With a clearer description of the use of some $1.4 million former Morgan Hill redevelopment funds provided by the state finance department, close to 30 families will be able to purchase new homes after all at Madrone Plaza.
After the city, now as the successor entity to the redevelopment agency which was deleted by the state as of Feb. 1, submitted the planned expenditure of the funds for down payment assistance loans to the state for approval last month, the Department of Finance sent city staff a confusing letter.
The initial letter said that the $1.4 million of property tax revenues to be loaned to South County Housing are considered an “enforceable obligation” along the lines of un-reimbursed bond proceeds and contracts for unfinished RDA work like the Butterfield Boulevard extension. But the city should seek other funds to fulfill the agreement, which was meant to pay for down payment assistance home loans up to $75,000 to new owners of 27 affordable town homes at Madrone Plaza near the intersection of Monterey and Cochrane roads, the state’s letter said.
That left the city, SCH as the developer and seller of the homes and potential new owners of the townhomes scratching their heads, wondering where the project goes next without such a vital chunk of financial assistance.
However, last week after numerous requests for clarification, DOF told the Times and city staff that the city can use the property tax funds it anticipated to fund the loans after all.
“We concluded this was an enforceable obligation, but we also indicated that the (new state) redevelopment law indicates to the extent you have other funds available you should use that first,” said H.D. Palmer of the DOF. “If all those are funds exhausted you would be able to use the property tax increment.”
It’s up to the city to determine if there are any other funds available for this project, which was first approved by the RDA in 2010. City staff have said there are no other funds.
On Friday, city staff received a letter from Brian Dunham of the DOF stating a similar clarification of the department’s position.
Property tax increment revenue – which comes up to about $22 million annually in Morgan Hill – is what formerly funded the RDA. Now those funds are placed into a trust fund that is controlled by the Santa Clara County Auditor-Controller, and their expenditure must be approved by the county redevelopment oversight board and the DOF.
The state law that dissolves the redevelopment agency requires that these funds – formerly used to combat blight and spur economic development – now be diverted to former RDA debt and contracts, as well as basic services such as schools and the cities’ and county’s general funds.
A spokesman for SCH said earlier this month that 27 buyers are already contracted to purchase townhomes pending the approval of the RDA loans. These families have already qualified for the loans and are in a contract to purchase from SCH. They were just waiting for oversight and DOF approval to use the public funds, Andy Lief of SCH said last week.
Now that this approval seems to be secure, Vincent Ancheta, 26, and his wife are closer to their dream of owning a home and starting a family.
Ancheta plans to use one of these down payment assistance loans from the city to purchase a two-bedroom, 1,200-square-foot townhome at Madrone Plaza. He said he first signed up for the loan, and started the process to close on the home about six months ago.
The couple currently rent a home in San Jose, which they share with their border collie. The down payment loan from the city would reduce their new mortgage payment below their current monthly rent, which Ancheta didn’t define.
Ancheta, who is from Morgan Hill originally, graduated from San Jose State University in 2008, and is now a project coordinator for Cisco Systems. His wife is a kindergarten teacher in Soquel. Ancheta’s mother still lives in Morgan Hill, and living closer to her will be “convenient” for the couple.
The Madrone Plaza townhome will be the first home the couple has owned.
“Without that down payment assistance loan, we don’t have a chance, with the economy and with loans not being given by the bank,” said Ancheta. “It’s taken a long time, but it is helping us greatly.”
The Morgan Hill RDA and SCH agreed to the $1.4 million assistance in 2010, and city staff and the developer noted this was long before the governor began floating the idea of eliminating RDAs statewide in order to close part of the state’s overall budget deficit.
The agreement between the city and SCH approved the loans from the RDA to the individual buyers of the affordable townhomes, of which there are more than 30 units at Madrone Plaza. About a dozen families, including Ancheta and his wife, are currently in contract to purchase the townhomes, and most of those require the down payment assistance, Lief said last week.
