City Council
Report
City Council Meeting: July 12, 2022
Agenda Item: 5.H
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department Subject: Approval of Third Modification to Professional Services Agreement with HR&A Advisors, Inc. for Preparation of a Report Pursuant to Section 9212 of the California Elections Code on a Citizens’ Ballot Initiative Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and execute a third modification to agreement #108300 (formerly #10830) with HR&A Advisors Inc. in the amount of $36,000 to prepare a Ballot Measure Impact Report, pursuant to California Elections Code Section 9212, for the proposed Initiative Measure to Establish Added Funding for Homelessness Prevention, Affordable Housing, and Schools by Amending Santa Monica Municipal Code Chapter 6.96 to Provide a Third Tier Transfer Tax Rate for Property Transfers of $8,000,000 or More with an Eleven Member Resident Oversight Committee, that is seeking to qualify and be placed on the November 8, 2022 ballot. This will result in a four-year amended agreement with a new total amount not to exceed $454,900, with future year funding contingent on Council budget approval.
Summary
On June 14, 2022, Council requested that the City Manager prepare a report pursuant to Section 9212 of the California Elections Code on an initiative titled:
An Initiative Measure To Establish Added Funding For Homelessness Prevention, Affordable Housing, And Schools By Amending Santa Monica Municipal Code Chapter 6.96 To Provide A Third Tier Transfer Tax Rate For Property Transfers Of $8,000,000 Or More With An Eleven Member Resident Oversight Committee, seeking to qualify and be placed on the November 8, 2022 ballot.
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Per the Elections Code, the report must be presented to the legislative body no later than 30 days after the elections official certifies to the legislative body the sufficiency of the petition. The Council action noted that the report shall be presented to City Council as soon as possible, but not later than July 26, 2022.
Given the subject matter of the report, which may include the potential fiscal, land use, economic development, and infrastructure impact of such a measure, as well as the swift turnaround required, staff has determined that a modification to the current contract with HR&A Advisors, Inc. for financial feasibility analysis and modeling of potential changes to development standards and project requirements related to the Housing Element, is the best approach to complete this report in the allotted time.
Viewed in isolation, the amount needed to commission this report ($36,000) would not require Council approval if processed as a standalone contract. In the interest of transparency and in light of the potential subject matter overlap with the existing contract, staff seeks authority to enter into a third modification to include the required report.
Background
On March 26, 2019, Council authorized an agreement with HR&A Advisors, Inc. to provide financial feasibility analysis of potential affordable housing requirements and minimum density. On November 12, 2019, Council authorized the acceptance of SB2 grant funds in the amount of $310,000 from the State of California Department of Housing and Community Development and a first contract modification in the amount of $179,000 with HR&A Advisors, Inc. for additional analysis related to housing production in the context of the 6th Cycle Housing Element. HR&A’s amended contract provided for a range of economic analyses, typical housing prototype modeling based on revised standards, and policy and program evaluation necessary to inform the preparation of the 6th Cycle Housing Element. During the City’s restructuring, Contract #10830 expired before the scope of work was completed and a new contract was executed for the remaining balance with Contract #108300.
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On June 14, 2022, Council approved a second modification to agreement 108300 in the amount of $89,000 and an extension of the term of the contract for one additional year to provide additional financial analysis in support changes that must be made to the City’s Housing Element to comply with State housing law.
Discussion
A petition has been circulating in the community to place an initiative on the November 8, 2022 ballot. If the petition qualifies under the rules set forth in the California Elections Code Sections 9200-9226, it will be presented to Council prior to the August 12, 2022 statutory deadline for submitting the ballot initiative to Los Angeles County.
Council has the ability to ask for a report on the impact of the initiative, as stated in Section 9212 of the California Elections Code:
(a) During the circulation of the petition, or before taking either action described in subdivisions (a) and (b) of Section 9215, the legislative 9215 body may refer the proposed initiative measure to a city agency or agencies for a report on any or all of the following:
(1) Its fiscal impact.
(2) Its effect on the internal consistency of the city’s general and specific plans, including the housing element, the consistency between planning and zoning, and the limitations on city actions under Section 65008 of the Government Code and Chapters 4.2 (commencing with Section 65913) and 4.3 (commencing with Section 65915) of Division 1 of Title 7 of the Government Code.
(3) Its effect on the use of land, the impact on the availability and location of housing, and the ability of the city to meet its regional housing needs. (4) Its impact on funding for infrastructure of all types, including, but not limited to, transportation, schools, parks, and open space. The report may also discuss whether the measure would be likely to result in increased 4 of 6
infrastructure costs or savings including the costs of infrastructure maintenance, to current residents and businesses.
(5) Its impact on the community’s ability to attract and retain business and employment.
(6) Its impact on the uses of vacant parcels of land.
(7) Its impact on agricultural lands, open space, traffic congestion, existing business districts, and developed areas designated for revitalization. (8) Any other matters the legislative body requests to be in the report. (b) The report shall be presented to the legislative body within the time prescribed by the legislative body, but no later than 30 days after the elections official certifies to the legislative body the sufficiency of the petition.
Among the items that Council discussed including in the report were the potential funds that the measure might generate, what property transactions it would apply to, the composition of the resident oversight committee, and whether there would continue to be a need for funds dedicated to affordable housing in future years.
Because the potential ballot initiative is for a new tax revenue source and includes only limited information about proposed expenditures of the revenue to be collected, most of the illustrative examples of “impacts” in California Election Code Section 9212 cannot be analyzed. However, the report can include useful background information about this source of revenue, explain the mechanics of how the revenue would be collected, provide a rough estimate of potential revenues based on past real estate sales, provide some general illustrations about how the City’s share of the tax revenues could be spent, and offer observations about potential risks to revenue collection or achievement of intended objectives (e.g., financial feasibility implications for new market rate residential development subject to the City’s Affordable Housing Production Program, which HR&A has assisted the City to shape and implement over more than 20 years).
Portions of the impact report will also benefit from prototypes developed by HR&A for the Housing Element update.
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Contractor Selection
HR&A Advisors, Inc. was selected on March 21, 2019 to provide the following:
• Update Financial Feasibility Analysis on the Downtown Community Plan (DCP) • Explore Revised Development Standards and Incentives for Housing Projects on Boulevards and in the Bergamot Area Plan
• Multi-Unit Districts Affordable Housing Fee and Density Study The existing contract award was made as an exception to the competitive bidding process pursuant to Section 2.24.80(d). Competition did not exist because HR&A had completed extensive feasibility analysis related to evaluating the feasibility of the City’s development standards, project requirements and fees including ongoing work on the Affordable Housing Production Program (AHPP) and Housing Element, as well as financial feasibility on the Downtown Community Plan, and 2015 Zoning Ordinance.
Completing a competitive procurement process is highly unlikely to produce costcompetitive proposals from other sources, given HR&A’s experience and knowledge with preparing modeling for the City.
Additionally, the recommended modification also qualifies as an exception to the competitive bidding process pursuant to Section 2.24.250(g), given that the time necessary to use the competitive solicitation process would not allow for the delivery of such a report to the Council and community within the timeline required by the State Election Code Section 9212(b).
Past Council Actions
Meeting Date Description
03/26/2019 Council approved a contract with HR&A Advisors, Inc to provide empirical testing of prototypical private developments to help increase the City’s supply of affordable housing
11/12/2019 Council authorized the City to accept an SB2 grant in the amount of $310,000 and to authorize the City Manager to negotiate and execute a first modification with HR&A in the amount of $179,000 for further prototype testing in support of the 6th Cycle Housing Element 6 of 6
6/14/2022 Council authorized the City Manager to negotiate and execute a second modification to agreement #108300 in the amount of $89,000 and extend the term of for one additional year, with HR&A Advisors Ince to provide additional analysis in support of the City’s Housing Element.
Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the General Fund to increase the amount of the agreement with HR&A Advisors Inc. Funds are included in the FY 2022-23 Adopted Budget in the Finance Department.
Contract Modification Request Amount
Agreement # Current Authorized
Amount
FY 2022-23 Modified
Request Amount
Account # Total Revised
Contract Amount
10830/108300 $268,900 20700002.556420 $268,900
10830/108300 $150,000 01700001.552010 $150,000
10830/108300 $36,000 01300001.552010 $36,000
TOTAL $454,900
Prepared By: Gigi Decavalles-Hughes, Director
Approved Forwarded to Council
Attachments:
A. Staff Report June 14, 2022
B. Contract 108300
C. Contract 108300 First Modification
D. HRA Oaks Initiative_06-10-22 (1)