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Alternative 3— Select the cash payment and allocate $1,041,421 to the LIHF for allowable uses and allocate the remaining $3,458,579 to a special fund for a one time operating program or capital project, including potentially an affordable housing project, to be determined as part of the City's regular priority setting, budget and capital improvement program process. Opportunities/Benefits • Same as Alternative 2 above • Provides the City Council with the flexibility to fully evaluate City needs, including those related to affordable housing, make a determination regarding the best use for these funds within the context of other competing needs. Limitations /Concerns • If used for non - housing purposes, it would not address current affordable housing needs. Analysis Staff recognizes that the community has many interests and needs of which BMR housing is only one. Further, the City has been in a challenging period economically where additional revenue for needed improvements would be welcome. However, notwithstanding the financial benefits, staffs perspective is that this benefit does not outweigh the overall benefits of obtaining below market housing. A summary of some of the issues is as follows: • The benefit of taking a cash payment is somewhat offset by the fact that as part of the most recent negotiations with the high density housing developers, development agreements were approved that provide for the City to utilize In Lieu Park Dedication fees for a wide range of park related improvements, including park renovation, enhancement and expansion, rather than just park land acquisition. As such, the City now has the prospect of receiving funding that was not anticipated previously. Attachment 5 reflects the anticipated amount of In Lieu Park Dedication fees that may be collected and the allowable use for these fees. • The opportunity to obtain actual BMR units is quite limited and reflected clearly in the fact that the of the City's estimated 7,698 constructed or approved residential apartment units, a total of 1,295 (5 %) are BMR units with regulated rents. The City is approaching a time when opportunities to obtain a significant number of BMR units is limited and as such, it is beneficial to capture this opportunity. • While over the years some residents have expressed concern regarding the impact of lower income households from many perspectives, including crime, social engineering, impact on services, etc., for this development, a total of 25 units (nearly 50% of the total 52 BMR units) would be reserved for residents with incomes at the median income. Further, 17, or 33% of the total units, would be reserved for Page 7 of 9