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HomeMy WebLinkAbout2012-06-12; City Council; 20936; Approval Home Investment Partnership Program FundingCITY OF CARLSBAD - AGENDA BILL 12 AB# 20.936 APPROVAL OF HOME INVESTMENT PARTNERSHIP PROGRAM FUNDING DEPT. DIRECTOF6^2j^^:?tI. MTG. 6/12/12 APPROVAL OF HOME INVESTMENT PARTNERSHIP PROGRAM FUNDING CITY ATTY. ^— DEPT. HNS APPROVAL OF HOME INVESTMENT PARTNERSHIP PROGRAM FUNDING CITY MGR. (A/ RECOMMENDED ACTION: Adopt City Council Resolution No. 2012-136 authorizing the City Manager to enter into agreements related to the use of Home Investment Partnership (HOME) Program funds by North County Solutions for Change (Solutions) for the development of affordable housing. ITEM EXPLANATION: The City of Carlsbad receives an annual allocation of federal funds through the HOME program. The City Council allocated $525,000 in 2010 program year funds to Solutions to assist them in the development of affordable housing to be used by families graduating from their homeless prevention program. Approximately 10 Carisbad residents are served by the prevention program each year. In 2011, an additional HOME Program allocation was made of $255,000 to Solutions for the same purpose. The total HOME allocation to Solutions is $780,000. Solutions has been attempting to identify suitable property to acquire for a project in Carlsbad for nearly two years. Unfortunately, the high cost of land in the City has made it very difficult for Solutions to identify a cost effective site in Carlsbad. As a result, they are requesting that they be allowed to use the funds to assist them in acquiring an existing 47 unit apartment complex at 786 Postal Way in the City of Vista. Solutions has already obtained the majority of financing needed for the $13 million project. However, they need to use the $780,000 in HOME funds to offset higher than anticipated rehabilitafion costs and relocation expenses required for existing tenants in the apartments. RECOMMENDATION: Staff prefers that affordable housing funds be used in the City of Carisbad. However, due to expenditure requirements tied to the HOME funds. Solutions is in danger of losing a portion of their allocation unless the funds are used before July of 2013. It is very unlikely that a suitable affordable property in Carlsbad will be available before that deadline, and the acquisition of the apartments in Vista is scheduled to occur this summer (2012). Staff is recommending that the City Council approve the use of the Solufions HOME fund allocation for use on the Vista apartment acquisition because it helps to meet the needs of homeless individuals. DEPARTMENT CONTACT: Frank Boensch 760-434-2818 frank.boensch(S)carlsbadca.qov FOR CITY CLERKS USE ONLY. / COUNCIL ACTION: APPROVED l^Q^ DENIED • WITHDRAWN • AMENDED • CONTINUED TO DATE SPECIFIC • CONTINUED TO DATE UNKNOWN • RETURNED TO STAFF • COUNCIL RECEIVED THE • REPORT/PRESENTATION OTHER-SEE MINUTES • Page 2 FISCAL IMPACT: The City of Carlsbad has received federal HOME program allocafions to provide $780,000 in funds to Solutions for Change to assist in the acquisition of the property in the city of Vista for the purpose of providing affordable housing to low income persons. The City of Carlsbad is proposing to use its funds for the acquisition of the property located outside of its city limits. The HOME Program expenditure has no impact on the General Fund. ENVIRONMENTAL IMPACT: Pursuant to Public Resources Code Section 21065, approval of funding for acquisifion of exisfing property for affordable housing does not constitute a "project" within the meaning of CEQA in that it has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and therefore does not require environmental review. EXHIBITS: 1. Resolution No. 2012-136 authorizing the City Manager to enter into agreements related to the use of Home Investment Partnership (HOME) Program funds by North County Solutions for Change for the development of affordable housing. 2. Letter from North County Solutions for Change. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 2012-136 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING THE CITY MANAGER TO ENTER INTO AGREEMENTS RELATED TO THE USE OF HOME INVESTMENT PARTNERSHIP PROGRAM FUNDS BY SOLUTIONS FOR CHANGE FOR THE DEVELOPMENT OF AFFORDABLE HOUSING. WHEREAS, the City has allocated Home Investment Partnership (HOME) Program funds to North County Solutions for Change for development of affordable housing for graduates of their homeless prevention program; and, WHEREAS, Solufions for Change has identified an available property at 786 Postal Way in the City of Vista as suitable and cost effective to accommodate the regional homeless prevention needs; and. WHEREAS, the City Council has taken all testimony into account. NOW. THEREFORE BE IT HEREBY RESOLVED as follows: 1. That the above recitations are true and correct. 2. That the City Manager is authorized to enter into agreements related to the use of Home Investment Partnership (HOME) Program funds by North County Solutions for Change for the development of affordable housing at 987 Postal Way, Vista California, subject to review as to form by the City Attomey, and the Finance Director is authorized to appropriate and disburse said funds to the subject project per said agreements. /// /// /// /// /// /// /// /// /// /// 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 12*^ day of June 2012, by the following vote to wit: AYES: NOES: Council Members Hall, Kulchin, Blackbum, Douglas and Packard. None. ABSENT: None. MATT HALL, Mayor ATTEST: .ORRAINE M. WOOD, City Clerk (SEAL) ^ .v^ North County Solutions for Change Changing Attitudes. Rebuilding Lives. May 16,2012 Debbie Fountain, Director City of Carlsbad, Housing and Redevelopment 2965 Roosevelt Street, Suite B Carlsbad, CA 92008-2389 Re: Vista Terrace Apartments Vista, Califomia Dear Ms. Fountain; North County Solutions for Change ("Solutions") requests the transfer of the approximately $780,000 of HOME funds to our 47-unit Vista Terrace acquisition/rehabilitation development in Vista, California. Solutions acquired site control June 30,2011 of the existing apartment complex at 786 Postal Way, Vista, CA and has maintained site control since then through extensions. We selected Chelsea Investment Corporation as our Development Consultant, an affordable housing developer with extensive experience in developing and financing both new construction and acquisition/rehabilitation projects including three new construction developments within the City of Carlsbad. Vista Terrace has a Low Income Housing Tax Credit Reservation of Credits dated March 21,2012 from the California Tax Credit Allocation Committee (TCAC) and a Private Activity Bond Allocation dated March 21,2012 from the California Debt Limit Allocation Committee. The bond allocation has an expiration date of June 19,2012. JPMorgan Chase Bank has issued the project a term sheet covering the terms and conditions for its purchase of the bonds directly providing a source of construction fimding. Likewise, the Califomia Community Reinvestment Corporation (CCRC) has submitted a term sheet providing the permanent financing. Both banks are cooperatively completing their due diligence and preparation of closing documents. In addition, a $4.8 million Supportive Housing Multifamily Housing Program commitment was awarded to Vista Terrace January 6,2012. In addition HUD granted Solutions $400,000 of McKinney-Vento homeless assistance funding on March 13,2012, which will be contributed by Solutions to Vista Terrace. Lastly, the viability of the project has been enhanced by the award of 35 Section 8 Project-Based Vouchers by the County of San Diego. A Subsidy Layering Analysis is presently being prepared by TCAC. The acquisition of the Vista Terrace Apartments and the close of the construction funding is scheduled for June 12,2012. We have been confronted with higher than anticipated relocation cost estimates and the scope of work that the outlined ftinding above can support covers only a moderate level of rehabilitation. Vista Terrace Apartments are 40 years old and require much more rehabilitation work than the budget allows. We need 'gap' funding of $780,000 to achieve the level of rehabilitation we originally anticipated. We recognize that the federal funds will require that the County Department of Housing and Community Development complete a NEPA prior to the funding be available for rehabilitation. We are in contact with HCD and we expect that the NEPA review can be expedited in as much as an environmental review has previously been completejLby HCD for Vista Terrace. President 722 W. California Ave. • Vista, California 92083 • Phone: 760-941-6545 • Fax: 760-941-1715 www.5olutionsforchange.org 5 CITY OF ^ CARLSBAD Memorandum Junes, 2012 To: From: Via: Re: Lisa Hildabrand, City Manager Debbie Fountain, Housing and Neighborhood Services Director John Coates, Assistant City Manager CONDITIONS FOR USE OF HOME FUNDS ON VISTA TERRACE ACQUISITION IN CITY OF VISTA To ensure that the City of Carlsbad receives adequate benefit to its low income residents in exchange for the use of its allocation of HOME funds ($780,000 total) for an affordable housing development within the City of Vista to assist homeless families, staff is suggesting that the City Council consider the following additional or enhanced conditions for the related subrecipient and loan agreements: 1. To the greatest extent possible and consistent with fair housing laws, North County Solutions for Change will give priority and/or preference in marketing and/or resident selection for the Vista Terrace development to a fair share of individuals or families that originated from Carlsbad as a resident or employee (of a local Carlsbad company). 2. North County Solutions for Change will provide annual reports to the City of Carlsbad as to the benefit realized for its residents and/or Carlsbad company employees as a result of the financial contribution to the Vista Terrace development, for the term of the agreement. 3. The City of Carlsbad shall be identified on all marketing and promotional materials as a funder of the development, and shall be kept informed of program accomplishments on an ongoing basis. If the City Council agrees with these conditions to demonstrate benefit to Carlsbad residents, it is recommended by staff that they indicate their desire to add these conditions to the subrecipient and/or loan agreement that will be executed by the City Manager on behalf of the Council when this reallocation of funds is considered at their meeting on June 12, 2012. cc: Ron Ball, City Attorney Frank Boensch, Program Manager Date: Otetributioh: City Clerk Asst. City Clerk Deputy Clerk Book Housing & Neighborhood Services 2965 Roosevelt St., Suite B I Carlsbad, CA 92008 I 760-434-2810 I 760-720-2037 fax I www.carlsbadca.gov Lisa Hildabrand Agenda Item # For the members of the: From: Sent: To: Cc: Subject: Debbie Fountain Tuesday, June 12, 2012 12:34 PM Lisa Hildabrand; Jane Mobaldi; Ron Ball John Coates; Frank Boensch FW: priority for units 1^11 T WUINUL ACM ^DCM CA«^CC^ Datejfijg^lty Manager —' Hi Lisa, Jane and Ron. FYI for tonight's agenda item for the HOME funds for North County Solutions for Change Generally when we provide funding for projects through CDBG and HOME for acquisitions or other capital improvements, it is done in the form of a deferred, no interest loan that is forgivable in 20 years if the property is maintained as approved and serves the approved populations; this type of loan acts more as a grant rathei^ than a loan. In the case of the acquisition/rehabilitation by North County Solutions for Change for an affordable housing development, other rules (specifically tax credit funding rules) require our assistance to be provided in the form of "true debt loan". Solutions, through their consultant Chelsea, is requesting that the city's assistance be provided in the form of a 3%, 55 year loan that is repaid at the end of the term of the loan (soft loan). Solutions/Chelsea is requesting that we provide the "grant" funds to Solutions, and then Solutions will loan the funds to the development partnership. I am not supportive of this 2-step loan structure because the program income (interest) will return to Solutions for Change rather than the City. Since it is necessary due to their other financing for the City to provide the assistance in the form of a "true debt loan", I believe we should make the loan of the HOME funds to the development partnership directly and similar to all of our other loans for affordable housing developments. This would result in a residual receipt loan to the partnership. This would be a 55 year loan that accrues interest at 3% per year and payments are made through surplus cash or residual receipts. It is very likely that there will be no surplus cash or residual receipts for some time, but when there is cash available a percentage will be required to be paid to the City. Ultimately, the loan would be repaid in full to the City with accrued interest at the end of the 55 year loan term. This interest income will be considered program income under federal rules and will ultimately need to be reprogrammed for another affordable housing development when it is received. I believe this loan structure would be more appropriate than that requested by Solutions/Chelsea. I have shared this opinion/recommendation with Solutions/Chelsea. Chris Megison, Executive Director for Solutions, however, continues to request the 2 step loan process (allowing Solutions to loan the City's HOME "grant" funds to the partnership). He may present this request tonight at the City Council meeting. My recommendation remains the same that I believe the Council should structure this assistance in the form of a residual receipts loan to the partnership under the conditions noted above. We have numerous loan documents that have been approved by the tax credit program. Therefore, I do not believe this City proposed loan structure will create any concerns for the other financing programs. Let me know if you have any concerns or questions regarding this matter. Thank you, Debbie Fountain Housing and Neighborhood Services Director City of Carlsbad From: Cheri Hoffman rmallto:cheri@chelsealnvestco.coml Sent: Wednesday, June 06, 2012 3:10 PM To: Frank Boensch; Tim Baker; Chris Megison Date: Distribiitibn: City Clerk As^. City Clerk Deputy Clerk Book Solutions for Change Home Investment Partnership (HOME) Program Funding Solutions for Change HOME Program Funding •HOME funds may only be used for affordable housing purposes.•Solutions for Change was allocated a total of $780,000 in HOME funds over two years. Solutions for Change HOME Program Funding •Solutions University teaches skills needed to solve homelessness for families with children.•Carlsbad provided HOME funds in 2003 and 2004 for development of the Solutions Family Center in Vista. Solutions for Change HOME Program Funding •Current allocation was made to acquire property  for graduates of the Solutions University from Carlsbad.•Solutions has been unable to identify a cost effective property suitable for their use in Carlsbad. Solutions for Change HOME Program Funding •Request to use Carlsbad HOME funds to purchase 47 unit apartment complex in the City of Vista.•Carlsbad families graduating from Solutions University will be eligible to rent in the Vista apartments. Solutions for Change HOME Program Funding •Solutions may lose approximately $125,000 of their HOME allocation if funds are not used before July 1, 2013.•A suitable and cost effective property may not be available for acquisition in Carlsbad prior to July next year. Recommendation•Approve the resolution authorizing the City Manager to execute documents related to the loan of HOME funds to Solutions for Change.