Chapter 5.06

CONTRACT AUTHORITY OF THE DIRECTOR OF HOUSING, CITY MANAGER AND DIRECTOR OF FINANCE

Parts:

• 1 Purpose

• 2 Definitions

• 3 Authority of Director of Housing

• 4 Joint Authority of Director of Housing and Director of Finance

• 5 Authority of Director of Finance

• 6 Authority of City Manager

• 7 Reports

Part 1

PURPOSE

Sections:

The purpose of the department of housing is to administer the city's comprehensive affordable housing program. To achieve that purpose, the department assists in the financing of acquisition, development, construction and rehabilitation of single-family dwelling units, multi-family dwelling units and mobilehomes for lower and moderate income residents of the City of San José. Additionally, the department manages its portfolio of loans, develops and implements housing policy, coordinates homeless programs and activities on behalf of the city, and assists in revitalizing neighborhoods through its housing assistance programs. (Ords. 23589, 24500, 26127, 26657.)

Part 2

DEFINITIONS

Sections:

• 5.06.200 Definitions generally. 5.06.204 CDLAC.

• 5.06.210 Consolidated plan. 5.06.215 General parameters. 5.06.220 Homebuyer program.

• 5.06.230 Housing guidelines. 5.06.240 Housing rehabilitation. 5.06.242 Inducement declaration. 5.06.245 IRS Code.

• 5.06.250 Major monetary default. 5.06.260 Minor monetary default. 5.06.265 Mobilehome.

• 5.06.270 Multi-family dwelling.

• 5.06.280 Non-monetary default. 5.06.285 Replacement housing. 5.06.290 Single family dwelling. 5.06.295 TEFRA.

The definitions set forth in this part shall govern the application and interpretation of this chapter.

(Ords. 26127, 26657.)

"CDLAC" means the California debt limit allocation committee. (Ord. 26657.)

"Consolidated Plan" means the federally required document pertaining to the community development block grant and housing programs and activities that the city must submit annually to the United States department of housing and urban development.

(Ords. 26127, 26657.)

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"General parameters" means the city council's approval parameters of a housing project, including, but not limited to:

• A. Identify of a developer.

• B. Approximate level of loan/grant funding.

• C. Affordability mix.

• D. Other sources of funds.

• E. Process/steps that the housing project will need to undergo.

(Ord. 26657.)

"IRS Code" means the Internal Revenue Code of 1986, as amended, including any Internal Revenue Regulations, as amended. (Ord. 26657.)

"Major monetary default" means non-payment of a loan to a superior lienholder, nonpayment of a loan to the city, bankruptcy of the borrower, or other action or failure of action that may result in jeopardizing the repayment of the loan made by the city, or the city's security interest therein. (Ords. 26127, 26657.)

"Homebuyer program" means housing programs providing mortgage loans, downpayment and closing cost assistance, interest subsidies and/or income tax benefits to income-qualifying homebuyers.

(Ords. 26127, 26657.)

"Housing guidelines" means the city's project development handbook, rehabilitation program handbook, loan management handbook, and any other handbook, guidelines, manuals, or procedures, that may be developed and issued by the director of housing from time to time. (Ords. 26127, 26657.)

"Housing rehabilitation" means painting, roofing, plumbing, electrical or other work to a singlefamily dwelling, to a multi-family dwelling, or mobilehome that restores or preserves the habitable condition of the single-family dwelling, multifamily dwelling or mobilehome. (Ords. 26127, 26657.)

"Inducement declarations" means the declarations of intent to reimburse costs paid prior to the issuance of bonds, pursuant to the IRS Code. (Ord. 26657.)

"Minor monetary default" means a monetary default that is not a major monetary default and includes, but is not limited to:

• A. Failure of the borrower to carry adequate insurance on the property.

• B. Non-payment by the borrower of real property taxes.

• C. Further hypothecation, or additional liens and judgments on the property.

(Ords. 26127, 26657.)

"Mobilehome" means a structure transportable in one or more sections, designed and equipped to contain one living unit, to be used with or without a foundation system, when connected to required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained therein. "Mobilehome" does not include a recreational vehicle or travel trailer. When installed on a foundation system (pursuant to Section 18851 of the California Health and Safety Code), a mobilehome shall be deemed a fixture and a real property improvement to the real property to which it is affixed.

(Ords. 26127, 26657.)

"Multi-family dwelling " means a detached building of permanent character placed in a perma-

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nent location which is designed or used for residential occupancy by more than one household, and includes single-room occupancy (SRO) living unit facilities.

(Ords. 26127, 26657.)

"Non-monetary default" means a default under the provisions of loan documents that is neither a major monetary default, nor a minor monetary default, and which is a failure to comply with any condition, covenant, term or provision of the loan documents, including allowing the city's security to deteriorate to the point of jeopardizing the loan made by the city or the city's security interest therein. (Ords. 26127, 26657.)

"Replacement housing" for purposes of housing rehabilitation, means construction of housing to replace a deteriorated multi-family dwelling of up to four units, or a single-family dwelling on real property which is owned by the borrower. (Ords. 26127, 26657.)

• 5.06.320 Replacement housing project loans.

• 5.06.330 Homebuyer programs.

• 5.06.335 Authority to negotiate and execute council-approved loans, grants and programs.

• 5.06.340 Changes to loans based on council-approved general parameters.

• 5.06.345 Changes to grants based on council-approved general parameters.

• 5.06.350 Federal, state and other housing project funds.

• 5.06.355 Housing and homeless fund.

• 5.06.356 Predevelopment funds.

• 5.06.360 Contracts form.

• 5.06.365 Annual action plan implementation.

• 5.06.380 Loan defaults and foreclosures.

• 5.06.385 Acquisition of property.

• 5.06.390 Acquired properties.

• 5.06.400 Leasing of properties.

• 5.06.410 Insurance payments.

"Single-family dwelling" means a detached building of permanent character placed in a permanent location which is designed or used for residential occupancy by one household. (Ords. 26127, 26657.)

"TEFRA" means the Tax Equity and Fiscal Responsibility Act set forth in Section 147(f) of the IRS Code.

(Ord. 26657.)

Part 3

AUTHORITY OF DIRECTOR OF HOUSING

Sections:

The director shall not enter into or execute any contract, loan or grant document pursuant to the provisions of this chapter unless the monies to be expended by the city for the contract or loan document have been previously appropriated by ordinance of the city council for the fiscal year in which the contract, loan or grant document is executed. (Ords. 23589, 24500, 26127, 26657.)

• A. The director is authorized to enter into and execute, on behalf of the city or on behalf of the redevelopment agency of the City of San José, contracts, including, without limitation, any housing rehabilitation contract, loan or grant agreement which will improve or preserve the affordable housing units available in

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the city. The director's authority to enter into and execute such contracts, loan or grant agreements is subject to:

1. Such conditions and limitations as are set forth in this chapter, and throughout this Code, including, without limitation, Section 2.04.2620 and Part 38 of Chapter 4.80 of the municipal code.

2. The requirements and restrictions of the department's housing guidelines.

3. Such conditions and limitations as may from time to time be imposed by resolution or other action of the city council or the redevelopment agency board.

• B. The maximum amount of a loan or grant to any person or entity for housing rehabilitation shall be established by resolution of the city council.

(Ords. 23589, 24500, 26127, 26657.)

• A. The director is authorized to enter into and execute, on behalf of the city or on behalf of the redevelopment agency, contracts, including, without limitation, any replacement housing contract or loan document which will increase, improve or preserve the affordable housing units available in the city. The director's authority to enter into and execute such contracts and loan documents is subject to:

  1. Such conditions and limitations as are set forth in this chapter and throughout this Code, including, without limitation, Section 2.04.2620 and Part 38 of Chapter 4.80 of the municipal code.

  2. The requirements and restrictions of the housing guidelines.

  3. Such conditions and limitations as may from time to time be imposed by resolution or other action of the city council or the redevelopment agency board.

• B. The maximum amount of a loan to any borrower for a replacement housing project shall be established by resolution of the city council.

(Ords. 26127, 26657.)

• A. In furtherance of the city's comprehensive affordable housing program, the director is authorized to enter into and execute, on behalf of the city or on behalf of the redevelopment agency, contracts, including, without limitation, any homebuyer program contract or loan document which will increase, improve or preserve the affordable housing units available in the city. The director's authority to enter into and execute such contracts and loan documents is subject to:

  1. Such conditions and limitations as are set forth in this chapter, and throughout this Code, including, without limitation, Sections 2.04.1720 and Part 38 of Chapter 4.80 of the municipal code.

  2. The requirements and restrictions of the department's housing guidelines.

  3. Such conditions and limitations as may from time to time be imposed by resolution or other action of the city council or the redevelopment agency board.

• B. The maximum loan to any borrower under the homebuyer program shall be established by resolution of the city council.

(Ords. 23589, 24500, 26127, 26657.)

The director is authorized to negotiate, execute and enter into contracts, loan and grant documents, other affordable housing program agreements, and agreements for other grant programs administered by the department of housing, consistent with the general parameters.

(Ords. 26127, 26657, 28067.)

• A. Any amendment of a contract, or loan document, for a project with previously approved general parameters by the city council, the director is authorized to enter into and exe-

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cute, on behalf of the city or on behalf of the redevelopment agency, any amendment of a contract or loan document for a project with previously approved general parameters by the city council, whether before or after the recordation of the loan documents, which involves any one (1) or more of the following circumstances:

1. A change in either the loan repayment, loan maturity, or other loan performance date, which results from unavoidable project construction schedule changes, project permit delays, requirements of other lenders, a remedy of a loan default, in advance of a loan default, or in instances when partial advance payments are made on the loan.

2. A change in the number or type of singlefamily dwellings or multi-family dwellings subject to the city's affordability restrictions where the change will neither exceed nor affect more than ten (10) percent of the originally approved number of units subject to the affordability restrictions and where the change will not reduce the percentage of units below the percentage required to be restricted for the project by local, state or federal law.

3. A change in the amount of the loan or loans to which the city's loan is subordinate, or a change in the city's loan priority, as long as the combined percentage of loan to value of the total loans for the housing project will not exceed either one hundred (100) percent, unless exceeding a loan to value ratio of one hundred (100) percent is necessary to preserve the affordability of the housing project, or protect the security of the city's loan.

4. An increase in the principal amount of a loan by no more than twenty (20) percent

of the loan amount; provided that all of the following occur prior to the approval of any increase:

• a. The director has determined by substantial evidence that:

  • i. The housing project which is the subject of the loan could not otherwise proceed; or

  • ii. The increase would materially reduce the cost or risk to the city.

• b. The total percentage of loan-tovalue ratio after such an increase will not exceed one hundred (100) percent, unless exceeding a loan to value ratio of one hundred (100) percent is necessary to preserve the affordability of the housing project or to protect the security of the city's loan or grant.

• c. The increased loan amount is available, at the time the loan is made, from the funding sources appropriated to the department, including the low and moderate income housing funds, HOME funds, community development block grant funds, and other funds which may be appropriated to the department from time to time.

5. A forgiveness of accrued interest on any portion of a loan that is in default, or in advance of a loan default, in an amount not to exceed in the aggregate ten (10) percent of the council-approved loan principal amount, over the term of the loan.

6. Notwithstanding the limitations set forth in Section 5.06.340.A.4, an increase in the principal of a permanent loan by an amount necessary to include all accrued but uncollected interest on a city acquisition, construction or predevelopment

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loan for the same project; provided that both of the following occur prior to approval of such increase:

• a. The director has determined by substantial evidence that:

  • i. The housing project which is the subject of the loan could not otherwise proceed, or

  • ii. The increase would materially reduce the cost or risk to the city, and

• b. The total percentage of loan-tovalue ratio after such an increase will not exceed one hundred (100) percent, unless exceeding a loan to value ratio of one hundred (100) percent is necessary to preserve the affordability of the housing project or to protect the security of the city's loan.

7. A change in the source of funding for a loan; provided, however, that the outstanding loan amount is available at the time of the change of the funding source, from the alternate funding sources appropriated to the department, including, without limitation, low and moderate income housing funds, HOME funds, community development block grant funds, tax-exempt bond proceeds, and other funds which the department may from time to time receive.

8. Conversion of a loan to a grant if all of the following occur prior to approval of any conversion:

   • a. The director has determined by substantial evidence that:

     • i. The housing project which is the subject of the proposed loan conversion could not otherwise proceed; and

     • ii. The proposed loan conversion would materially reduce the administrative cost to the city; and

     • iii. To the extent applicable, the law governing another lender's proposed additional funding prohibits, or makes it impractical, for another lien to exist on the property that is the subject of the loan.

   9. A change in either the interest rate, interest calculation method, repayment schedule, or other loan terms, that does not materially increase the cost or risk to the city, and that results from requirements of other lenders, a need to make technical corrections to loan documents, a remedy of a loan default, or in advance of a loan default.

   10. Prior to the recordation of a loan or grant security interest, a change of the borrower or grantee, provided, however, that the participation of the developer of the affordable housing project previously approved by the city council, is maintained.

   11. A change to increase individual secondmortgage loan amounts by up to twentyfive (25) percent.

   12. A change to allow the transfer of indebtedness and ownership of the affordable housing project to another qualified developer/sponsor if there is no increased risk to the city's loan or grant security and no change in affordability, targeted population, or services.

• B. Any amendment shall be subject to:

1. Such conditions and limitations as are set forth in this chapter, and throughout this Code, including, without limitation, Section 2.04.2620, and Part 38 of Chapter 4.08 of the Municipal Code.

2. Such conditions and limitations as may from time to time be imposed by resolution or other action of the city council.

(Ords. 23589, 24500, 26127, 26657, 28067.)

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§ 5.06.345

• A. The director is authorized to negotiate and execute, on behalf of the city or on behalf of the redevelopment agency, contracts, including, but not limited to, any amendment of a contract or grant document of a grant for a project with previously approved general parameters by the city council which involves any one or more of the following circumstances:

  1. A change in grant performance dates resulting from unavoidable project construction schedule changes, project permit delays, or requirements of other lenders or grantors.

  2. A change in the number or type of singlefamily dwellings or multi-family dwellings subject to the city's affordability restrictions where the change will neither exceed nor affect more than ten percent of the originally approved number of units subject to the affordability restrictions and where the change would not reduce the percentage of units below the percentage required to be restricted for the project by local, state or federal law.

  3. An increase in the grant amount by no more than twenty percent of the grant amount; provided that all of the following occur prior to approval of any increase:

     • a. The director has determined by substantial evidence that:

       • (1) The housing project which is the subject of the grant could not otherwise proceed, and

       • (2) The increase would materially reduce the cost or risk to the city, and

       • (3) The increased grant amount is available, at the time the grant is made, from the funding sources appropriated to the department, including the low

and moderate income housing funds, HOME funds, community development block grant funds, and other funds which may be appropriated to the department from time to time.

4. A change in the source of funding for a grant, provided, however, that the outstanding grant amount is available at the time of the change of the funding source, from the alternate funding sources appropriated to the department, including, but not limited to, low and moderate income housing funds, HOME funds, community development block grant funds, taxexempt tax allocation bond proceeds, and other funds which the department may from time to time receive.

• B. Any amendment shall be subject to:

  1. Such conditions and limitations as are set forth in this chapter, and throughout this Code, including, without limitation, Section 2.04.2620 and Part 38 of Chapter 4.08 of the municipal code.

2. Such conditions and limitations as may from time to time be imposed by resolution or other action of the city council or the redevelopment agency board.

(Ords. 26127, 26657.)

The director is authorized to enter into, execute and submit on behalf of the city or on behalf of the redevelopment agency, loan or grant applications, applications for mortgage credit certificate (MCC) allocations, required certifications and any other related documents to obtain or maintain funding assistance necessary to carry out the purposes of this chapter, except for CDLAC applications for tax exempt financings or applications requiring a payment of funds by the city or the redevelopment agency.

(Ords. 23589, 24500, 26127, 26657, 28067.)

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§ 5.06.390

The director is authorized to make individual loans or grants from monies in the housing and homeless fund not to exceed amounts established by resolution of the city council, to nonprofit service providers for projects that are consistent with the city council-approved criteria for expending these funds.

tary default, under homebuyer, project development, and housing rehabilitation loans. The director is further authorized to write-off homebuyer, project development, and housing rehabilitation loans that the director determines, after all reasonable legal collection efforts have been exhausted, to be uncollectible.

(Ords. 24500, 26127, 26657.)

(Ords. 26127, 26657.)

The director is authorized to make individual predevelopment loans or grants in amounts not exceeding one hundred thousand dollars ($100,000.00) to nonprofit housing organizations for projects with general parameters that are consistent with the criteria for expending these funds that are approved by resolution of the city council. (Ords. 26127, 26657, 28067.)

Notwithstanding the provisions contained in Section 2.04.4220 of this Code, the director is authorized to acquire property for affordable housing purposes subject to the following limitations:

• A. Such acquisitions are consistent with the city's administrative procedures for real property transactions; and

• B. The acquisition is at a purchase price not to exceed fair market value.

(Ords. 26127, 26657.)

All contracts, loan documents or amendments entered into or executed pursuant to the provisions of this chapter shall be in writing, be approved by the city attorney or the redevelopment agency general counsel, and be executed by the director in the name of the City of San José, or in the name of the redevelopment agency.

(Ords. 23589, 24500, 26127, 26657.)

The director is authorized to negotiate and execute, on behalf of the city or on behalf of the redevelopment agency, all grant agreements which are necessary to implement the housing programs and activities approved by the city council in its adoption of the annual action plan of the consolidated plan.

(Ords. 26127, 26657.)

The director is authorized to exercise all remedies available to a lender, in consultation with the city attorney, in the event of a non-monetary default, a major monetary default, or a minor mone-

• A. Notwithstanding the provisions of Section 2.04.4220 of this Code, the Director is authorized to provide management, (including maintenance) and/or to dispose of properties the City has acquired under this Chapter by direct purchase, foreclosure proceedings, or deeds in lieu of foreclosure, and to provide repairs to and replacement of, operating systems in those properties.

• B. Notwithstanding Section 27.02.050 of this Code, the Director is authorized to expend an amount not to exceed the lesser of fifteen (15) percent of the value of the property, or five hundred thousand dollars ($500,000.00) for any reasonable rehabilitation or improvements of properties acquired under this Chapter by direct purchase, foreclosure proceedings, or deeds in lieu.

• C. The Director is authorized to issue requests for proposals or requests for qualifications and to award consultant contracts up to fifty thousand dollars ($50,000.00) associated with (1) predevelopment activities for properties

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§ 5.06.390

that the City anticipates it will purchase for affordable housing, and (2) for professional services including, but not limited to, accountancy and auditing, in order to administer the federal and other grants programs of the department of housing and to investigate the financial situations of grantees and borrowers of City funds as the need arises.

(Ords. 24500, 26127, 26657, 28067, 30308.)

The director is authorized to enter into residential leases not to exceed ninety days to provide housing for tenants of properties acquired under Section 5.06.385 or for relocation of households displaced by housing rehabilitation not to exceed ninety days.

(Ords. 24500, 26127, 26657.)

tion of affordable housing projects. Such inducement declarations shall comply with the IRS Code. (Ord. 26657.)

• A. The director of housing and director of finance are jointly authorized to file applications with CDLAC to obtain the authorization to issue tax-exempt, private-activity bonds.

• B. The director of housing and director of finance are jointly authorized to obtain and place into escrow the CDLAC application fees and associated city processing deposits and fees from development entities.

• (Ord. 26657.)

Part 5

AUTHORITY OF DIRECTOR OF FINANCE

In furtherance of the city's comprehensive affordable housing program, the director is authorized to endorse insurance payment checks made payable to the city as an insured or co-insured, where the director has sufficient assurance and binding commitment from the borrower that the insurance proceeds will be used to restore the value of the security for the city's loan. (Ords. 26127, 26657.)

Part 4

JOINT AUTHORITY OF DIRECTOR OF HOUSING AND DIRECTOR OF FINANCE

Sections:

• A. The director of finance is authorized to hold TEFRA hearings on the issuance of taxexempt bonds within the City of San José to finance affordable housing projects, in accordance with notice and other requirements established by the IRS Code. Such hearings shall be known as the finance director's TEFRA hearings.

• B. The director of finance shall be charged with the responsibility of processing certificates of compliance executed by the Mayor, in accordance with the IRS Code.

• (Ords. 26657, 31191.)

Part 6

The director of housing and the director of finance are jointly authorized to issue inducement declarations to express the city's intent to issue tax-exempt revenue bonds to finance the construc-

AUTHORITY OF CITY MANAGER

Sections:

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§ 5.08.010

The city manager is authorized to execute loans and grants consistent with the general parameters set forth in Section 5.06.215 for specific affordable housing developments and other grant programs administered by the department of housing, as long as the following criteria are met:

• A. The total loan interest rate does not exceed five (5) percent.

• B. The loan repayment term does not extend the loan term beyond the term of the affordability restriction.

• C. The repayment term maintains at a least a fifty (50) percent share of residual receipts, unless a lower percentage is required in the loans from other public lenders.

• D. The city's lien priority does not jeopardize the loan or grant security or project affordability, in the judgment of the city manager.

• E. The term of the affordability restriction is consistent with applicable state and federal regulations.

• F. The loan conditions continue to protect the loan or grant security, or leverage additional non-city funding, or accelerate loan repayment to the city.

• (Ords. 26657, 28067.)

Part 7

REPORTS

Sections:

At least once each calendar year, the city manager, or designee, shall file with the city council a report that lists all actions and transactions that have occurred with regard to this title. (Ord. 26657.)