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HomeMy WebLinkAboutOld Civic Center Site Project - Article XXXIV Opinion Regard • • : A � . _ Subject CITY OF HUNTINGTON BEACH INTER-DEPARTMENT COMMUNICATION HUNTINGTON BEACH -TMrp en er, To Gail Hutton From Senior ty City Attorney Develo ecialist Subject CITY ATTORNEY.'S OPINION. REGARDING Date September 3, 1981 IRfiICLE XXXIV REFERENDUM -PROCEDURES ,(PROP IV' JUNE, 1980) As you know, in June, 1980 the City had placed on its election ballot -Prop "L", .an . Article XXX:IV referendum. complying with the. provisions of the State Constitution. Since the approval of this measure, _the ;City Council has also .approved a Cooperation Agreement with :the Orange. County .Housing Authority and more recently authorized. by resolution the Orange County Housing Authority .to apply .to HUD for :public housing funds on.. the City's behalf.. As part of this application for public housing funds now .Under preparation, HUD will require the submission of certain .documents. certi- . fy.ing the validity of the Article XXXIV .referendum measure One of -these-required documents is an .opinion .from:the. local. governing body's counsel , certi:fyi'ng, that the election. procedures used. in.placing the Article XXXIV. measure ;on the ballot.were consistent with the election's code and Article XXXIV of-the State Constitution. •UESTION: Please prepare on your letterhead. a statement to certify .that . Prop "L", .a low rent..housing .referendum approved through. .the election of June, 1980,,.was prepared .in .comgliance.with Article XXXIV of the State. Constitution and the..election's code. Attached you will find.one copy of a suggested format provided by the County of Orange County Counsel . Upon completion, please return.. this. document to this office and we will forward it to the.Orange .County Housing Authority:along with the other required documents for the Housing Authority's use for applying for public housing.funds. on the City's behalf. . If you should have any questions, please call me at extension 5542. SVK:3b attachment HCD-29 _ CITY OF HUNTINGTON BEACH White City Attorney REQUEST FOR LEGAL SERVICES canary City Clerk f� Pink City Administrator Goldenrod Departmental HUMINGTUN BEACH Date Request Made By Department Sept. 3, 1981 Stephen V. Kohler Development Services/HCD Di Vision INSTRUCTIONS: File request in the City Attorney's Office as soon as possible. Print or type facts necessary for City Attorney. Out- line briefly reasons for the request.Attach all information and exhibits pertinent to the subject. Type of Legal Service Requested: [. 1 Ordinance.. ( j Insurance [ l Other. f 1 Resolution [ ) Gonda { j Contract/Agreement IX1 Opinion All exhibits must be attached,or this request will be returned to you. Da Exhibits Attached Please prepare.a statement to certify that Prop 'T" was prepared in compliance with Article XXXIV of the State Constitution and the election's code. (see attached memo) If.for Council Action, If not for Council action,desired completion date Signature: Agenda deadline _ Council meeting 1 PIO 12/79 ADItIAN KUM:"=R - OF97ICE.S OF WILLIAM J.MCCOURY THE COUNTY �'�j f�^�{TATISEiT ARTERY C. WAMLNUTTMONN TE iH i►V.Y\.1����JJJ JJJ... �y J3L e�/.aV]'1�/Il� L AiiTNUR C.WAMLSTHDT.JR. County Of. LAUR_NCE M.WATSON VICTOR T.DELLHRU6 JOHN R.GRISET HALL OF ADMINISTRATION • P.O.BOX 1379 • SANTA ANA.CA 92702 • 834-3300 cNARLES B.SEVIER .TERRY C.ANDRUS TERRY E. DIXON EDWARD N.DURAN July 20, 1981 IRYNEC.BLACK RICHARD D..OVIlDO O.M.MOORIF JULEE ROBINSON DENJAMIN'P.DIE MAYO R.DONALO MCINTYRK 'HOWARD SERSIN M.TONI PERRY DAN IEL J.DID16R - _ GENH-AXEf_ROO . Mr. Art Luna ROBfiRT L:AUSTIN DONALD H.RUBIN,. Executive Director DAVID R.CHAFPEI! EVANS Orange County ,H CAROL 0,.B.ROWN ousing Authority AR C D 2043 North Broadway BARBARA L.STOCKER DEPUTIES Santa Ana, CA 92706 Dear Mr. Luna: As . the. attorneys. for . the County .of Orange, our.. opinion has been requested regarding the validity of the proceedings to ratify County Measure C in the June 3, 1980 election. .This office serves as counsel to the Orange County Registrar of Voters, and as such we have reviewed. the actions of. the Registrar of Voters in that election. It is. our. opinion that. they, "have complied with the requirements of. Article XXXIV of the California Constitution and the Elections Code. Very truly yours, ADRIAN KUYPER, COUNTY COUNSEL By Benjyatmin P. de May Deputy BPD h"p STATE OF CALIFORNIA EDMUND G.BROWN JR.,Governor DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT 921 Tenth Street, Sacramento, CA 95814 (916) 445-4775 December 12, 1978 Mr. Reed Flory Mr. Michael Casciola Housing Concepts, Inc. 17895 Sky Park Circle, Suite A Irvine, CA 92714 Re: Application of Article XXXIV to Section 8 (Existing) Tandem Development Gentlemen: The following is the department's response to your Article XXXIV inquiry. Because of the importance and uniqueness of the concept, and our hope that it can be replicated in other communities, we have chosen to prepare a formal opinion in this matter. If I can be of any further assistance, please feel free to call me. `BACKGROUND The City of Huntington Beach is leasing surplus property to a private developer for 55 years at a cost of $1.00. The relevant conditions for use are that the property be developed as multi-family housing, and that all rents in the devel- opment not exceed the HUD Fair Market Rents for the area. The developer has applied to the California Housing Finance Agency for new con- struction financing and will receive a 72% loan for the entire structure and Section 8 New Construction allotments for 49% of the units. Of the balance of the units, the private developers will , of their own volition, reserve a "sig- nificant number" for Section 8 (Existing) certificate holders. Certain federal tax benefits accrue if over 80% of the units are leased to moderate and low income households. QUESTION PRESENTED Is. Article XXXIV referendum authority required prior to construction because of the involvement of (a) the City of Huntington Beach, (b) the California Housing Finance Agency, and (c) the County Housing Authority as the local agency operating the Section 8 (Existing) program? CONCLUSION Article XXXIV authority is not necessary for the described housing development because there is neither "development, acquisition, or construction" by a state public entity, nor is it resulting in creation of a "low rent housing project." December 12, 1978 Page Two ANALYSIS Article XXXIV of the California Constitution provides, in relevant part, that: No low-rent housing project shall hereafter be developed, constructed, or acquired in any manner by any state public body until , a majority of the qualified electors of the city, town, or county, as the case may be . . . approve such project by voting in favor thereof .. ." The test for applicability is more simply stated as a three-part analysis: as a (1) state public body (.2) developing, constructing, or acquiring (3) a low-rent housing project for low-income persons. All three portions of the test must be met before Article XXXIV authority is required. In the instant situation, neither the second nor third requirement is met. A. There is insufficient state ' involvement in "development" to trigger Article XXXIV. There are three possible sources of state involvement which might trigger Article XXXIV: the write-down of the land, the housing authority certification of Section 8 (Existing) households, and the CHFA loan with Section 8 (New Construction) financing for 49% of the units. The long-term lease of land by the City of Huntington Beach is a form of land "write-down" which has been found exempt from Article XXXIV by the courts in Winkelman v. City of Tiburon (1973) 32 Cal .App.3d 834, 108 Cal .Rptr. 415. In that case, a private developer received city land at below-market cost to develop a Section 236 project. The court noted that since the developer was going to "design, plan, finance, construct, own and operate" the project and "bear all of the contractual and financial risks associated with" the project, the City of Tiburon was not a co-developer as a consequence of this write-down. This analysis was not effected by the result of CHFA y. Elliott (1976) 17 Cal . 3d 575, 131 Cal .Rptr. 361. In the instant situation, the City will have no involvement different than that of the City of Tiburon: the condition that all rents be a Fair Market Rent levels (rather than a requirement that all tenants be low-income) cannot be distinguished from the Tiburon requirement of construction of a Section 236 project. Therefore, the involvement of the City of Huntington Beach is not sufficient to be considered "development" sufficient to trigger Article XXXIV. The involvement of the local housing authority similarly is not sufficient to trigger Article XXXIV. Its role vis-a-vis the instant project is merely to certify applicants for Section 8 (Existing) certificates and then passively monitor their use for purposes of recertification or grounds for eviction. (24 C.F.R. 882). This ,involvement of the housing authority .is similar to that under the former $ection 23 program, and is not involvement of "development" at all ; on the contrary, it was once suggested that this might be "acquisition" of a low-rent project, but even that was firmly rejected by the Attorney General , 47 Ops.Cal .Atty.Gen. 17 (1966): December 12, 1978 Page Three The role of the California Housing Finance Agency (CHFA) is much more. direct and extensive in the instant project than that of the foregoing public agencies. In 1976, in CHFA y: Elliott; su Ora, the "extensive participation of the CHFA in development of projects i-t financed was found to be "development" sufficient to trigger Article XXXIV. But, as will be discussed below, the instant devel- opment is not a "low-rent housing project" and therefore, since the third require- ment is not met, Article XXXIV is not triggered. B. The instant project is not a' "low=rent housing project`pursuant to Article XXXIV. The Article XXXIV defines "low-rent housing project" as follows: "For purposes of this article the term 'low-rent housing project' shall mean any development composed of urban or rural dwellings, apartments or other living accommodations for persons of low income, financed in whole or in part by the Federal Government or a state public body extends assis- tance by supplying all or part of the-labor, by guaranteeing the payment of liens, or otherwise . . . For the purposes of this article only 'persons of low income' shall mean persons or families who lack the amount of income which is necessary (as determined by the state public body developing, construction, or acquiring the housing project) to enable them, without financial assistance, to live in decent, safe, and sanitary dwellings, without overcrowding. " The Legislature has interpreted and implemented Article XXXIV in the Public Housing Election Implementation Law, Health. and Safety Code Section 37000-2 (1976). It noted that the Article was directed towards controlling federally subsidized conventional public housing projects which were exempt from ad valorem property taxes, were occupied entirely by persons of low income, and were physically different than private sector developments. It further exempted certain developments from the definition of the term, "low-rent housing project" including: "(a)(1) The development is privately owned housing, re- ceiving no ad valorem property tax exemption not fully reimbursed to all taxing entities; and (2) not more than 49 percent of the dwellings, apartments, or other living accommodations of such development may be occupied by persons of low income ..." (Section 37601) Clearly, the 49% reservation of units pursuant to the CHFA Section 8 (New Con- struction) financi.ng does not comprise a "low-rent project" as defined by Section 37001(a). Therefore, since one of the three factors is not present, the CHFA involvement does not tr.i:gger Article XXXIV. CHFA'.V: Patitucci (1978) _ Cal .3d'_, 148 Cal .Rptr. 875. Similarly, the City's condition of'requring that all rents not exceed the HUD Fair Market Rent levels would not trigger Article XXXIV: the units are not December 12, 1978 Page Four reserved for low-income persons, as required by Article XXXIV, but merely are to be rented at below-market levels. Therefore, the City's involvement does not trigger Article XXXIV. The presence of Section 8 (Existing) certificate holders provided by the county housing authority does not, alone, render the development a low-rent housing project. In 47 Ops.Ca1 .Atty.Gen. 17 (1966) , - the Attorney General confronted a similar problem with the earlier, analogous Section 23 program. Both programs involve only short-term leases of individual units dispersed through the private housing; there is not change in the physical quality of the community, and no property tax exemptions are accorded as a result of the use of the Section 8 certifi:cates. While Section 23 limited use to not more than ten percent of the units in any residential structure, no fixed percentage is offered in the instant situation. It can be assumed that no more than 50% of the available units would be resided in by Section 8 recipients since the other units are for low-income persons subsidized through the CHFA allocation; the project description only calls for a "significant number" of Section 8 (Existing) residents. Finally, consideration must be given to whether Article XXXIV is triggered by the anticipated existence of more than 49% of the residents in the develop- ment being of low income because of the tandem use of the two Section 8 programs. To so rule would suggest that no landlord, on his own volition, could permit a multi-family structure to be occupied by a majority. of- low-income households, with or without Section 8 existence. . No suggestion has been made to that effect, nor does any law or ordinance yield that result. In addition, Article XXXIV prohibits excessive residence by low-income house- holds if, and only if, there is very extensive state involvement in develop- ment, construction, and acquisition. The proposed development does have extensive involvement, resulting in required provision of 49% of the units for low-income households.; use of the remaining units is not conditioned other than the rent limits, and only the developers are responsible for per- mitting additional low-income household residents. Unlike the 75%-25% mixture rejected by the Elliott court, which the court deemed to be low income "in effect", the instant project has another extremely significant difference.-- there is no continuing requirement for use by low- income persons other than the 49% ratio required by the CHFA-Section 8 (New Construction) loan. If additional low-income households are present, and if the project becomes a low-rent project "in effect," the owners, as much as the local residents, will be-motivated by financial and related pressures to reduce the percentage so that a more stable, mixed-income community will result. Such a result was not possible under the earlier CHFA-financed models, the housing authority projects which spawned Article XXXIV, and similar housing projects. The Supreme Court's praise of the Legislature in Patitucci is applicable in concluding discussion of the instant concept, and philosophically offers further support for its exemption from Ahe Article XXXIV referendum requirement. December 12, 1978 Page Five "We have long noted the critical importance of governmental efforts to meet the housing needs of low and moderate income citizens (citations) In a comprehensive and innovative program, the Legislature has sought to fulfill these worthy goals while promoting economic and social integration and by enhancing, rather than endangering, the financial and environ- mental health of our communities. Its efforts in these posi- tive directions are laudable and should not be thwarted by unduly restrictive interpretations of constitutional language adopted to meet different conditions (at p. 880) ." Respectfully submitted, Ronald S. Javor Legal Counsel