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THE CITY OF 3 i j~L£~S~NTONo CITY COUNCIL AGENDA REPORT April 17, 2007 Assistant City Manager TITLE: APPROVAL OF AN AFFORDABLE HOUSING AGREEMENT AND AMENDMENT TO AN EXISTING AGREEMENT WITH PONDEROSA HOMES FOR THE LEHMAN/SELWAY DEVELOPMENT (PUD-50) SUMMARY The City Housing Commission and staff are recommending the City Council approve the establishment of a City funded rent reduction grant program for the Gardens of Ironwood located at 4341 Cornerstone Court. The rent reduction program will be in the form of an annual financial grant made to the Gardens of Ironwood to reduce the monthly rent payments by approximately 33% for five households/units. The grant will be funded entirely by a payment of $313,126 from Ponderosa Homes to the City made to meet its Inclusionary Zoning Ordinance obligation for the Lehman\Selway development (PUD-50) recently approved by the City Council. HOUSING COMMISSION RECOMMENDATION Recommend the City Council approve a rent reduction program for the Gardens of Ironwood to be funded by a Lower Income Housing Fee payment from Ponderosa Homes for the Lehman\Selway development. STAFF RECOMMENDATION Approve the Affordable Housing Agreement (Attachment 1) requiring a Lower Income Housing Fee payment of $313,126 for the Lehman\Selway development and an Amendment #2 (Attachment 2) to the affordable housing agreement entered into by the City in May 2003 for the Busch Property developed by Ponderosa Homes. These agreements implement the rent reduction program as approved by the Housing Commission. FINANCIAL STATEMENT With a conservative rate of return, investing the $313,126 paid by Ponderosa Homes will yield enough revenue to meet the City's maximum financial exposure of $378, 598 for the full fifteen years of the program. If the City elects to extent the grant program beyond fifteen years, the Lower Income Housing Fund will most likely fund it. Although, there is no obligation to extend the program beyond the initial fifteen years, the owners have offered to extend the program for three option terms of five-years.