Questions and Answers
State Route 710 Sales Program
Priority 5 Sales - Private Housing Related Entities
The Department of Transportation (Caltrans) is providing the below answers to questions received from Housing Related Entities (HRE) who attended the virtual information session held on July 26, 2022. Caltrans will strictly adhere to the State Route (SR) 710 Sales Program regulations and strongly encourages HREs to thoroughly read and understand the regulations. The regulations can be found on the Office of Administrative Law website at oal.ca.gov under the link to the California Code of Regulations, Title 21, Division 2, Chapter 9.5.
Question 1: What is the scoring mechanism for judging bid submittals?
Answer: Bids will be evaluated in accordance with 21 CCR § 1485 (e).
Question 2: If Pasadena has the first option to purchase the properties, what does that do to the timing for Pasadena properties? And if the City of Pasadena purchases the properties, do the same restrictions apply to them? Could they resell to a nonprofit organization?
Answer: The City of Pasadena (City) has priority to purchase unoccupied properties within its jurisdictional boundaries. Once Caltrans solicits the City’s interest in purchasing available properties, the City will have 30 days to identify properties of interest. Caltrans will then send a sales contract and the City has 60 days to execute the contract and 120 days to close escrow.
Neither Senate Bill 51 (Durazo, 2021) nor Senate Bill 381 (Portantino, 2021) applied to the City; therefore, the City is subject to different use restrictions. The City may resale a property pursuant to the use restrictions; refer to 21 CCR § 1483.1.
Question 3: Does 100% of the property have to be low-income housing? Our proposal was to provide transitional housing on a portion of the property and use the rest for programs and services for women with cancer. We are curious what percentage of the property has to be actual housing units and what part can be ancillary services for those tenants (permanent housing, job skills, mental health, etc).
Answer: The property must be used for low-or moderate-income rental housing for a term of at least 55 years pursuant to 21 CCR § 1485.1 (b). Any additional units constructed on the property must also be used for low-or moderate-income rental housing. If the property is a single-family residence, it may be used for owner-occupied affordable housing for a term of 45 years.
Question 4: We believe the minimum bid for each property is what Cal Trans paid the original property owners, but we think we heard in the webinar that there was an additional cost on top of that. Can you tell us what that was?
Answer: There is no additional cost. The Reasonable Price is set at the Minimum Sales Price, which is the original acquisition price paid by Caltrans.
Question 5: Property tax: How will the property tax be assessed? Will it be assessed by the transaction price or current market value?
Question 6: Insurance: Will there be any special insurance program for HREs to qualify? The insurance premium is mainly calculated based on replacement cost which has been rising significantly according to CPI index.
Answer: Caltrans has no information regarding insurance program requirements or qualifications.
Question 7: Is it assumed that each of these properties would have to undergo its own Conditional Use Permit application, or will Caltrans, requiring affordable housing within properties that it currently owns that are zoned Public Facilities (PF-1), shepard that application for each property before closing?
Answer: Caltrans will not participate in any permit application process or rezoning process.
Question 8: What level of detail is required for the 10-year proforma? Is there a template of the 10-year proforma (perhaps one that HCD uses, or one that can be built or shared with HREs) that can be provided addressing the information you would like to review in that proforma?
Answer: The 10-year proforma must comply with 21 CCR § 1485 (d)(1). Each HRE must determine for itself the level of detail it believes is necessary or advantageous to include. The proforma should contain sufficient detail to support operating the property at affordable rents. It is helpful for the evaluation panel to understand estimated operating revenue, expenses, rehabilitation costs, reserves, and debt service. If the purchase will be financed, it is also helpful to provide information assuring the likelihood that financing can be secured.
Question 9: Are we permitted to submit a proforma that addresses multiple properties and their acquisition/rehab/lease-up strategy within one spreadsheet (and perhaps multiple sheets)?
Answer: Yes; if an HRE is submitting a bid on multiple properties one proforma is sufficient provided it addresses each individual property.
Question 10: Will you allow for one bid package to purchase all of the properties if we submit that with a level of detail that does describe how much for each house we would be willing to pay?
Question 11: Where do you expect that the HRE should describe their qualifications to perform in this program as affordable housing developers, property managers, owners, acquisitions/rehabilitation and new construction experts?
Answer: It is important to identify the HRE’s experience and capability in providing and sustaining the property as affordable housing. Refer to 21 CCR § 1485 (e) for further evaluation criteria.
Question 12: What is required information of the rehabilitation plan other than a plan that ensures to factor in a prevailing wage requirement? Do you expect that this would be a spreadsheet or a written document with narrative?
Question 13: We do not readily have the resources to turn to 3rd party market analysts to provide us with a marketing plan that we may submit to HCD, for example, in support of a LIHTC deal. What is the expectation of the contents, and length, of the Marketing Plan to be submitted in bid packages from any qualified HRE?
Answer: HRE’s have discretion to determine the appropriate level of detail in preparing the marketing plan referenced in 21 CCR § 1485 (d)(4), which simply addresses a plan for how the HRE proposes to target future tenants consisting of Persons and Families of Low or Moderate Income.
Question 14: Has Caltrans contacted the Board of Equalization and the LA County Property Tax Assessor's Office to work to guarantee affordability by creating a qualified property tax exemption for the transfer from Caltrans to any HRE?
Answer: No, Caltrans will not guarantee creation of a qualified property tax exemption. Refer to Question 5 regarding real property tax assessment.
Question 15: Is it assumable that a reassessment of property taxes will be triggered upon each property sale to an HRE? Does the CC&R create an exemption in LA County to the reassessment of property taxes?
Answer: Yes; the properties will be reassessed upon transfer of the property from Caltrans to an HRE. Again, refer to Question 5 regarding real property tax assessment.
Question 16: While none of the properties in the El Sereno tranche are presently occupied, for future property disposition, when a single-family renter is over income (earning more than 120% AMI), are they no longer going to have the legal right to purchase the property in which they reside?
Answer: Eligible tenants residing in El Sereno have first opportunity to purchase the property they rent regardless of income.
Question 17: Under Section 4.3 of the CC&Rs, what property price is the HRE expected to utilize to transfer the property to a person or family of low or moderate income under a sale transaction?
Answer: The sales price of an affordable property depends on the Affordable Housing Cost of the buyer and must be calculated consistent with provisions of Section 50052.5 of the Health and Safety Code as implemented by 25 Cal. Code Regs § 6924. Refer to 21 CCR § 1481.2 (c) for additional information.