ITEM 8-A
Council Meeting: 4/14/92 Santa Monica, California
TO: Mayor and City Council Members
FROM: City Attorney and City Staff
SUBJECT: Recommendation to Introduce for First Reading an
Ordinance Amending Supplemental Fire Protection
Provisions to Eliminate Exemption for Certain HUD-Insured
High Rise Buildings
INTRODUCTION
This report transmits information and recommendations regarding the
Supplemental Fire Protection Provisions relating to residential
high-rise buildings with mortgages insured by the United States
Department of Housing and Urban Development (HUD). The
accompanying ordinance eliminating the exemption from supplemental
fire protection for certain HUD-insured High Rise residential
buildings has been prepared in response to City Council direction,
and is presented for City Council consideration. This report
recommends that the City Council introduce the ordinance for first
reading.
BACKGROUND
Previously, the City Council directed the City Attorney to amend
Ordinance 1217, the Supplemental Fire Protection Provisions. The
Ordinance currently exempts buildings with HUD-insured mortgages
from complying with the City regulations concerning the
installation of fire sprinklers. The City Council directed that
the ordinance be amended to eliminate the exemption.
The City Council also directed staff to work with the nonprofit
owners of the three high-rise buildings affected by the proposed
amendment. Staff was to negotiate a timetable for installation of
the fire sprinklers, and seek any available federal or state
funding.
Revising the existing ordinance to eliminate the current exemption
would affect three senior high-rise buildings. These developments
are:
1.) Geneva Plaza - 1441 21st Street - 100 units
2.) Santa Monica Towers - 1233 6th Street - 163 units
3.) Westminster Towers - 1112 7th Street - 285 units
During the past two years, staff has been working with both HUD and
the nonprofit owners toward developing a feasible plan to provide
for the installation of fire sprinklers at these buildings.
DISCUSSION
Council had initially directed staff to insure that the high rise
buildings were retrofitted with sprinklers without any significant
financial hardship on the tenants. Therefore, much staff time was
spent negotiating with HUD staff and the building owners to insure
that the retrofit could occur with minimal negative impact on the
residents. The initial staff report to the City Council indicated
that low cost financing for the fire sprinklers retrofit might come
from a variety of sources. Initial discussions with HUD staff
indicated that the owners of high-rise buildings might be eligible
for funds under the HUD Flexible Subsidy Program. This program
makes funds available for certain types of rehabilitation. Another
source could be cash currently held in the reserves of each of the
three projects themselves, such as in the replacement reserve or
the operating account. These accounts are used for capital repairs
and replacements and for ongoing property maintenance. A third
alternative would be to raise rents to allow for financing through
a commercial loan.
Staff worked with the nonprofit owners in preparing an application
for funds under HUD's Flexible Subsidy Program. However, after
further meetings with HUD staff, the high-rise owners were advised
in late 1991 that HUD staff would not recommend their application
for funding. The HUD staff believed that the buildings had
adequate funds available from their replacement reserve and
operating accounts. In addition, HUD staff noted that there had
been no rent increases at these properties for some time; since
1987 for Santa Monica Towers, and since 1986 for Westminster
Towers. The rent at Geneva Plaza was decreased in 1987.
After further meetings and evaluation of each building's financial
resources, HUD finally determined, independent of the City
requirement, that the sprinkler retrofit must be done, and that it
should be paid for from building reserves. Thus, HUD will require
that the buildings be equipped with the sprinkler system regardless
of City Council action on this ordinance. The impact on reserve
accounts at Geneva Plaza is not significant enough to warrant a
rent increase. However, the cost of this retrofit will
significantly lower the building reserves at Santa Monica and
Westminster Towers. The only feasible way to replenish these
reserves is to increase the rent.
Santa Monica Towers requested a rent increase in February of this
year, which was granted by HUD and will become effective on May 1,
1992. The process requires the owner to formally notice the
residents of the intention to request a rent increase, and allows
for a comment period lasting thirty days. HUD then considers the
any/all comments when evaluating the request. The amount of the
increase ranges from $37 for an efficiency unit, to $55 for a two-
bedroom apartment.
Westminster Towers is in the process of preparing a request for
rent increase, and stated it will begin the process in a few weeks.
Current rents at this complex range from $160 for an efficiency
unit, $235 for a one-bedroom, to $275 for a large one-bedroom unit.
The amount of the rent increase to be requested here are similar to
the amounts at Santa Monica Towers.
Staff has determined that if a rent increase causes a significant
additional rent burden for any tenant, the tenant can apply for
unused subsidies currently existing at each building. HUD has
supplied each of the buildings with Section 8 rent subsidies which
can be used by eligible tenants. Under Section 8, eligible tenants
(very low income) pay no more than thirty percent (30%) of their
income toward the rent, and HUD pays the difference between that
amount and the total contract rent. At Geneva Plaza, one-hundred
percent (100%) of the tenant units are covered by the Section 8
subsidy.
At Westminster Towers, one-hundred twenty-eight (128) Section 8
subsidies were reserved for the project by HUD. However, only
thirty-six (36) of these subsidies are currently being utilized.
At Santa Monica Towers, ten (10) Section 8 subsidies are reserved
for the building. Only one (1) of these subsidies is currently
being utilized. Due to the current extremely low rents at
Westminster and Santa Monica Towers most of the households pay less
than thirty percent (30%) of their incomes for rent and neither
qualify for, nor benefit from, participation in the Section 8
subsidy program.
With respect to Santa Monica Towers, the manager of the complex
reports that roughly ten residents have sought information on
eligibility for subsidies after the rent increases take effect,
which approximates the number of available (unused) subsidies at
this building. The resident manager at Westminster Towers expects
that most of the unused subsidies here will be utilized if a rent
increase is granted by HUD, thereby relieving eligible tenants of
this new rent increase. It is the belief of staff that the
available (unused) subsidies at Santa Monica and Westminster Towers
will serve to minimize any negative impact on the existing tenants.
As described above, HUD has directed the fire sprinkler retrofit to
go forward regardless of the existence of an exemption for these
buildings from the City sprinkler retrofit ordinance. Installation
of the fire sprinklers began in late January of this year for one
of the buildings, with the other two buildings scheduled to begin
installation by late summer of this year. All three properties
will have completed the installation by the end of 1993.
The proposed ordinance eliminates the exemption and provides
sufficient time to conclude the already scheduled retrofit. The
ordinance sets a compliance date of December 31, 1993. By then,
all three high-rise buildings will be in compliance with the fire
sprinkler law.
FINANCIAL/BUDGETARY IMPACT
The proposed amendment will have no budgetary/financial impact.
RECOMMENDATION
It is respectfully recommended that the City Council introduce the
accompanying ordinance for first reading.
Prepared by: Robert M. Myers, City Attorney
Barbara Stinchfield, Acting Director
Chuck Elsesser, Housing Program Manager
Jim Kemper, Senior Development Analyst
Community Development Department