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CC Resolution No. 15-092 Amending the Housing Assistance Program for Department HeadsRESOLUTION NO. 15-092 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CUPERTINO AMENDING RESOLUTION NO. 12-083 THE HOUSING ASSISTANCE PROGRAM FOR APPOINTED EMPLOYEES AND DEPARTMENT HEADS WHEREAS, the recruitment and hiring of top quality appointed employees and department heads is essential to the efficient operation of the City of Cupertino, and WHEREAS, the cost of housing, the relative unavailability of new housing, and current housing financing conditions in the San Francisco Bay Area, and particularly the City of Cupertino, tend to act as a disincentive to persons relocating to this area, and therefore, as an obstacle to the recruitment, hiring, and retention of such top quality personnel; and WHEREAS, said conditions act not only as an obstacle to the recruitment, hiring, and retention of such personnel, but also in the event of the hiring of such personnel tend to discourage such persons from residing within the City of Cupertino; and WHEREAS, the City Council believes and appreciates the fact that the interest of the City of Cupertino would best be served by encouraging appointed employees and department heads appointed by the City Manager to live within the Cupertino corporate limits to ensure their ready availability and familiarity with the community; and WHEREAS, the City regularly invests its funds in a variety of financial securities at varying earning rates, some of which are substantially below current mortgage rates; and WHEREAS, a portion of these reserves may be utilized to accomplish the intent of the City Council to promote the recruitment, hiring, and retention of the best available personnel to fill appointed employees and department head positions and to encourage such personnel to reside within the boundaries of the City of Cupertino, while the City still produces substantially equivalent investment income; and WHEREAS, in order to promote said objectives the City Council desires to institute a policy under which the City, in appropriate cases, may provide financing assistance to appointed employees and department heads for the purpose of assisting such persons to purchase a residence within the City of Cupertino; and NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CUPERTINO RESOLVES AS FOLLOWS: SECTION 1. The City Council finds that the recruitment, hiring, and retention of personnel to fill the City Manager, City Attorney and department head positions is of key importance to the functioning of the City government, that it is in the interest of the City to Resolution No. 15-092 Page2 encourage appointed employees and department heads to live within the corporate boundaries of the City of Cupertino, that the provision of housing assistance may, in certain cases, enhance the ability of the City to accomplish the aforementioned purposes, and that such assistance can be provided without significantly affecting the financial status of the City. SECTION 2. The City Council hereby declares that it shall be the policy of the City, in appropriate cases, where necessary to secure or retain the services of such persons, and to assist appointed employees and department heads to reside within the City of Cupertino by making available, as an additional benefit of employment, a secured loan of City funds to acquire local housing. The need for such assistance shall be reviewed on an individual basis by the City Council for appointed employees and the City Manager for department heads and shall not be deemed available as a matter of right. SECTION 3. Said loans, if made, shall be made available only upon the following terms and conditions, and upon such other terms and conditions, not inconsistent with the following, which may be deemed reasonable by the City: (a) Any such loan shall constitute a benefit of employment in consideration for the employee's services, to be evidenced by a separate written agreement. (b) Any such loan shall not exceed an amount that is equal to five times the employee's maximum base salary at the time of the loan. (c) Any such loan shall be available only upon residential property within the City of Cupertino which, is, in fact, used as the principal residence of the employee. Any such loan shall be due and payable in full upon sale or transfer of the property by the employee or termination of the use of the property as the principal residence of the employee. If the employee terminates employment with the City of Cupertino with fewer than five years of employment, any such loan shall be due and payable within 12 months of termination. If the employee terminates employment with the City of Cupertino with more than five years of employment, any such loan shall be due and payable within 24 months of termination. ( d) Any such loan shall be secured to the satisfaction of the City Manager and City Attorney evidenced by a promissory note secured by a Deed of Trust. (e) Any such loan shall provide for either a variable interest rate or a fixed interest rate. If the interest rate is fixed, the rate shall be the 11th District cost of funds prevailing immediately prior to making of the loan plus 1.5%. If the interest rate is variable, the initial interest rate shall be the 11th District cost of funds prevailing immediately prior to making of the loan. The interest rate on variable interest rate loans shall be adjusted annually based upon changes in the 11th Resolution No. 15-092 Page3 District cost of funds existing on the anniversary date of said loan; provided, however, that no adjusted rate shall vary from the initial interest rate by more than 4 percent. In no event shall any such loan, whether at fixed or variable interest rate, exceed 90 percent of the purchase price of said property, or be for a term exceeding 30 years. (f) If at any time during the term of the loan commercial or other financing becomes available at or below the interest rate then applicable to the City loan, the employee shall refinance and retire the City loan. (g) Such loans shall only be made from City funds that would be otherwise available and invested in financial securities with varying rates of return. (h) The employee may be permitted a two percent discount from the otherwise applicable interest rate for one period not exceeding five years. If such discount is permitted, the value of the discount will be an addition to the loan's principal on an annual basis. When the loan is due and payable or when the employee elects to pay the loan through refinancing or otherwise, the value of the reduction shall be added to the loan's principal for each month since the last annual addition to the loan's principal. Upon expiration of the five year interest discount period, the interest rate shall revert to that originally set forth in the note or the interest rate then prevailing under the program for fixed rate loans, whichever is lower. (i) Whenever such loan is made the City shall pay or reimburse the employee for 50 percent of his or her closing costs as the purchaser of the residence as to which the loan is granted. SECTION 4. The City Council may elect to contribute a sum not to exceed 30 percent of the bona fide purchase price of the residence. Any contribution pursuant to this section shall entitle City to a proportionate share in the equity of the residence. To facilitate purchase, Council may modify the terms of the equity sharing agreement for appointed employees provided that the ultimate City contribution at the close of escrow does not exceed 30 percent of the purchase price. The City Manager may modify the terms of the equity sharing agreement for Department Heads provided that the ultimate City contribution at the close of escrow does not exceed 30 percent of the purchase price. NOW, THEREFORE, BE IT RESOLVED that the City Council hereby adopts the Housing Assistance Program described herein. Resolution No. 15-092 Page4 PASSED AND ADOPTED at a regular City Council meeting of the City of Cupertino this 20th day of October, 2015, by the following vote: VOTE MEMBERS OF THE CITY COUNCIL AYES: Sinks, Chang, Paul, Vaidhyanathan, Wong NOES: None ABSENT: None ABSTAIN: None ATTEST: APPROVED: fu};;;t/tt Grace Schmidt, City Clerk ~~xu Rod Sihl<s, Mayor, City of Cupertm.o---,