CITY PURCHASES MIDTOWN PARK

Over a period of several months prior to the auctioning of Midtown Park by FHA, various proposals involving the purchase of the development by the City of San Francisco were presented to the Board of Supervisors. Barton-Western, Inc., the developers in default, tried to interest the City in supporting a porposal in which a nonprofit corporation would float a $3.6 million bond issue secured by the City to pay off the existing debt on Midtown Park and operate the apartments as a middle-income housing development. Barton-Western, Inc. owed $3.1 million to FHA. At hearings before the Finance Committee of the Board of Supervisors in March, 1967, most City agencies advised against such a high purchase price. The Real Estate Department estimated the current worth of the property at $1.5 million which was a figure used by FHA when tax relief was sought by and granted to the Federal government during the preceding year.

Further negotiations involving the purchase of Midtown Park by the City of San Francisco continued after FHA tried in vain to sell the apartment complex at public auction. Mayor Joseph L. Alioto's chief housing aide, John H. Tolan, Jr., who replaced T. J. Kent, Jr. as the Mayor's Deputy for Development in 1968, led the discussions with FHA and others to work out equitable arrangements for the purchase of Midtown Park. In March, 1968, Mayor Alioto proposed such a purchase to the Board of Supervisors for the price of $2.1 million for the public purpose of creating a rehousing resource for moderate income families. Negotiating the purchase would include the participation of the City, FHA, a nonprofit corporation, a mortgage company and a housing manager.

In May, 1968, a nonprofit corporation was organized to assist the City in the acquisition of Midtown Park and later became the recipient of the property deed from the Federal government. Contingent on a favorable tax ruling for the nonprofit Midtown Park Corporation by the Internal Revenue Service, the Board of Supervisors approved in principle the acquisition three months later. The Internal Revenue Service granted a tax exemption to the Corporation during the following December.

FHA agreed to deed Midtown Park to the nonprofit corporation for $2.1 million, plus closing costs. A commitment from Penn Mutual Life Insurance Company (mortgagee) with local assistance from the Marble Mortgage Company was made to execute a mortgate for that amount with the proceeds paid to FHA as full consideration for the Midtown Park property. Thus, no down payment was required. The Internal Revenue Service ruled that the interest payments on this mortgage would be excludable from the gross income of the mortgagee. Based on this ruling and the City's guarantee of the rent rolls, the mortgagee established a 5 percent interest rate substantially under the current market.

Upon receiving title to the property from the Federal government, the Midtown Park Corporation deeded the property with FHA approval to the City. The City took title to the property and leased it back to the Midtown Park Corporation for a term equal to the life of the mortgage. The City relieved the nonprofit corporation of any liability for possessory interest taxes, which would be levied against the property but be paid by the City. In further assisting the Corporation, the City established and set in motion

a review process which would monitor from time to time rental charges at reasonable rates for tenants of moderate income.

The Midtown Park Corporation would be responsible for the disbursement of funds and the contracting of maintenance services. FHA audit and standards of operation would apply to the property and would be controlled by Midtown Park Corporation executing a "regulatory agreement" with FHA. The City Attorney, the Regional Counsel of the Department of Housing and Urban Development, and the attorneys for the mortgagee performed the necessary legal services in the acquisition negotiations without cost to either the City or the nonprofit corporation. No additional attorneys were employed who were not already being compensated.

Residents at Midtown Park, concerned about the proposed provisions of the purchase agreement and the effects on current lease arrangements and rent structures, organized themselves into a tenants organization called the Committee for an Integrated Community. The Committee met with City officials to iron out various aspects of the changeover in ownership and participated in meetings and hearings before the Board of Supervisors. The Board voted final approval of the municipal acquisition of Midtown Park in December, 1968, which included a major participatory effort by the Committee for an Integrated Community.

As part of the arrangement in which the City acquired Midtown Park, the Committee for an Integrated Community won agreement with City officials over the selection of the nonprofit Midtown Park Corporation which was to function as mortgagor. Five board members, nominated from and by the residents of Midtown Park and elected by the organizing directors assumed

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control of the nonprofit organization on February 9, 1969. In place of the Housing Authority, which under the original proposal was to manage the apartments, the new Board of Directors executed a managerial contract with the existing resident manager and engaged an outside accounting firm to provide monthly accounting and payroll services. With City approval, the Board of Directors assumed all other professional management duties of the Midtown Park Corporation, previously rendered by a professional realty company. This provided a considerable cash savings to the operation of Midtown Park.

INITIAL CHANGES AND BUILDING IMPROVEMENTS

The Midtown Park Corporation sought some immediate changes to increase safety and revenues. in order to establish an equitable rent schedule a rent adjustment program was implemented with the approval of the Board of Supervisors. This measure raised the rents on 63 apartments about $10, closing a discrepancy on units rented before August, 1967.

The Board of Directors reinstated security deposits of one month's rent for all residents who moved into the apartments after August 1, 1967. The money secured was placed in a passbook savings account to refund deposits when necessary and to secure funds for other needed improvements.

An initial safety measure authorized by the Directors was the instalTation of locks on all outside entrances to apartment hallways and doorbel comections for all apartments. This bell and lock installation costing

out $4,000 was purposely a one-way system. Although inidvidual apartMots can be signalled from the outside, the resident can only permit direct entry into the hallway by personally opening the outside door. Securing the outside doors has almost entirely eliminated forceable entry and burglaries. Before this installation, frequent break-ins occurred as individual apartments were easy targets for prowlers who could move through the buildings at will. The individual apartments were initially protected by simple door locks, then dead bolt safety locks, and finally the installation of metal plates. The unwanted intruder could not be deterred until all interior common areas became off-limits to non-residents. The measure