13,9800165,081329,136790,965386,18744,898357,208EMPLOYEE SERVICES 00 8,321 18,073 16,50818,977 6,809 21,883 SUPPLIES & OTHER SERVICES13,9800134,352255,470194,634277,46816,089243,939MAINT-FACILITY & EQUIP006,77114,52076314,52061914,520UTILITIES & COMMUNICATION0051,782106,99365,78673,12013,24575,300CONTRACT, PROF SPEC SVCS13,980071,129103,71595,448154,6981,900118,841MISC EXPENSE00050001,00001,000LANDSCAPE & PEST CONTROL004,67028,50014,40029,20032529,200POSSESSORY INT PPTY TAX0001,24218,2374,93005,078INTERNAL SERVICE FUNDS0022,40855,59322,37789,74222,00091,386COMPENSATED ABSENCES0040840837737700EQUIP REPLACEMENT CHARGES0022,00022,00022,00022,00022,00022,000INSURANCE & OTHER COSTS00033,185067,365069,386TRANSFER OUTto CAARF (Fund 326)0000557,446000Revenue Less Expenses-9,3680127,219348,322-158,352239,453162,749319,054 9 | P a g e
Utilities As noted earlier, the City pays for nine (9) separate utilities monthly. Budgeting for tenant usage prior to full occupancy proved challenging, and it took several months before the digital water usage metering system was operational. However, now that the property has been fully occupied for one year and communication with the on-hours following rainfall to comply with City policies, utility budgeting is easier to manage. Equipment Replacement ReserveThe City utilizes a separate special revenue equipment replacement fund (Fund 140) for the replacement and acquisition of equipment for Workforce Housing needs. Each year, Fund 139 expenditures include $22,000 going toward Fund 140 to establish a reserve to pay for replacing building systems and equipment as the building ages. Examples include future replacements of windows, doors, garage doors, the roof, carpet, appliances, and cabinetry. The City may need to access this fund earlier than planned due to warping cabinets in one unit and potential common area carpet replacement sooner. While this is not an issue nowanalysis of the reserve fund methodology as part of the FY 2025-26 budget analysis. Insurance and other costs While the property’s insurance is part of the City’s asset insurance and does not require a separate expense, in the budget each year to provide an emergency fund for unforeseen expenses. With full occupancy and two (2) years of history of repairs, maintenance, and system testing, , notably for invoice processing. In FY 23-24, for ook approximately 30 review, approve, and process before submitting to Finance. This amounts to a total of nearly 85 hours per year, with a substantial number of invoices submitted a have , including requiring invoices to be submitted within 30 days of service and for June invoices by July 15 of each year. All invoices are now emailed to a dedicated email account for workforce housing. budget. In addition to processing invoices (from Community Development Department and Finance Department), the Housing Coordinator works on approves expenses and bids for work, handles issues with tenants who have not paid rent, processes security deposit returns, manages special projects, such as bidding, purchase, and installation of the inspections with the Building Divisionapproves the annual report submitted by the property manager, ensures that the covenant is adhered to, and responds to inquiries from tenants or members of the public. 6. Questions Please direct any questions regarding this report to [email protected]. The next report will be issued in 2025 unless the City Council requests an interim report.