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bond counsel raises issue with the preference system, the City and developer would work to identify an <br /> alternative system. <br /> Mr. Bocian noted that it is not uncommon, that the City has always prevailed in this respect and that <br /> staff is confident the same will hold true for this project. The agreement further stipulates that it runs <br /> with the land and will remain in place for perpetuity, the project is required to accept Section 8 <br /> vouchers, units will be spread throughout the project, the developer is responsible for marketing the <br /> units and qualifying tenants, and that the project will provide three units (one each of one, two and three <br /> bedroom) that are specifically designed as accessible units. He stated that the proposed Development <br /> Agreement meets the requirements of the City's Inclusionary Zoning Ordinance (IZO) and exceeds it <br /> with respect to affordability. <br /> Mr. Bocian reviewed the Inclusionary Unit Credit Agreement. He explained that the City's IZO permits a <br /> developer to meet its affordable requirement by providing offsite use, which provides for situations <br /> where it may be more economically feasible if units do not occur within a certain development. In view <br /> of this option, the Council adopted Resolution 04-073 in 2004 to spell out of the overall guidelines and <br /> use of what are called Inclusionary Unit Credits (IUCs). Similar to the cap and trade concept, one <br /> project could choose to make its excess affordable units available through transfer or sale to another <br /> project looking to meet its offsite requirement. <br /> Vice-Mayor Cook-Kallio asked if the assumption is that this allows for greater affordability. <br /> Mr. Bocian said staff believes it does in this instance. The develop has been clear in that it could <br /> provide the level of affordability proposed here without some outside financial source to offset the cost. <br /> Staff and the developer are also aware that changes in the IZO law is making it increasingly difficult to <br /> achieve this level of affordability and see this as an opportunity to provide that here as well as make it <br /> available to another development that would otherwise not be able to accomplish the same. <br /> The proposed project provides 35 units to low or very low income households which is 9 units more <br /> than required by the IZO. Based on this language, the applicant would have 9 units to make available to <br /> another developer. In this particular instance however, the applicant is requesting 16 IUCs because of <br /> the depth of affordability. Staff and the Housing Commission carefully considered the request and feels <br /> the 16 credits can be supported with conditions. Staff is recommending that the Council approve 8 <br /> unconditional IUCs, which the applicant may do with as they wish without any implications for their own <br /> project. Use of the remaining 8 units would require the backfill of one 100% AMI unit for each IUC used. <br /> Assuming all 16 IUCs were transferred, the project would yield 19 of the original 50% AMI units and 8 <br /> units at 100% AMI. A total of 27 units would be credited to the project for an affordability level of 16%, <br /> the majority of which would still be at 50% AMI. <br /> The IUC Agreement contains two primary terms related to the use of the credits — the credits may be <br /> transferred to any existing or future development except for the California Center project and the <br /> transfer must occur prior to issuance of St. Anton's certificate of occupancy. The agreement also <br /> stipulates that if approved, the City Manager is authorized to sign any agreement related to use of the <br /> credits and the matter will not come before the Council for review or approval. <br /> Mr. Bocian stated that an action by the Council to approve the IUC Agreement supersedes some of the <br /> requirements set forth in Resolution 04-073. He did however note that the agreement is largely <br /> consistent with the resolution, with exception of the Council's ability to review and approve how the <br /> credits are shared. The agreement sets forth the City's issuance of a $500,000 fee waiver, paid from <br /> the Lower Income Housing Fund, to support the affordability of the project. It also establishes <br /> provisions should the project fail to obtain the expected financing. While staff believes it unlikely that <br /> should occur, the fallback provision is an affordability plan similar to what the Council approved for the <br /> California Center. <br /> City Council Minutes Page 6 of 14 May 21, 2013 <br />