HomeMy WebLinkAbout3 - CDA AFFORDABLE HOUSING DEV
REQUEST FOR COUNCIL/
HOUSING AUTHORITY
ACTION
CITY COUNCIL MEETING DATE: CLERK OF COUNCIL USE ONLY:
JUNE 20, 2017
TITLE
: APPROVED
As Recommended
As Amended
DISCUSSION ON AFFORDABLE HOUSING
st
Ordinance on 1 Reading
DEVELOPMENT PROJECTS, APPROVAL
nd
Ordinance on 2 Reading
OF CITY FINANCIAL ASSISTANCE, AND
Implementing Resolution
Set Public Hearing For__________
APPROVAL OF APPROPRIATION
ADJUSTMENT
{STRATEGIC PLAN NO. 5, 3C}
CONTINUED TO
FILE NUMBER
CITY MANAGER EXECUTIVE DIRECTOR
OPTIONS FOR CITY COUNCIL CONSIDERATION
As recommended by the Ad Hoc Committee, discuss the various Affordable Housing
Development projects requesting City financial assistance and seek City Council direction on the
allocation of current and available affordable housing development funds. Following are options
for City Council discussion and consideration:
A) Santa Ana Arts Collective, Meta Housing Corporation:
Option #1: Amend the project’s original award by an additional amount up to $2.9
million per Keyser Marston Associates gap analysis report.
Option #2: Amend the project’s original award by an additional amount up to
$1,481,215, per CSG Advisors gap analysis report. City financial
assistance to be negotiated by CSG Advisors and Meta Housing.
Option #3: Take no additional action to fund the project at this time.
B) First Street Apartments, AMCAL Multi-Housing:
Option #1: Award of affordable housing development funds for an amount up to
$8,522,740, per CSG Advisors gap analysis report.
Option #2: Award of affordable housing development funds for an amount up to
$8,795,000, per Keyser Marston Associates gap analysis report.
Option #3: Take no additional action to fund the project at this time.
Discussion on Affordable Housing Development Projects, Approval of City Financial Assistance,
and Approval of Appropriation Adjustment
June 20, 2017
Page 2
C) Aqua Housing, Community Development Partners:
Option #1: Amend the original project award with an additional 31 project-based
vouchers.
Option #2: Take no additional action to fund the project at this time.
D) Tiny Tim Plaza, Community Development Partners:
Option #1: Commit to a future award of affordable housing funds for an amount of $6
million up to $11.7 million per CSG Advisors gap analysis report. Award of
funds to follow the approval of the project by the Planning Commission and
City Council pending the availability of funds.
Option #2: Take no action to fund the project at this time.
JOINT RECOMMENDED ACTIONS:
1. Staff recommends the approval of option A1, option B1, option C1, and option D1.
2. Direct staff to develop a policy and criteria for the allocation of future affordable housing
development funds.
3. Approve a conditional pre-loan commitment, pending the approval of the Site Plan Review by
the Planning Commission and City Council for the Tiny Tim Plaza project, as follow:
Housing City Council -
Development Project Successor Inclusionary
Agency Funds Housing Funds
Tiny Tim Plaza $4,700,000 $1,300,000
CITY COUNCIL ACTIONS:
1. Staff recommends the approval of the following actions regarding loan documents and
commitment letters:
a. Direct staff to amend the Inclusionary Housing loan agreement for the Santa Ana Arts
Collective project for an additional amount not to exceed $2,900,000 in Inclusionary
Housing funds and provide for City Council consideration at the July 5, 2017 meeting.
2. Approve an appropriation adjustment. (Requires five affirmative votes).
Discussion on Affordable Housing Development Projects, Approval of City Financial Assistance,
and Approval of Appropriation Adjustment
June 20, 2017
Page 3
APPROPRIATION ADJUSTMENT NO. 2017-148 - Recognizing the Inclusionary Housing
Fund balance in the amount of $4,200,000 in revenue account (no. 41718002-50001) and
appropriating same to the Inclusionary Housing Fund’s Loans and Grants expenditure account
no. (41718820-69152) for the Santa Ana Arts Collective project and conditional pre-loan
commitment for the Tiny Tim Plaza project.
HOUSING AUTHORITY ACTIONS:
1. Staff recommends the approval of the following actions regarding loan documents and
commitment letters:
a. Approve a pre-loan commitment in an amount not to exceed $8,522,740 for the First
Street Apartments project.
b. Approve an award of 31 additional project based vouchers to Community Development
Partners with Mercy Housing Living Centers as the service provider for the Aqua
Housing project and authorize the Executive Director of the Housing Authority to
execute an amendment to the Agreement to Enter into a Project-Based Vouchers
Housing Assistance Payments contract for an additional 31 vouchers for the Aqua
Housing project.
3. Approve an appropriation adjustment. (Requires five affirmative votes).
APPROPRIATION ADJUSTMENT NO. 2017-149 - Recognizing the Housing Successor
Agency’s fund balance in the amount of $8,633,785 in revenue account no. (60718002-50001)
and appropriating same to the Low and Moderate Income Housing Asset Fund’s Loans and
Grants expenditure account no. (60718830-69152) for the First Street Apartments project’s
pre-loan commitment and conditional pre-loan commitment for the Tiny Tim Plaza project.
DISCUSSION
On February 21, 2017, City Council established an Ad Hoc Committee to provide
recommendations on how to move forward on affordable housing development projects in the
queue and to return to the City Council with options for consideration. The Ad Hoc Committee
met on February 28, and requested that staff seek the assistance of CSG Advisors, an
independent affordable housing development finance firm, to prepare:
A second opinion financial gap analysis for the Santa Ana Arts Collective and First Street
Apartments projects to compare to the previously completed financial gap analysis reports
prepared by Keyser Marston Associates (KMA), and
Discussion on Affordable Housing Development Projects, Approval of City Financial Assistance,
and Approval of Appropriation Adjustment
June 20, 2017
Page 4
Financial gap analysis reports on Aqua Housing and Tiny Tim Plaza affordable housing
development projects seeking City financial assistance.
On May 17, 2017, the Ad Hoc Committee met and recommended staff bring the four projects to
City Council for discussion and seek direction based on the results of the financial gap analysis.
In addition, the Ad Hoc Committee requested that staff provide the currently available affordable
housing development funds (Exhibit 1), estimate of potential future funding, restrictions and uses
of those funds (Exhibit 2), and development schedule for each project (Exhibit 3).
Following is the description, history and status of each of the four projects seeking City financial
assistance:
Santa Ana Arts Collective, Meta Housing Corporation: 1666 North Main Street
The Santa Ana Arts Collective is an artist focused affordable housing development project that
consists of a 57-unit adaptive reuse project to convert an existing five-story office building to
residential units and ground-floor commercial and community space. The unit mix consists of 26
one bedroom units, 14 two bedroom units and 17 three bedroom units for 30%, 50% and 60% of
the Area Median Income (AMI).
This project applied to the City for financial assistance through a competitive Request for
Proposals (RFP) process on August 21, 2015. On November 3, 2015, the City Council awarded
$4,635,000 in funding for the project from its Community Development Block Grant (CDBG
$500,000), Inclusionary Housing Funds ($1.875 million), and a pre-commitment of HOME
Investment Partnerships Program funds ($2.26 million). As conditioned in the City’s approval, the
developer Meta Housing Corporation (Meta Housing) then gathered the balance of awards
projected to fully finance the project. In October 2016, the project was awarded Affordable
Housing and Sustainable Communities (AHSC) funds by the California Department of Housing
and Community Development (CA HCD). In November 2016, Meta Housing was competitively
awarded 9% Low Income Housing Tax Credits (LIHTC). Under normal circumstances a LIHTC
allocation is the final piece of financing needed for a project to move forward. However, since the
November 2016 presidential elections, anticipated federal tax reform has upended LIHTC equity
markets and resulted in a financial gap that, absent additional funds, renders the project
infeasible. On December 14, 2016, Meta Housing submitted a request for an additional $3.1 in
City funds due to the financial gap created by lower tax credit equity pricing and rising interest
rates. The request was submitted to KMA for review.
In December of 2016, City staff informed Meta Housing of other alternatives such as a hybrid 9
percent/4 percent tax credit structure proposed by the California Tax Credit Allocation Committee.
Meta Housing applied and was unsuccessful in securing the hybrid tax credits. On March 1, 2017,
KMA completed a financial gap analysis and determined $2,900,000 as the financial gap for the
project if the City required the Developer to defer or forgo $600,000 of the developer fee included
in the Project’s budget (Exhibit 4). Later as requested by the Ad Hoc Committee, CSG Advisors
completed a second opinion financial gap analysis on May 9 and determined $1,481,215 as the
financial gap for the project if the City required Meta Housing to contribute a portion of its
Discussion on Affordable Housing Development Projects, Approval of City Financial Assistance,
and Approval of Appropriation Adjustment
June 20, 2017
Page 5
developer fee to the partnership in the form of a $1 million General Partner Capital Contribution
(Exhibit 5). The developer fee would need to be negotiated. Meta Housing has informed city staff
that $1.4M in financial assistance would limit their ability to complete the project.
Meta must pull their first building permit for the project by July 28, 2017 or they will lose their 9%
LIHTC award.
First Street Apartments, AMCAL Multi-Housing: 1440 East First Street
The First Street Apartments project will provide 69 units of affordable workforce housing. The
rental units (less one manager’s unit) are 100% affordable to family households earning between
30% and 60% of the AMI. The unit mix currently consists of six four-bedroom units, 28 three-
bedroom units and 35 two-bedroom units (one being a manager’s unit).
This project initially applied to the City for financial assistance through a competitive RFP process
for project based vouchers (PBVs) and was awarded eight PBVs by the Housing Authority on
May 5, 2015. On February 2, 2016, the City Council approved the Planning Commission’s
recommendation to direct Heritage Village OC LLC (Heritage Village) inclusionary housing funds
to AMCAL and also directed the City Manager to lead discussions on the project. On April 15,
2016, KMA completed a financial gap analysis and determined $8,795,000 as the City’s financial
assistance (Exhibit 6). On December 20, 2016, the City Council authorized the City Manager to
execute a conditional loan commitment letter with AMCAL for $2,600,000 of inclusionary housing
in-lieu fees contingent on the City’s receipt of an in-lieu fee payment of $2,600,000 from Heritage
Village. In addition, the Housing Authority also authorized the drafting of loan agreements in an
amount not to exceed $6,195,000 for a total of $8,795,000 pre-committed for the project. On
February 21, 2017, staff agendized the City conditional loan and Housing loan agreements for
City Council consideration. The City Council tabled the agreements and requested that an Ad
Hoc Committee review the project as well as other projects in the queue.
As requested by the Ad Hoc Committee, CSG Advisors completed a second opinion financial gap
analysis on May 12, 2017, and determined $8,522,740 as the financial gap for the project (Exhibit
7). On May 16, 2017, AMCAL submitted a letter informing the City that Heritage Village will not be
making the initial payment of $2.6M in In-lieu fees in time for the June 28 tax credit application
deadline. The delay in payment was also confirmed by a representative from Heritage Village.
As such, AMCAL requests that the City bridge the $2.6M of in-lieu fees with currently available
City affordable housing development funds in order to meet the tax credit application deadline.
The developer is preparing to apply for 9 percent competitive tax credits on June 28, 2017.
th
Aqua Housing, Community Development Partners: 317 East 17 Street
The Aqua Housing project consists of a 57-unit new construction permanent supportive housing
development, for chronically homeless individuals with wrap-around supportive services provided
on-site by Mercy Housing Living Centers. The unit mix currently consists of 12 studio units and
45 one-bedroom units for 30% and 60% of the AMI, including a single one-bedroom property
manager’s unit.
Discussion on Affordable Housing Development Projects, Approval of City Financial Assistance,
and Approval of Appropriation Adjustment
June 20, 2017
Page 6
This project applied to the City for financial assistance through a competitive RFP process for 56
project based vouchers (PBVs) on January 31, 2017. On April 4, 2017, the Housing Authority
awarded 25 project-based vouchers to the project. However, the project will need an additional
31 PBVs to be feasible and for the developer to apply for the June 28th 9 percent tax credit
deadline. Planning staff have been reviewing the project since the approval of the initial 25 PBVs
and the City has invested resources in the required NEPA environmental review. On May 22, the
Planning Commission approved the entitlements for the project. The developer is preparing to
apply for 9 percent competitive tax credits on June 28, 2017.
As requested by the Ad Hoc Committee, CSG Advisors is conducting a financial gap analysis for
affordable housing development funds in the event that the additional 31 PBVs are not awarded.
Tiny Tim Plaza, Community Development Partners: 2223 West 5th Street
The Tiny Tim Plaza project consists of a 51-unit new construction affordable housing
development targeting low-income families making 30%-60% AMI, including 5 units targeting at-
risk homeless families. This development was identified as one of the projects in the queue and
as such, on February 28, 2017, the Ad Hoc Committee requested a financial gap analysis be
conducted to determine the financial assistance for the project.
On May 18, 2017, the developer, Community Development Partners, requested that the City
commit affordable housing funds during the month of June as the commitment will provide for a
favorable outcome in the acquisition of land and closing of escrow tentatively scheduled for July.
The developer is requesting $6 million in City financial assistance for the project. On May 24, as
requested by the Ad Hoc Committee, CSG Advisors completed the financial gap analysis and
determined $11.7 million as the financial gap for the project (Exhibit 8) if the developer does not
receive new market tax credits, Section 8 vouchers, or other State funding. The project will apply
for 4 percent non-competitive tax credits in October 2017.
Currently, the project is in planning development review and anticipated to be reviewed by the
Planning Commission on September 11, 2017. Planning staff estimates that the project will be
agendized for City Council consideration on October 3, 2017.
Additional Ad Hoc Committee Recommendations:
The Ad Hoc Committee recommended that the City Council direct staff to develop a policy and
criteria for the allocation of future affordable housing development funds. It is anticipated that
future federal funding for affordable housing may decrease requiring the City to prioritize projects
for funding. The selection criteria would include elements such as; 1) affordability, 2) number of
units, 3) operating costs to tenants, and 4) gap analysis. Upon the direction of the City Council,
staff will conduct research and prepare options and recommendations for City Council
consideration at a later date.
Regarding the availability of affordable housing development funds, the Ad Hoc recommended
that staff provide the City Council with the current available funds on hand and to estimate future
funding. As provided in the May 2, 2017 quarterly report of Housing division projects and
Discussion on Affordable Housing Development Projects, Approval of City Financial Assistance,
and Approval of Appropriation Adjustment
June 20, 2017
Page 7
activities, the currently available affordable housing development funds amount is $18,661,468.
This value includes Housing Successor Agency, Inclusionary Housing, HOME program and
CDBG available funds as detailed in Exhibit 1.
In addition, staff estimates that the City will receive future Inclusionary Housing Funds from the
Heritage Project (est. $9.7M) and 421 N. Harbor Blvd mixed use market-rate development project
(est. $717,388). The future sale of Housing Successor Agency properties (four developable
sites) may generate an estimated $4 million. Lastly, the allocation of 2017-18 CDBG funds for
multi-family housing will provide an additional $300,000 and is dependent on the allocation of
federal funds.
STRATEGIC PLAN ALIGNMENT
Approval of this item supports the City’s efforts to meet Goal #5 - Community Health, Livability,
Engagement & Sustainability, Objective #3 (Facilitate diverse housing opportunities and support
efforts to preserve and improve the livability of Santa Ana neighborhoods), Strategy C (Provide
that Santa Ana residents, employees, artists and veterans receive priority for affordable housing
created under the City’s Housing Opportunity Ordinance or with City funding to the extent allowed
under state law).
FISCAL IMPACT
Approval of the City Council appropriation adjustment will recognize $4,200,000 in the
Inclusionary Housing Fund’s revenue account (no. 41718002-50001) and increase the Loan and
Grants expenditure account no. (41718820-69152) by the same amount in the FY 2016-17
budget, for the Santa Ana Arts Collective project and a portion of the conditional pre-loan
commitment for the Tiny Tim Plaza project. Both loans from the Inclusionary Housing Fund are
estimated to be fully expended in FY 2017-18, pending changes to the project schedules for both
projects.
Funds in the amount of $4,588,955 are available in the Low and Moderate Income Housing Asset
Fund, Loans and Grants account (no. 60718830-69152) for a portion of the pre-loan commitment
for the First Street Apartments project. Approval of the Housing Authority appropriation
adjustment will recognize $8,633,785 in the Low and Moderate Income Housing Asset Fund’s
revenue account (no. 60718002-50001) and increase the Loan and Grants expenditure account
no. (60718830-69152) by the same amount in the FY 2016-17 budget, for the remaining First
Street Apartments project commitment and the Tiny Tim Plaza project conditional pre-loan
commitment. Both loans from the Low and Moderate Income Housing Asset Fund are estimated
to be fully expended in FY 2017-18, pending changes to the project schedules for both projects.
Discussion on Affordable Housing Development Projects, Approval of City Financial Assistance,
and Approval of Appropriation Adjustment
June 20, 2017
Page 8
Housing
Inclusionary
Development Project Successor
Housing Funds
Agency Funds
Santa Ana Arts Collective $2,900,000
First Street Apartments $8,522,740
Tiny Tim Plaza $4,700,000 $1,300,000
Totals $13,222,740 $4,200,000
The housing assistance payments for the Aqua Housing project (31 project based vouchers) are
expected to be $355,260 annually. The payments will not commence until the completion of the
project and tenant occupation of the units. Funds will be budgeted in future fiscal years in the
Housing Choice Voucher Program, Housing Assistance Payment account (no. 13618760-69158)
for anticipated expenditure beginning in FY 2019-20.
APPROVED AS TO FUNDS AND ACCOUNTS:
________________________________ __________________________________
Robert Cortez Francisco Gutierrez
Acting Executive Director Executive Director
Community Development Agency Finance and Management Services Agency
Exhibits: 1. Available Funds for Affordable Housing Development Projects
2. Restrictions and Uses of Funds
3. Development Schedules for Affordable Housing Projects
4. KMA Analysis for the Santa Ana Arts Collective
5. CSG Advisors Analysis for the Santa Ana Arts Collective
6. KMA Analysis for the First Street Apartments
7. CSG Advisors Analysis for the First Street Apartments
8. CSG Advisors Analysis for Tiny Tim Plaza
9. First Street Apartments project pre-loan commitment letter
10. Aqua Housing project award letter
11. Tiny Tim Plaza project conditional pre-loan commitment letter