05-16-1996 Council Minutesi"','. ~"\~'\i.':".~ .--=,1. n,....':" .~ ___1. ~~'~..\'~u._' ',--,' \ '.1-\..1. L-O, nJ'::;"c.)CITY
COUNCIL MINUTES OF
AN ADJOURNED REGULAR MEETING ORANGE,
CALIFORNIA May
16,1996 The
City Council of the City of Orange, California convened on May 16,1996 at 4:30 P.M. in an Adjourned
Regular Meeting in the Council Chambers, 300 E. Chapman Avenue, Orange,California.
4:
30 P.M. SESSION 1.
OPENING 1.
1PLEDGE OF ALLEGIANCE TO THE FLAG 1.
2 ROLL CALL PRESENT -
Murphy, Barrera, Mayor Coontz, Spurgeon, Slater ABSENT - None
1.3 APPROVAL
OF MINUTES - None 1.4 PRESENTATIONS/ ANNOUNCEMENTS/
INTRODUCTIONS - None 1.5 PROCLAMATIONS - None 2.
CONSENT CALENDAR 2.1 Declaration
of City Clerk,
Cassandra 1. Cathcart, declaring posting of City Council agenda of an adjourned regular meeting of
May 16, 1996 at Orange Civic Center, Main Library,Police facility at 1107 North Batavia,
the Eisenhower Park Bulletin Board and summarized on Time Warner Communications; all
of said locations being in the City of Orange and freely accessible to members
of the public at least 24 hours before commencement of said adjourned regular meeting.
ACTION: Accepted Declaration of Agenda Posting
and authorized its retention as a public record in the Office of
the City Clerk.URGENT ITEM - PERMIT PARKING SUSPENSION, ORANGE
IDGH SCHOOL MOTION - Slater SECOND - Spurgeon AYES - Murphy, Barrera,
Mayor Coontz, Spurgeon,
Slater Moved that
the need to discuss this item arose after
the posting of the agenda.2.2 Request from Orange High School for the temporary
suspension of permit parking restrictions within Area A on May 19, 1996 for a
Community/Celebrity Auction event benefiting the Vocal Music Department.PAGE 1
CITY COUNCIL MINUTES May 16,1996
2. CONSENT CALENDAR (Continued)
MOTION - Slater SECOND -
Murphy AYES - Murphy,
Barrera, Mayor Coontz, Spurgeon, Slater Approved.Item 2.
1
and Urgent Item 2.2 were approved as recommended.END OF CONSENT
CALENDAR 3. REPORTS FROM
MAYOR COONTZ - None 4. REPORTS FROM COUNCILMEMBERS -
None 5. REPORTS FROM BOARDS, COMMITTEES,
AND COMMISSIONS - None 6. ADMINISTRATIVE REPORTS 6.1 Approval
of HOME Agreement
with Orange Garden Apartments LLC to provide funding in the amount of $769,
250 (HOME Funds) for the acquisition and rehabilitation of the apartment building located at 1931,
1941 and 2003 Quincy Street (Continued from May 14, 1996.)NOTE: Redevelopment Item
5.1 was
discussed jointly with this item. For Agency action see Redevelopment Minutes, Item 5.1.Mayor
Coontz announced Stuart McGuinniss, D.
D.S. telephoned the Council voicing concerns;and a letter was received from
Paul T. Dunlap, Dunlap Real Estate Investments, 305 N. Harbor Blvd., Suite 325, Fullerton, Property Manager
for apartments at 931 N. Highland and 802 W.Maple.The City Manager announced the
final
document depicting the changes was delivered to Council for review.Mayor Coontz recognized the
following speakers:
Carole Walters, 534 N. Shaffer, asked
in the City document, Page 22, where it indicates the City shall be responsible for relocation, Mr.
McGee said the City was not responsible. Does the City investigate people who will be receiving
money; and will the developer be responsible for the other 176 units. It was suggested
items of this type should be held at 7:00 p.m. in order for people that work can attend the
meeting.PAGE 2
CITY COUNCIL MINUTES May 16,1996
6. ADMINISTRATIVE REPORTS (Continued)
The City Manager reported under State Law and under the rules and regulations of the affordable
housing for the HOME and housing set-aside units, the local agency is by law responsible.
In order not to incur the cost and be responsible for that cost, the City has asked for
indemnification,that is to ask the developer to assume the financial liability of any relocation costs for
displaced persons that may occur so that the Agency nor the City would be responsible or liable for
any additional
dollars.The City Manager indicated developers and people involved with this type of project are asked
to produce their financial records and indicate how much money they are putting into the
project.As to criminal investigations, the City is not allowed to
investigate.The City Manager commented the City does not have any binding agreement regarding the
176
units.Marty McCune, 931 N. Highland, commented Mr. Summerville and friends had lost
the Woodland Apartments project which foreclosed a few years ago. This is the same
Mr.Sommerville that is involved in this project. It was suggested all partners be
investigated thoroughly before a decision is
made.Mike Alvarez, 360 S. Glassell, commented he was asked by property owners to review
the proposed project. In reviewing the development agreement, Council would be signing with
a limited liability company who places a cap on their liability, not the City's. How do you place
a cap on the City's
exposure?The City Manager reported in analyzing the possibility of displaced persons with the HOME
units and set-aside units, the relocation specialists retained interviewed the persons occupying
the units and assessed the number of vacant units. It is their assessment that there are
sufficient vacant units available to transfer people around on-site through a rehabilitation of
the project without incurring liability. However, there is always a potential for liability and the City
should be insured for that liability. The relocation specialists identified amounts of approximately $
170-200,000 on these 80 units. The City asked for a cash equivalency of a pledge, a letter
of credit or certificate of deposit of $250,000 to stand during that 24 month period of
potential liability because that liability only runs for a particular period of time, starting last November
through the time of escrow closing, 24 months. Additional assets have been set aside to handle
liability that may be incurred. If the relocation plan is followed there would not be
displaced persons
which would require relocation.Mr. Alvarez commented it was hard to see that some of the problems
in that neighborhood would actually be mitigated
by the proposed project.The Housing Manager, Mary Ellen Laster, reported there is a management
plan submitted by the developer with occupancy restrictions for the units based upon two plus
two, meaning two people per bedroom plus two additional people any place else in the units. That is for
the 80 units under the
HOME and
CITY COUNCIL MINUTES May 16,1996
6. ADMINISTRATIVE REPORTS (Continued)
Paul Dunlap, 931 N. Highland, 803 W. Maple, commented the issue of the 80 units versus 126 is
very clear and indicated his presence was for no other reason but to maintain the integrity of what
happens in that neighborhood. The neighborhood has been attacked by an eroding economy and
has brought about the foreclosure where there is only 90 occupied units out of256. The concern
is that the entire 256 units be cleaned up. Without an agreement that is ail encompassing, the City
will short change itself
Barbara DeNiro, 1118 E. Adams, asked if the $769,250 is for the 80 units? The City Manager
indicated it was for 24 of the 80 units. Mrs. DeNiro, asked if the $1,215,750 on the
Redevelopment Agency was for the remaining 80? The City Manager indicated it was. Mrs.
DeNiro further asked if the tough stipulations were placed on the project because Redevelopment
funds were being used?
Mayor Coontz responded because federal and state funds are involved, strict regulations and
enforcement applies whereas comparatively there is little control over the private sector
Barry Cottle, P. O. Box 311, Tustin, commented they have reviewed the final draft document and
are prepared to sign. If they do not keep the units affordable, or provide evidence on a yearly
basis, this forgiveable loan becomes a loan. They will be managing the project all the way
through. $250,000 is not a cap, it is a pledge, setting aside a cache savings account as a
certificate of deposit for two years the relocation right for displaced persons. The relocation
expert has indicated that with the experienced management team the relocation costs can be
minimal. Fifty percent of the units in the HOME project are vacant. There are three
overcrowded units which have families that live in a one-bedroom unit. In phase one of rehab,
we wilI rehab two bedroom units and offer it to those families in the one bedroom at the same
rent they pay today and they can move into the two-bedroom unit. As a private owner we
have the right to have occupancy limits on the number of people that live in a private unit. We
have a management plan and do
not discriminate.The document contains a scope of development which encompasses roof
problems, architectural enhancement, sewer, parking, and replacement of garage doors. All forms are in
English and Spanish for the apartment complex. Mr. Cottle indicated he had met with Mr. Dunlap and
they all have the same concerns for the area. Street abandonment is one way to work together
to extend the landscaping and slow down traffic. On the 176 units, the project will be
reroofed, exterior enhancements, paint, landscape, put in their own occupancy limit and manage them.
It is proposed to move the manager to the central portion of
the complex.Mayor pro tern Barrera suggested that the garages be used for cars instead
of storage.Councilman Slater asked what type of occupancy levels could be enforced on the
176 units?Mr. Cottle responded it will be two people per bedroom and two overall and can
be legally enforced if they do
not discriminate.
CITY COUNCIL MINUTES May 16,1996
6. ADMINISTRATIVE REPORTS (Continued)
Councilman Slater commented the next door neighbor is Neil Buxton who is involved in
purchasing properties and indicated to Councilman Slater that he had an apartment project on
Katella which was sold to Bill Sommerville and the property was subsequently foreclosed on. Is
that the same BilI Sommerville that lost these units on Katella?
Mr. Cottle said it was. The project on Katella had a ground lease with restrictions. Mr.
Sommerville and Mr. Conzelman tried to solve the problems but eventually elected to foreclose.
Councilman Slater asked the City Manager ifhe could be 100% sure that the City is clear of all
liability of relocation costs on the remaining 176 units?
The City Manager indicated he could not give a 100% guarantee, however there is no connection
between the City's agreement with the 80 units and those 176 by way of the entities that are
purchasing them. As reviewed with legal counsel there is an acid test as to the liability for
relocation and that is one that the City/Agency has a owner/participation agreement and the
second is that there be displaced persons. If anyone brought litigation against the City they would
have to prove that there is an owner/participation agreement on those 176 units and imply that
any actions Council may have considered in the past are connected with this unit which we have
been advised is a big hurdle for someone to overcome.
Councilman Slater asked the City Attorney since the City is helping the investors purchase the
entire 250 units or the 176 units and are not getting anything in exchange for the 176 units, is this
a gift of public funds?
The City Attorney indicated these issues have been reviewed and addressed by special outside
counsel who is very knowledgeable in these types of transactions. In any negotiated transaction
you attempt to reduce or limit the risk ofIiability as much as possible and I think that has been
done. There is no problem with any legal issue because of the public purpose requirement.
Councilman Slater commented," At least the City was not on the hook for that. On the Council
agenda, the HOME funds are strictly federal money, no city funds. The Redevelopment funds of
1.2 million are of concern. If we vote for this, we are forfeiting control that we could have had
over all 256 units and by control I strictly mean the ability to assure that there is strong
management in place, that there is occupancy limits enforced which perhaps there are and that the
degree of rehabilitation is what it should be."
Mayor Coontz called for a vote to open the Redevelopment Agenda.
MOTION
SECOND
AYES
Murphy Mayor
Coontz Murphy, Barrera,
Mayor Coontz, Spurgeon, Slater Moved to discuss
the Redevelopment agenda item jointly with the Council item for discussion.PAGE 5
CITY COUNCIL MINUTES May 16, 1996
6. ADMINISTRATIVE REPORTS (Continued)
Mayor Coontz requested the Housing Manager to reiterate the controls for the Redevelopment
agreement.
The Housing Manager indicated the agreements mirror each other. The difference being that with
the Housing Set-Aside Agreement we are talking about housing set-aside funds
for affordable housing, and there are HOME funds which are federal funds allocated for the
HOME agreement between the City and Developer. There are restrictions on management which conform
to the management plan submitted to the City which are attached to the
agreement. Occupancy standards which the developer intends to abide by are also part of the management plan
which are going to be approved with the agreement. There are maintenance clauses within
the agreement requiring the property be maintained to a
certain standard.
Council comments:Councilman Murphy: "I have confidence in this project because of the amount of
detail involved with the agreements on these 80 units. When you have common ownership it will not
be a situation where one side of a project gets taken care of and the other one does not. If
I lacked any of that confidence, I couldn't support this proposal because I believe we are
managing federal moneys as well as utilizing housing set-aside money in the Redevelopment Agency
which can only be used for these types of projects in order to bring some positive change to an area
that has been documented as one of the real problem areas of this City. Whenever we can
have an opportunity to not only invest in affordable housing, but also reduce the amount of required
services the City pays on an annual basis, there is a return on the investment to the taxpayer that
is important. This meets
all those criteria. "Mayor Coontz: "I read both documents and believe the State and Federal regulations,
as well as City regulations imposed through the Redevelopment Agency, make these projects as
tight as a drum. It was extremely interesting realizing these are the kinds of things we are looking
for in the way of management and rehabilitation that certainly could have helped us a number
of years ago both on Highland Street and in the project on Prospect. I visited
the Prospect Project approximately eight years ago and it took me probably ten hours a week to try to
figure out what to do on that project. They had no control over who was in the units and they
were charging by the head on top of the basic rent. People were coming in and out the windows,
sleeping under the stairs, bathtubs, laundry rooms, pushing out into the neighborhoods changing
oil, repairing cars,involved in drugs and prostitution. We spent a year as a City working
on an overcrowding ordinance and Santa Ana jumped the gun. I think that if our proposal had gone
to the State before Santa Ana we would be in a different situation throughout the State of
California than we are today. I think these two projects really address a lot of problems and we've
done our utmost to check on and verifY
the legal aspects."Councilman Spurgeon: "I have done my due diligence as an elected official
and reviewed both packets. I do support this project. I don't think at any time in very few areas that we
are able to give 100% guarantee of anything, that's part ofIife. I feel very satisfied with the
staff and legal assistance we have received and advice that we are doing the right thing, plus it's the
right thing
CITY COUNCIL MINUTES May 16,1996
6. ADMINISTRATIVE REPORTS (Continued)
far as public policy in my view. We've got to start someplace over there and if it's 80 units to start
with and hopefully according to the comments made by the gentlemen affiliated with the bank,
those other 176 units will be looked at very closely because it is part of the overall financial
package even though we as a City are not involved with that. We do have high hopes that will be
completed and we will have less calls for service, and will watch that very closely."
RESOLUTION NO. 8620
A Resolution of the City Council of the City of Orange approving a HOME Agreement with
Orange Garden Apartments LLC, a California Limited Liability Company and making certain
findings.
MOTION
SECOND
AYES
NOES
Murphy
Mayor Coontz Murphy,
Barrera, Mayor Coontz, Spurgeon Slater That
Resolution No.
8620 as introduced be adopted and same was passed and adopted by the preceding vote.MOTION
SECOND AYES
NOES
Murphy
Spurgeon
Murphy,
Barrera, Mayor
Coontz, Spurgeon
Slater Moved to authorize the transfer
of funding
in an amount not to exceed $769,250 from HOME Program Account Numbers 317-6057-465802-9194
and 317-6058-465802-9194 for the acquisition
and rehabilitation of the Orange Garden Apartments by the LLC.7.
REPORTS FROM CITY MANAGER - None 8. LEGAL
AFFAmS - None 9. RECESS TO
THE MEETING OF THE ORANGE REDEVELOPMENT AGENCY 10. ORAL PRESENTATIONS
Barbara DeNiro, 1118
E. Adams, complimented Councilman Slater for pulling things out so everyone understands what
is happening.Mrs. DeNiro, discussed
the abandoned vehicles that have been left behind Luckys Supermarket on Collins and indicated
she will keep track of this problem.PAGE 7
CITY COUNCIL MINUTES May 16,1996
10. ORAL PRESENTATIONS (Continued)
Carole Walters, 534 N. Shaffer, complained that Council should deny requests that come in at the
last minute. Usually these requests are known ahead of time and could make the Agenda time
limits.
Mayor Coontz instructed the Director of Public Works to send formal letters instructing the
individual groups affiliated with Orange High School how to apply for individual parking.
11. RECESS
URGENT REQUEST - ITEM FOR CLOSED SESSION The
City Attorney announced a Closed Session item which has to do with anticipated litigation and
there is a need for a conference with legal counsel, specifically significant exposure to litigation
pursuant to Government Code Section 54956.9c and one potential case.MOTION
SECOND
AYES
Mayor
Coontz Barrera Murphy,
Barrera, Mayor
Coontz, Spurgeon, Slater Moved that the need
to discuss this item arose after the posting of the agenda and the item be considered for closed session
as announced by the City Attorney.MOTION SECOND AYES Mayor
Coontz
Barrera
Murphy,
Barrera, Mayor Coontz,
Spurgeon, Slater
The City Council recessed to Closed Session
at 6:05 p.m.12. ADJOURNMENT MOTION SECOND AYES Barrera Murphy
Murphy, Barrera,
Mayor
Coontz,
Spurgeon,
Slater The
City
Council adjourned at 6:30 p.m.
L:2/~>~. ,--C(L' ~~;:;;JOANNE C. COONTZ 7 MAYOR
CASSANDR1... 1. ATHCART, CMC
CITY CLERK PAGE 8