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RES 2003-31 AFFORDABLE HOUSING APPLICATIONSRESOLUTION NO. 2003-31 A RESOLUTION of the City Council of the City of Bainbridge Island, Washington, related to affordable housing; authorizing income -qualified units in all land use applications to follow the administrative procedures established by BIMC 18.90.060; and repealing Resolution No. 2001-01. WHEREAS, the City adopted a Comprehensive Plan on September 1, 1994, subsequently amended, which contains a Housing Element that establishes goals and policies for the provision of affordable housing; and WHEREAS, the City has implemented an affordable housing program to meet the goals of the Comprehensive Plan, as contained in BIMC Chapter 18.90, which requires that land use applications of eight or more dwelling units or residential lots, or 10,000 square feet or more of residential floor area ratio in the Mixed Use Town Center/High School Road Districts, must provide ten percent of the dwelling units for income -qualified households; and WHEREAS, the initial income -qualified buyer may resell the income -qualified unit at market rate, subject to an administrative procedure, adopted by resolution of the City Council, which allows the city to capture a share of the appreciation; and WHEREAS, on December 22, 1999, the City Council adopted Resolution No. 99-39, establishing interim administrative procedures as outlined in Exhibit A, attached; and WHEREAS, on January 24, 2001, the City Council adopted Resolution No. 2001-01, establishing administrative procedures as outlined in Exhibit B, attached, which superceded those adopted by Resolution No. 99-39; and WHEREAS, on November 29, 2000 the City Council passed Ordinance 2000-40, adding new BIMC Section 18.90.060, to recognize that in planning for the construction of affordable units, certain developers and owners had relied on the procedures outlined in Resolution 99-39, and that these procedures should remain available to applications that were complete on or before September 25, 2000; and WHEREAS, the City has now had sufficient experience with the affordable housing program to determine that revisions to the program are needed; and WHEREAS, the City Council has further determined that the provisions of BIMC 18.90.060 should apply to all affordable home ownership units constructed or required to be constructed as a result of the requirements of BIMC Chapter 18.90 , regardless of date of application, until such time that the affordable housing program can be revised; now, therefore, THE CITY COUNCIL OF THE CITY OF BAINBRIDGE ISLAND, WASHINGTON, DOES RESOLVE AS FOLLOWS: Section 1: Any affordable home ownership units constructed or required to be constructed as part of a land use application that is not participating in the fee in -lieu of program adopted by Ordinance No. 2003-20, shall be subject to the provisions of BIMC 18.90.060 as in effect on the date of adoption of this resolution. Section 2: Resolution No. 2001-01 is repealed. PASSED by the City Council this 11 day of June, 2003 APPROVED by the Mayor thitalene day of Ju e,-2/003. Kordonowy, ayor ATTEST/AUTHENTICATE USAN P. KASPER, City Clerk FILED WITH THE CITY CLERK: June 6, 2003 PASSED BY THE CITY COUNCIL: June 11, 2003 RESOLUTION NO.: 2003-31 Administrative Procedures Adopted by Resolution 99-39 All affordable homeownership units created as a result of BIMC 18.90 or 18.40 shall be initially sold to income qualified households. 2. The sale shall be subject to a note secured by a Deed of Trust allowing the City to capture the difference between the initial appraised value and the actual sales price ("the subsidy") at the time of resale. In addition the City will capture a prorated share of the appreciation attributable to "the subsidy", provided the purchaser retains ownership for five years from the date of initial closing. 3. If the initial purchaser sells prior to the end of the five years, the City will capture an additional portion of the seller's share of the appreciation based on the following sliding scale, exclusive of any out -of pocket expenses, including actual cash down payments and the portion of the payments credited to principal: a. Within the first year, 80%. b. Within the second year, 60% C. Within the third year, 20% d. Within the fourth year, 15% e. Within the fifth year, 10% 4. The Deed of Trust will be generally subordinate to the primary financing and may be subordinate to other financing upon the review and approval of the City. 5. The note shall become due at the time of a change in ownership. 6. The note shall become due at the time the unit is no longer the primary residence of the qualified owner. The unit may not be rented to others within the first five years 7. The owner of an affordable housing unit shall not be required to pay to the City any shortfall resulting from the resale of the unit. 8. Any proceeds resulting from the sale of affordable housing shall be placed in the City's Housing Trust Fund. 9. A unit that is owned or sponsored by a public or private nonprofit agency that already restricts benefit and resale is exempt from the above provisions. EXHIBIT A Administrative Procedures Adopted By Resolution 2001-01 The following administrative procedures shall guide all transactions for affordable housing units created as a result of the requirements of Section 18.90.020C (2) of the Bainbridge Island Municipal Code, except those described in number 7 below: 1. All affordable homeownership units created as a result of BIMC 18.90 or 18.40 shall be initially sold to income qualified households. 2. Upon initial sale, the income qualified purchaser shall execute the following documents: a. Subsidy Agreement, setting the amount and terms of the subsidy. b. Promissory Note, detailing the requirements for repayment of the subsidy. c. Deed of Trust, securing the City's interest in the property. 3. The income qualified purchaser shall give the Housing Resources Board a right of first refusal to purchase the Property. 4. Upon resale at market rate the City will capture a percentage of the appreciation, net of sales costs, described in the Subsidy Agreement as follows: 1S'year 97% 2nd year 94% 3`d Year 90% 4d' Year 87% 5th Year 83% 6's Year 79% 7'" Year 75% 8'" Year 71% 9'h Year 67% l Os' Year 63% 11th Year 59% 12th Year 55% 13`s Year 51% 14th Year 47% 15`s year 42% 16th Year 35% 17'" Year 27% 180'Year 19% 19a' Year 11% 20th -3e 0% 5. The Deed of Trust will be generally subordinate to the primary financing and may be subordinate to other financing upon the review and approval by the City. 6. The note shall become due at the time of a change in ownership. 7. The owner of an affordable housing unit shall not be required to pay to the City any shortfall resulting from the resale of the unit. 8. Any proceeds resulting from the sale of affordable housing shall be placed in the City's Housing Trust Fund. 9. Affordable housing units created, owned, or sponsored by public and private non -profits already restricting benefit and resale are exempt from the above provisions. E7EE[BIT B City ofBainbridge Island PLANNING AND IMENT �rluior. �7 MEMORANDUff TO: City Council FROM: Kathy Cook DATE: June 4, 2003 RE: Meeting of June 11, 2003: Resolution 2003-31, Establishing Administrative Procedures for the Affordable Housing Program, and Repealing Resolution 2001-01 The Council recently passed Ordinance 2003-20, establishing an interim, optional fee in -lieu of program that would allow developers in the Mixed Use Town Center and High School Road districts to meet the City's affordable housing requirements by making a financial contribution to the Housing Trust Fund. This program was established to address problems associated with the City's current affordable housing program, including difficulties in marketing the affordable units. The fee in -lieu of program is limited to the downtown area, partly because this is where most of the current affordable housing units are located. Due to the subdivision moratorium, there are not many residential developments elsewhere on the Island that are subject to the affordable housing requirements. However, there are several subdivisions that were in process when the moratorium was established, and the affordable units in these developments are now coming on the market. Resolution 2003-31 is intended to provide flexibility in the administrative procedures that govern the affordable units, which should in turn make them more marketable. As established by BIMC 18.90.020C(2), the affordable housing units must be initially sold to income qualified buyers. The units can be resold at market rate, but at the time of resale the City's Housing Trust Fund captures a share of the appreciation. BIMC 18.90.020C(2) states that the repayment mechanism is to be specified in an administrative procedure adopted by resolution of the City Council. The City has had two different repayment mechanisms since the affordable housing program was developed.. (Summaries of the two programs are attached to Resolution 2003-31.) The first repayment mechanism was adopted by Resolution 99-39, and involved a subsidy that was calculated at the time of original purchase, based on the difference between the appraised fair market value and the reduced purchase price. This mechanism worked relatively well, and all the homes that were built under it have been sold. (Please note that the provisions of Resolution 99-39 were originally adopted on an interim, six-month basis, but were later extended by Ordinance 2000-40 to be available to applications that were complete by September 25, 2000. See BIMC 18.90.060.) In January 2001, Resolution 2001-01 was adopted, establishing a new repayment mechanism thatrequires that a percentage of the appreciation be paid to the City upon resale. Experience has now shown that due to the percentage of appreciation that must be paid to the City, prospective buyers are unwilling to participate and the units cannot be sold. As proposed, Resolution 2003-31 would repeal Resolution 2001- 01, and reinstate the earlier subsidy repayment program. I have heard from at least two real estate agents that they would be able to sell the affordable units currently on the market if this program were made available Please give me a call if you have any questions or would like further information. City of Bainbridge Island CITY COUNCIL AGENDA BILL X PROCESS INFORMATION Subject: Resolution 2003-31: Establishing Administrative Date: 06/11/03 Procedures for the Affordable Housing Program, and Repealing Resolution 2001-01. Agenda Item: Resolutions Bill No.: Contact Person: Kathy Cook Referral(s): Operations Committee Reading: ❑ 1St 1:12 nd Q 3rd BUDGET INFORMATION Department or Fund: Planning Department Total Expenditure Required Budgeted? Is a budget amendment required? (tax included): None Dyes Ono Oyes Ono POLICY INFORMATION Comprehensive Plan: Housing Element Municipal Code: BIMC 18.40.030 Goals: F. Review and revise the affordable housing program. Objectives: 5 DESCRIPTION/SUMMARY The attached draft Resolution 2003-31 would repeal the City's affordable housing administrative procedures, as adopted by Resolution 2001-01, and replace them with the administrative procedures that had been used prior to adoption of Resolution 2001-01. The resolution is a companion piece to the fee in - lieu of program recently established by the City Council, and is intended to assist applicants in meeting the City's affordable housing requirements until the affordable housing program can be reviewed and revised. Please see the attached staff memo for further information. RECOMMENDED ACTION Adopt Resolution 2003-31.