DATE: MARCH 7, 2023
DEPARTMENT: COMMUNITY DEVELOPMENT DEPARTMENT
FROM: MEGAN HUNTER, DIRECTOR
BY: MICHAEL GOMEZ, ECONOMIC DEVELOPMENT ANALYST
TITLE: PURCHASE AND SALES AGREEMENT FOR 403 EAST ROMIE LANE RECOMMENDED MOTION:
A motion to approve a Resolution authorizing the Mayor to execute a Purchase and Sales Agreement (PSA) in the amount of $1.45 million ($1,450,000) for a newly built duplex located at 403 East Romie Lane in the City of Salinas utilizing the American Rescue Plan Act (ARPA) funding for the purchase.
EXECUTIVE SUMMARY:
In recognition of the critical need for more affordable housing in Salinas, the City Council appropriated $7 million from the American Rescue Plan Act (“ARPA”) to the Affordable Housing Production Fund. Since then, staff have been working diligently to identify projects that would advance the City’s affordable housing goals. On February 7, 2023, during closed session, staff presented the opportunity to City Council to acquire 403 East Romie Lane, a newly constructed duplex. After receiving Council direction, City staff reached out to the realtor with a purchase price of $1.45 million, contingent on the appraised value and pending completion of the City’s 30-day due diligence period. The negotiated price is one hundred thousand less than the original sales price. Escrow would close on May 1, 2023.
The Community Development Department Housing Division will identify a property management partner and develop a rental plan consistent with Fair Housing regulations to rent the duplex to large families who are extremely low, very low, or low income. Citizenship or residency would not be a requirement to apply.
BACKGROUND:
The 2015-2023 Housing Element identified that a significant portion of Salinas’ households are considered “cost burdened”. Households are considered cost burdened when they spend more than 30% of their income on rent, mortgage and other housing needs. Among renters, almost 53 percent of households paid more than 30 percent of income towards housing costs. Almost 49 percent of owner-households paid more than 30 percent of income towards housing costs. Over the subsequent years, affordability has gotten even more challenged. As a result, the City Council has made providing affordable a strategic plan priority. On November 16, 2021, Council approved Resolution 22250 appropriating $7 million ($7,000,000) from the American Rescue Plan Act (“ARPA”) to the Affordable Housing Production Fund authorizing the funds to be used for predevelopment, acquisition, construction, plans, and studies. Staff have been actively soliciting proposals for the use of these funds from developers and has also explored opportunities for the City to acquire both developed and undeveloped properties for housing. In reviewing properties for acquisition, staff discovered 403 East Romie Lane (Assessor’s Parcel Number [APN] 002-622-002-000), which is unique in that it is a newly constructed duplex comprised of two large town style homes with separate garages.
DISCUSSION:
403 East Romie Lane (“Property”) is currently owned by Seneca Family of Agencies, a non-profit organization that specializes in helping children and families by providing emergency housing for foster children. This organization has decided to dispose of the property and does not currently have renters, again unusual for any multiple unit property. The Property was offered for sale with an asking price of $1.55 million. It is a two-story duplex with approximately 1,643 square feet of living space per unit on a 7,050 square feet lot built in 2020. Each unit consist of 3 bedrooms and two and half baths, with an upstairs loft/ laundry room, and a two-car garage. Because the Property is newly constructed, both exterior and interior are in excellent condition. The only anticipated improvements to the Property are the addition of a water softener for each unit and some landscape maintenance.
After closed session on February 7th, staff contacted the agent representing the owners of 403 East Romie Lane, which has been on the market since January 23, 2023. Staff negotiated a purchase price of $1.45 million based upon real estate comps for similar properties. This purchase price is contingent on the appraised value. The sellers Brokerage firm, Silberstein Broker, will receive 3.0% of the purchase price as compensation for the sale in escrow. Following the execution of the PSA and the completion of the City’s 30-day due diligence period, escrow will close on May 1, 2023. The property will be delivered professionally cleaned and the interior paint will be touched up/re-painted as needed. The Seller with leave the property furnished with the items shown during the walk-through including washer, dryer, stove, refrigerator, microwave, and dishwasher. City staff has reviewed the Preliminary Title Report and are currently coordinating an appraisal report and a full property inspection report and will update council if any substantive findings are found.
After City Council acts, the Housing Division will initiate work on a rental plan that is consistent with Fair Housing regulations. Staff also will begin drafting a request for proposals for a property manager partner who will assist with lease up, oversee maintenance, and provide tenant support. After the Purchase and Sales Agreement is executed, the Housing Division will issue the RFP and select the most qualified respondent with a local preference. Depending on the contract requirements, staff may return to City Council for approval of the property manager.
CEQA CONSIDERATION:
The City of Salinas has determined that the proposed action, acquisition of an existing duplex, is not a project as defined by the California Environmental Quality Act (CEQA) (CEQA Guidelines Section 15378). In addition, CEQA Guidelines Section 15061 includes the general rule that CEQA applies only to activities which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. Because the proposed action and this matter have no potential to cause any effect on the environment, or because it falls within a category of activities excluded as projects pursuant to CEQA Guidelines section 15378, this matter is not a project. Because the matter does not cause a direct or foreseeable indirect physical change on or in the environment, this matter is not a project. Any subsequent discretionary projects resulting from this action will be assessed for CEQA applicability.
STRATEGIC PLAN INITIATIVE:
The proposed acquisition supports the City of Salinas Strategic Plan 2023-2025 goal of Housing/Affordable Housing. This acquisition represents an increase in local affordable housing stock and will provide a stable, long-term housing opportunity for up to two large low-income families.
DEPARTMENTAL COORDINATION:
CDD’s Economic Development Division continues to coordinate with both the Housing and Permit Services Divisions of the Department in identifying and vetting viable properties. Additional consultation regarding the preparation of the draft PSA has also occurred with the City Attorney.
FISCAL AND SUSTAINABILITY IMPACT:
Council approved Resolution 22250 appropriating $7 million ($7,000,000) from the American Rescue Plan Act (“ARPA”) to the Affordable Housing Production Fund. The Purchase Price for the Property is $1.45 million with the estimated escrow cost of three thousand and sixteen dollars ($3,016.00). As part of the resolution, City Council would authorize the expenditure of $1.45 million for the purchase of the property and use of the Housing Production CIP for escrow expenditures.
Upon taking ownership, the City will assume responsibility for ongoing property maintenance costs, remediation and repair, and property taxes. The annual costs of property maintenance will be minimal as this Property was built in 2020 and has been kept in excellent condition. Property taxes will initially be approximately $18,125 per year. These ongoing costs will need to be included in future annual general fund annual budget requests.
ATTACHMENTS:
Resolution
PSA – 403 E Romie Lane – Draft, including a Legal Description, Grant Deed, and Certificate of Acceptance Aerial Photograph – 403 E Romie Lane
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