|Amendment No. 2 to Professional Services Agreement with Keyser Marston Associates, Inc.
|Proceed to City Council for approval of Amendment No. 2 to Professional Services Agreement (PSA) with Keyser Marston Associates, Inc. (KMA) to provide financial analysis services for the Acacia Apartments project and Trumark affordable for sale units at Central Park Village in the additional amount of $30,250.
|Innovative Housing Opportunities/Acacia
Innovative Housing Opportunities (IHO) approached City staff to discuss the current financial state of the Acacia Apartments project as well as IHO’s proposed amendments to the deal structure, including the Affordable Housing Agreement and City loan terms. Staff initially worked directly with IHO to negotiate assistance options. Dialogue between City staff and IHO representatives was slow moving for quite some time when it was realized the necessary analysis was beyond staff’s resources and therefore a consultant was necessary.
With the retirement of a Management Analyst II and Economic Development Manager in the Community Development Department, there was a loss of institutional knowledge with these positions not re-filled, and existing staff lacked technical housing expertise to keep Brea’s housing programs going. While the City explored alternatives for staffing the housing programs going forward, it was necessary to hire a consultant to provide financial analysis services for the Acacia Apartments project.
In 2018, staff requested a proposal and quote from KMA to perform a comprehensive financial analysis of the Acacia Apartments project.
In July 2018, the City of Brea entered into a PSA with KMA for $24,500 to provide “economic development initiatives, real estate analysis, assistance in fee studies and various related services on an as-needed basis.” The dollar amount of this PSA fell into the City’s Informal Solicitation Purchasing Policy by which the City Manager had the authority to execute the contract (up to $25,000). This PSA is funded by the Housing Successor Fund (280).
Later that same year Trumark Homes, LLC was preparing for construction of their affordable for-sale units at Central Park Village and would be required to work with City staff in setting affordable sales prices. In October 2018, staff requested an additional proposal and quote from KMA to provide financial analysis services associated with setting affordable sales prices for Trumark’s project. The cost to perform analysis for both projects (Acacia and Trumark) were within the original $24,500 contract amount; no additional funds were necessary.
Amendment No. 1
Once work was well underway, several unexpected issues were discovered with both projects which caused more analysis than originally anticipated. KMA worked with IHO and City staff to establish the needs of the Acacia Apartments project to ensure future feasibility. Additional analysis included the need to investigate the history of the project and the current status of the capital needs, prepare cash flow analysis, and review and summarize all of IHO’s requests. KMA also worked with Trumark and City staff to establish the calculation of the affordable sales price covenants. However, additional analysis included the need to review the City’s Housing Ordinance, revisions to the calculations, and numerous conference calls with City staff and Trumark.
In September 2020, staff requested an additional proposal and quote from KMA to review complete transaction packages submitted by Trumark for the 20 affordable for-sale units at Central Park Village. The additional analysis mentioned above, plus the additional services resulted in the need to increase the amount of the existing PSA from $24,500 to $39,790. Due to the urgency of the matter to keep the projects moving, it was determined that under Section 3.24.120 E. of the City’s Purchasing Code, it was in the best interests of the City to allow the City Manager to execute Amendment No. 1 (dated September 21, 2020) to the PSA with KMA.
Need for Amendment No. 2
KMA has continued working on the Acacia analysis, as well as attend multiple meetings at the request of City staff. In addition, there has been much continued communication and review regarding affordable buyer qualifications for the Central Park Village for-sale units. At the request of staff, KMA has provided an additional proposal and quote for future needs related to the outcome of negotiations regarding the Acacia Apartments project and continued review of affordable homebuyer application packages. The additional request for services would result in an increase of $30,250 to the contract. This would bring the current contract amount of $39,790 to $70,040. However, there are potential savings if not all requested services are utilized.
While KMA has provided additional guidance to Trumark related to qualifying affordable buyers; going forward KMA's scope of work related to the affordable for-sale units at Central Park Village will only consist of assisting City staff with review of buyer application packages. Staff will look to recuperate costs from both IHO and Trumark where applicable. However, there is still a need for KMA's services, specifically to review at least 20 affordable buyer application packages (which was quoted at $20,000). It is the intent of staff to take over this process in future.
|The continued need for this PSA with KMA is due to the loss of institutional knowledge with staff retirements and current staff lacking the same level of technical housing expertise. In the upcoming Fiscal Year, staff will be evaluating the need for additional staffing resources and/or technical expertise proportionate to maintenance of existing housing and future projects.
Staff requests the Finance Committee recommend that Amendment No. 2 to the PSA with KMA proceed to City Council for approval. KMA would continue to provide financial analysis services for the Acacia Apartments project and the Trumark affordable for-sale units at Central Park Village. The not-to-exceed amount of this amendment is $30,250. This would bring the current contract amount of $39,790 to $70,040. This PSA is paid from the Housing Successor Fund (280), thus creates no impact to the General Fund.
|William Gallardo, City Manager
Prepared by: Marie Dao, Management Analyst
Concurrence: Tracy Steinkruger, Community Development Director