Nov 23, 2015 - regarding how the Plaza Hotel could be repurposed to house the homeless for a duration of five years. At
COUNCIL AGENDA: ITEM:
12/15/15 4.3
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SANJOSE
Memorandum
CAPITAL OF SILICON VALLEY
TO: HONORABLE MAYOR AND CITY COUNCIL
FROM: Jacky Morales-Ferrand
SUBJECT: ACQUISITION OF THE PLAZA HOTEL Approved^ , ^
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DATE: November 23, 2015
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COUNCIL DISTRICT: 3 RECOMMENDATION Adopt a resolution: (a) Authorizing the Director of Housing, on behalf of the City, to negotiate and execute a purchase and sale agreement to acquire the Plaza Hotel, located at 96 South Almaden Boulevard ("Plaza Hotel" or "Property"), from the Successor Agency to the Redevelopment Agency of the City of San Jose ("SARA") for $750,000 from the Community Development Block Grant ("CDBG") Fund for the purposes of housing the homeless for a duration of five years; and (b) Authorizing the Director of Housing to negotiate and execute all other legal documents in order to effectuate the acquisition.
OUTCOME Approval of the recommended actions will allow the City to acquire the Plaza Hotel in order to provide transitional housing for currently homeless households for a duration of five years.
BACKGROUND On September 22, 2015, the Housing Department presented options to the City Council regarding how the Plaza Hotel could be repurposed to house the homeless for a duration of five years. At the September meeting, the City Council directed the Housing Department to pursue steps necessary to control the Plaza Hotel by seeking approval from the Oversight Board to the Successor Agency of the Redevelopment Agency of San Jose ("Oversight Board"). The City Council also directed staff to explore the possibility of housing homeless veterans in a portion of the rooms at the Plaza Hotel.
HONORABLE MAYOR AND CITY COUNCIL November 23, 2015 Subject: Acquisition and Rehabilitation of the Plaza Hotel
Page 2
On December 10, 2015, the Oversight Board will consider the City's offer to acquire the Plaza Hotel for its appraised value of $740,000. The Oversight Board's approval is a required condition before the City is able to purchase the property. The Housing Department will issue a supplemental memorandum if the Oversight Board's action requires any clarification or changes to the actions and conditions outlined in this memorandum.
ANALYSIS Benefits of Acquisition The Plaza Hotel presents a unique opportunity to house homeless individuals in a relatively short period of time. Utilizing the Plaza Hotel for this purpose is the City's most viable option for the following reasons: 1. The Plaza Hotel can house people much more quickly than constructing a new project or converting a commercial building. Because it has been vacant for years, some rehabilitation work will need to be completed prior to occupancy. 2. The Plaza Hotel is vacant. As a result, there are no occupants to relocate. This avoids the additional cost and time that would otherwise be associated with acquisition of an occupied building. 3. The Plaza Hotel's zoning and general plan designation allows for residential use. Therefore, the additional time that would otherwise be required for General Plan and zoning changes is not necessary. 4. The downtown location of the Property provides some relief to the downtown businesses that have been impacted by homeless people residing in the downtown. It will also provide some immediate housing for homeless individuals who have City-issued rental coupons but have been unable to find a privately-owned apartment that would accept the coupons. 5. This action activates a vacant and underutilized building. Acquisition Cost If directed to acquire the Plaza Hotel, staff would work with SARA staff to execute a Purchase and Sale Agreement to acquire the Property for its appraised value of $740,000, plus up to $10,000 to cover closing costs. This purchase price is supported by an appraisal by J Kaeuper & Company on July 28, 2015. Rehabilitation and Operations of the Property At this time, the Plaza Hotel is in a state of disrepair and requires an investment from the City to make it habitable prior to its occupancy. Initial analysis determined the estimated cost to bring the Property to a habitable condition was $1,500,000. Details on the anticipated costs of
HONORABLE MAYOR AND CITY COUNCIL November 23, 2015 Subject: Acquisition and Rehabilitation of the Plaza Hotel
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rehabilitating the Plaza Hotel is provided in Attachment B, the supplemental memorandum, dated September 21, 2015. However, the final cost of the rehabilitation will not be known until the City acquires the Property and conducts more detailed analysis. Staff has identified that federal Community Development Block Grant (CDBG) funds are a viable source to both acquire and renovate the Plaza Hotel to house homeless individuals because the Plaza Hotel will be purchased and held by the City, the building must be used to meet a national objective. At the time the City decides to no longer use it as homeless housing then the change in use must be publically noticed. The goal is to utilize the site temporarily until a supportive housing site is constructed in the downtown. Upon sale, the current fair market value of the property will be returned to the CDBG program. NEPA approval has been finalized for the Property, which enables the use of federal funds for acquisition and rehabilitation. After acquiring the Plaza Hotel, the Housing Department intends to lease it to Abode Services ("Abode"). Abode was selected through two separate competitive processes the Housing Department conducted to identify potential operators of: 1) under-utilized hotels for master leasing; and 2) supportive housing developments in the Downtown Core. In addition to operating the Property, Abode would also be charged with exploring the possibility of how homeless veterans could occupy a portion of the rooms at the Property.
EVALUATION AND FOLLOW-UP Staff will bring forward a separate City Council action early in 2016 with a rehabilitation funding request and more detailed terms of a lease agreement with Abode.
POLICY ALTERNATIVES To arrive at this proposal, staff considered the following option: Alternative:
Look for opportunities to use the Plaza Hotel for a purpose other than housing the homeless.
Pros:
The Plaza Hotel would be sold to the highest bidder which would allow for private development of the property. A high-density reuse will likely invigorate the Downtown.
Cons:
The City would give up a unique, much-needed opportunity to house 49 homeless individuals in the near-term for a very reasonable price. In addition, the Property can still be redeveloped in the future after its immediate use in its current form.
Reason for not Acquisition of the Plaza Hotel presents a unique, financially viable recommending: opportunity to house homeless individuals in the near-term, which compliments the Housing Department's other activities to serve the housing needs of the homeless.
HONORABLE MAYOR AND CITY COUNCIL November 23, 2015 Subject: Acquisition and Rehabilitation of the Plaza Hotel
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PUBLIC OUTREACH The Housing Department hosted an outreach meeting on July 15, 2015, with stakeholders from the San Jose Downtown Association, development firms, commercial and residential property management companies, and the public to discuss the concept of the Plaza Hotel and to address any potential concerns. On August 14, 2015, the Housing Department participated in a meeting about downtown homelessness hosted by the San Jose Downtown Association. An estimated 100 individuals representing the business, nonprofit, and governmental industries attended the meeting. At the meeting, Housing Department staff provided information about how the Plaza Hotel would be utilized to house members of the homeless population. The Housing Department's memorandum for the September 22, 2015 Council, meeting was posted on the City's Council Agenda website. In addition, the SARA memorandum to the Oversight Board for its meeting on November 19, 2015, was posted to the Oversight Board Agendas page on the City of San Jose website. Finally, this Memorandum will be posted on the City's Council Agenda website for the December 15, 2015 Council meeting.
COORDINATION Preparation of this report was coordinated with the Office of the City Attorney.
COMMISSION RECOMMENDATION The potential use of underutilized hotels has been discussed by the Housing and Community Development Commission as a viable and positive option to house the homeless in San Jose.
POLICY ALIGNMENT This expenditure is consistent with the following policy documents: the City's Envision 2040 General Plan and the 2014-23 Adopted Housing Element in that it will help the City meet its Regional Housing Needs Allocation; the City's current Housing Investment Plan in that it increases San Jose's supply of affordable housing; the City's 2015-20 HUD Consolidated Plan that it will provide rental homes affordable to very low- and extremely low-income households; and, the Community Plan to End Homelessness approved by the City Council in February 2015 that it is providing supportive housing for homeless residents.
HONORABLE MAYOR AND CITY COUNCIL November 23, 2015 Subject: Acquisition and Rehabilitation of the Plaza Hotel
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COST SUMMARY/IMPLICATIONS 1.
AMOUNT OF RECOMMENDATION: EXPENSES
AMOUNT
Purchase Price Closing Costs
$740,000 $10,000
TOTAL
$750,000
2.
SOURCE OF FUNDING: $750,000 Community Development Block Grant Fund (441)
3.
FISCAL IMPACT: Funding in the amount of $750,000 was previously appropriated in the Community Development Block Grant Fund (441) for acquisition of the Plaza Hotel property.
BUDGET REFERENCE The table below identifies the fund and appropriations proposed to fund the actions recommended as part of this Memorandum.
Fund # 441
Appn # 3115
Appn. Name Property Acquisition
441
2246
Housing Program Development and Monitoring
Total Appn $1,400,000
Proposed Action $740,000
2015-2016 Adopted Operating Budget XI-15
$1,451,850
$10,000
XI-15
Last Budget Action (Date, Ord. No.) 10/20/15 Ord. 29636 6/23/15 Ord. 29589
CEOA Exempt, File No. PP15-078. /s/ JACKY MORALES-FERRAND Director of Housing
For questions, please contact Patrick Heisinger, Senior Development Officer, at (408) 975-2647. Attachments
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