To: Commissioners, Housing Advisory Commission
From: Thomas Lord
Subject: re U1 Property Purchase and Revenue Bond
Date: May 3, 2018


Recommendation: That the HAC discuss, amend, and adopt a referral to City Council described below.

The referral will support using 2017's U1 revenues to partially pay for the purchase of real properties at 1001 University Avenue, 1007 University Avenue, 1011 University Avenue, and 1925 Ninth Street -- the so-called Premier Cru building.

The referral will oppose using U1 revenues to support a revenue bond.


Real properties purchased in 2017

On March 28, 2017, Berkeley City Council voted to purchase the land and buildings at 1001 University Avenue, 1007 University Avenue, 1011 University Avenue, and 1925 Ninth Street -- the so-called Premier Cru building.

The City tentatively planned to use 1011 University Ave. as a temporary City Council chambers instead of the chambers in the seismically unsafe Maudelle Shirek building. 1007 University Ave. has a standing tenant with a long lease. Short term options for the parking lot at 1925 Ninth Street and the 1001 were not decided. In the long run, Council plans to use the site for housing.

To complete the purchase, the City borrowed $6,650,000 from its own Worker's Compensation Fund. Those funds must be replaced.

In May of 2017, the Housing Advisory Commission was advised that Council would soon consider repaying the Workers Compensation Fund using revenues raised by Measure U1 (an increase to the tax on residential rents).

Berkeley Way Funding Gap

More recently, on March 13, 2017, the City Manager informed City Council of a $15M funding gap for the BRIDGE Housing project at Berkeley Way. Council will consider issuing a revenue bond in the principle amount of $15M to be repayed with annual allocations from U1 revenues. The Mayor has suggested from the dais the possibility of issuing instead a $25M bond to have extra borrowed funds.

Locking in U1 revenues for years to come

If Council were to dedicate U1 to the real property purchase and the revenue bond, while also continuing existing anti-displacement expenditures, more than half of U1 revenues will be unavailable for any other purpose for years to come.

The HAC's Response in May of 2017 and subsequently

Shortly after the University Ave. properties were purchased, this Commission took two actions (May 2017):

  1. We recommended against using U1 funds for the purchase because we agreed that the funds would have more impact if put to more immediate housing programs.

  2. We recommended a 1 year moritorium on reserving U1 funds to give this commission time to develop recommendations.

When the commission took those actions, the general understanding was that in June we would form a work plan, and that the work plan would include implementing the U1 recommendations called for by BMC 19.44.020(B)(10).

As it turns out, the Chair and Vice Chair steered a rather different course. They undertook a work plan process that the Commission was not able to complete, even after 3 months. That process did not allow discussion of implementing our duties under BMC 19.44.020. Motions were made to return the work plan attention to the duties under the ordinance but this Commission rejected those motions.

As a conseuqence, it is now May 2018. In one month, the moritorium this Commission requested will expire. This Commission has not had a single group discussion about 19.44.020(B)(10). This Commission has not followed up on the direction it set in May of 2017.

We asked council to pause so that we could develop housing policy. Then the Chair and Vice Chair led us in a very different direction.

Therefore, Council and the City Manager have begun moving on without our input. In particular, two proposals are coming before council.

  1. By the time of tonight's meeting, Council will have considered using U1 revenues to pay for the real properties purchased in 2017.

  2. Soon, the City Council will consider issuing a revenue bond against U1 revenues, borrowing funds to cover a large funding gap in the projected costs for the BRIDGE Housing project on Berkeley Way.

Making the best of a bad situation

It is unforunate that we, as a Commission, have not been able to discuss housing policy in any systematic way, nor have we been able to have discussions about investment strategies for U1 revenues.

That does not mean we can not start now, tonight.

I offer two propositions:

  1. That we as a commission find ourselves short on policy recommendations is in one way an opportunity: We should support maximizing the amount of U1 revenue that goes to repay the worker's compensation fund in FY 2018-2019.

    Paying down that debt as rapidly as possible now, while policy is in turmoil, will leave more funds available in the next fiscal year, when hopefully we will have gotten our act together.

  2. We as a commission should strongly oppose a revenue bond. The rapid BRIDGE cost inflation is beyond absurd and there is no evidence at all that this project is now or has ever been fiscally viable. For reasons we can discuss at the meeting, borrowing money for matching funds to access a grant simply contradicts the purpose of seeking grants in the first place.

Council referral

Proposed text (with boilerplate to be added):

The Housing Advisory Commission recommends that in FY 2018-2019, the small sites program and anti-displacement funding notwithstanding, all available revenue from U1, from tax year 2017 only, be used to repay the Workers Compensation Fund for the purchase of real properties on 9th St. and University (1001 University Avenue, 1007 University Avenue, 1011 University Avenue, and 1925 Ninth Street).

The Housing Advisory Commission recommends against a revenue bond to close a large funding gap for the BRIDGE Housing project on Berkeley Way, and encourages Council to re-consider whether that project is fiscally viable and efficient.

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Copyright (C) 2018 Thomas Lord