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APPROVE COMMERCIAL LIEN FORGIVENESS INCENTIVE AGREEMENT FOR 931 NORTH MADISON STREET, APN 137-140-26
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1) Approving a Commercial Lien Forgiveness Incentive Agreement with the owner of the real property located at 931 North Madison Street for the forgiveness of $85,235.79 in code enforcement liens against the property under the City’s Commercial Lien Forgiveness Program; and
2) Authorize the City Manager, or his designee, to execute the Agreement and to take all the necessary and appropriate actions to carry out the purpose and intent of this resolution.
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Summary
In October 2008, City Council adopted City Council Policy Number 700-6 (the “Policy”) to relieve code enforcement fines, penalties, interest, and/or liens which prevented the successful rehabilitation of blighted commercial properties. The Policy requires City Council approval for lien totals exceeding the current Council limit, which is currently $75,000.
The applicant, Raul Aguirre, purchased the subject property at 931 North Madison Street in August 2017 when it had significant existing code violations and associated fines and penalties. The applicant has brought the property back into code compliance and requests Council forgive the penalties and fees under the Policy.
DISCUSSION
Background
In October 2008, City Council adopted City Council Policy Number 700-6 (Attachment A - Policy 700-6). The intent of the Policy is to allow the City Manager to forgive certain liens previously imposed by the City, for the public purpose of facilitating substantial investment, improvements, and/or blight abatement to blighted properties. City Council amended the Policy in 2010 to clarify the lien forgiveness program applied only to commercial or multi-family property and again in 2014 to extend the program’s boundaries to the City limits (Attachment B - Resolution 10-0121 and Attachment C - Resolution 2014-07-15-1213).
The Policy operates by setting screening criteria and an application process. To participate in this program, a property must, among other requirements, have more than $5,000 in code enforcement fines and penalties assessed against it, be used for commercial or multi-family (4 units or more) use, and the applying property owner must not have caused, maintained, or allowed the violations, fines, fees, or liens at the property. The Economic Development Director is responsible for determination of a property and owner’s eligibility.
If a property and owner satisfy the Policy’s criteria, the City Manager may then negotiate the project’s lien forgiveness if the requested lien forgiveness amount is less than the City Council limit. If the requested lien forgiveness amount is greater, City Council must approve the lien forgiveness agreement.
In each instance where the City chooses to forgive certain liens, the agreement must be approved by the City Manager and be conditioned upon the successful investment, improvements, and/or blight abatement of the subject property and the subject property remaining in acceptable condition for five years following the project’s completion.
Present Situation
The applicant, Raul Aguirre (“Applicant”), acquired the real property at 931 North Madison Street, Assessor Parcel Number 137-140-26 (the “Property”), on August 2, 2017 from New Bridge Equity, LLC. The Property consists of an eight-unit apartment complex at the corner of North Madison Street and Acacia Street (Attachment D - Vicinity Map and Attachment E - Aerial Map). The Property was boarded-up and vacant when Applicant purchased the Property. Applicant did not cause the code violations which had resulted in significant fines and penalties against the Property when he purchased the Property.
On October 4, 2017, Applicant entered into a Stipulated Agreement with the Neighborhood Services Section of the City of Stockton Police Department (Attachment F - Stipulated Agreement). Applicant agreed to completely rehabilitate the property, including making repairs to the plumbing, electrical, roof, siding, flooring, bathrooms, and windows, within 180 days and issued a $50,000 performance bond to the City.
Applicant pulled the necessary permits and spent approximately $70,000 to make the required improvements to bring the Property back into code compliance. Code Enforcement approved the completed work before the expiration of the Stipulated Agreement. The Property no longer appears blighted from the street and Applicant improved the interior of the Property with new fixtures, flooring, bathrooms, GFCI plugs, smoke and carbon monoxide detectors.
Applicant now applies to the City to forgive the $85,235.79 in “soft costs,” the interest and civil penalties arising from Code Enforcement violations; Applicant would pay $8,802.91 in “hard costs,” such as the notice posting, recording, abatement, and inspection fees associated with enforcing code violations against the Property. The Economic Development Department has prepared a Commercial Lien Forgiveness Agreement (Exhibit 1 of the Proposed Resolution) for this purpose.
Under the Commercial Lien Forgiveness Agreement, Applicant will pay to the City the “hard costs” amount of $8,802.91. Upon receipt of that money, the City will request that the San Joaquin County Treasurer/Tax Collector remove the same amount from the Property’s liability stated on the tax roll. Applicant will also execute a Promissory Note (the “Note”), payable to City in the amount of $85,235.79 and which shall be secured by a Deed of Trust on the Property, for the “soft costs” to be forgiven. If the Property remains in code compliance at the end of a five-year monitoring period, the City shall forgive the Promissory Note and re-convey the Deed of Trust. If Applicant fails to meet all applicable requirements, the Note will be called and the lien amounts reinstated, including the retroactive application of all applicable interest and penalties.
FINANCIAL SUMMARY
Approval of the Commercial Lien Forgiveness Incentive Agreement will forgive $85,235.79 in outstanding code enforcement fees and penalties. There are no expenditures from the City General Fund.
Attachment A - Policy
Attachment B - Resolution 10-0121
Attachment C - Resolution 2014-09-09-1206
Attachment D - Vicinity Map
Attachment E - Aerial Map
Attachment F - Stipulated Agreement