Following a couple of discussions exhaustively vetting the risks associated with a unique offer, Burlingame officials agreed to take a chance on a proposed land deal designed to boost the city’s affordable housing stock.
The Burlingame City Council voted 4-1, with Councilwoman Ann Keighran opposing, to enter a joint powers authority interested in purchasing a local apartment building with between 100 and 150 units.
Should the authority operated by the California Community Housing Agency, or CalCHA, acquire the unspecified building, which is slated to go to market early next week, rents of the units would be reserved for those making between 60% to 120% of the area median income.
In the wake of two lengthy discussions this week by councilmembers examining all potential pitfalls, Vice Mayor Emily Beach indicated she reached a sufficient level of comfort with the arrangement, according to video of the meeting Wednesday, Dec. 4.
“I think the process has been very uncomfortable. None of us like doing public policy decisions on this short of notice. But this is a really important opportunity,” she said.
Officials rushed to make a decision on the proposal, so as to join the authority in sufficient time to make an offer on the building, which remains unidentified for fear of sacrificing bargaining leverage.
And while most councilmembers backed Beach’s willingness to overcome their unease with hopes of capitalizing on a unique and fleeting deal, Keighran could not muster the support needed to join her colleagues.
“There are too many unknowns that I don’t feel comfortable,” she said.
Officials all generally agreed there are unanswerable questions associated with the proposal, given the contracted time frame under which they must operate. But to become more comfortable with the proposal, Councilman Ricardo Ortiz played out an alternative scenario.
Regardless of whether the authority is able to acquire the property, it will be sold, he said. And according to Mayor Donna Colson, the building is marketed as an opportunity for the new buyer to evict existing tenants to make room for renovations, then relist the property at market rates. So even if the property does not mature to become a lucrative asset, there is a value associated with attempting to protect the existing tenants, said Ortiz.
“I’m still a little uncomfortable about it but I can’t see sitting here allowing option one happen,” said Ortiz, referring to staying on the sidelines while another buyer steps in and displaces hundreds of Burlingame residents.
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Should the authority buy the building, rents would be capped for existing tenants who earn between 60% and 120% of the area median income. For those currently earning more than that range, rents would be brought near the market. As those units turn over, rents would be reset again in the preferred range designed to accommodate teachers, city workers and other middle income earners.
Another source of discomfort for officials is the unique financing structure needed to purchase the building.
Under the agreement, city officials become non-voting members of the authority. In turn, Burlingame faces no additional investment obligation but neither collects property taxes on the land, nor does the county or local school district. The authority also maintains the license to issue revenue bonds to finance the deal, and after a period of 15 and 30 years, Burlingame officials stand to receive the opportunity to take over the property.
Officials can exit the authority at any point with no penalty, and are seeking assurances that the authority will not attempt to purchase other Burlingame properties without their consent. If the identified property is not acquired, officials plan to leave the authority immediately.
Keighran said the loss of property tax income compounded her concerns as well. City Manager Lisa Goldman added County Manager Mike Callagy called to express his reservations with the financial impact of the arrangement.
Colson balanced such concerns by noting Burlingame does not seek Measure K funding from the county as frequently as other local municipalities, and will add to the property tax base with commercial development along the Bayshore to offset the loss.
Noting the variety of reservations associated with the proposal, Councilman Michael Brownrigg said ultimately he felt the venture was worth pursuing.
“These dice are worth rolling in order to protect the families that are there and to make sure it is affordable for the next 30 years to the people in our middle class and working class,” he said.
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(1) comment
Walking away from the property tax income is mistake. The market suggests it would be more prosperous for Burlingame to let the property sell, the new owner makes improvements, and tenants later pay market and help generate property tax income. To make these arrangements for properties today, with an expectation that it and similar arrangements later, will somehow help thousands and thousands of people come to the peninsula and be able to "live affordability" forever is wrong headed. City entanglements with properties/rules re rents etc. and the attendant decisions for so-called "low income" housing is not helping the middle class in California's large cities and areas like the peninsula.
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