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HomeMy WebLinkAbout1998-02-12; Housing Commission; MinutesMinutes of: HOUSING COMMISSION Time of Meeting: 6:OO P.M. Date of Meeting: FEBRUARY 12,1998 Place of Meeting: CITY COUNCIL CHAMBERS CALL TO ORDER: Chairperson Wellman called the Regular Meeting to order at 6:08 p.m. PLEDGE OF ALLEGIANCE: The pledge of allegiance was led by Commissioner Escobedo. ROLL CALL: Present: Chairperson Wellman, Commissioners Calverley, Escobedo, Noble, Rose, and Walker Absent: Commissioners Latas, Scarpelli, and Schlehuber Staff Present: Debbie Fountain, Housing and Redevelopment Director Craig Ruiz, Management Analyst Leilani Hines, Management Analyst Toni Espinoza, Housing Specialist I1 Cissie Sexton, Office Specialist Bobbi NUM, Housing Program Manager APPROVAL OF MINUTES: ACTION: Motion by Commissioner Rose, and duly seconded, to approve the Minutes of the Special Meeting of January 14, 1998, as submitted. Calverley, Escobedo, Noble, Rose, Wellman VOTE: 5-0-1 AYES: NOES: None ABSTAIN: Walker COMMENTS FROM THE AUDIENCE ON ITEMS NOT LISTED ON THE AGENDA: There were no comments from the audience. NEW BUSINESS: 1. 1996-97 HOME PROGRAM - Request for approval of a recommendation for reallocation of $13,400 from the City of Carlsbad’s 1996-97 HOME Investment Partnership Program. Leilani Hines stated that as a participant of the County HOME Consortium, the City continues to be eligible to receive HOME funds. In fiscal year 1996-97, the first year the City participated in the HOME Consortium, the City received approximately $194,000 in HOME funds, which was split with $180,000 going to single-family rehab and $13,400 to the Community Resource Center Security Deposit Assistance Program. Unfortunately, at this time the Community Resource Center is unable to provide this program for the City due to the rigorous requirements of the HOME Program. In addition, they feel they are unable to implement the program because of the lack of funding sources available for administration of the program. Staff is therefore requesting a recommendation of approval of Housing Commission .Resolution 98-004, to reallocate these funds, originally allocated to a security deposit assistance program, to housing rehabilitation costs associated with owner-occupied single-family homes. Chairperson Wellman asked if there were any questions of Staff. -- A HOUSING COMMISSION MINUTES FEBRUARY 12,1998 Page 2 Chairperson Wellman commented that the State will no longer provide the armories to be used for emergency housing and asked Staff to explore this issue. Ms. Hines responded that the City Council did approve participation in the County of San Diego’s HoteliMotel voucher program for homeless persons. She said that the City is participating in this program which is specifically geared to the elderly, disabled, or families with children. Ms. Hines added that vouchers for hotels or motels are available for those persons needing shelter through March of this year through Lifeline Community Services and St. Francis Center in Vista. She said that any persons within the community who need this type of assistance this winter should be referred to these two agencies. In addition, the City is also working with other jurisdictions as well as social service providers to look at a more regional approach to homeless for the next winter season so there is something available for the homeless next year. Commissioner Noble added that there are agencies that request and get funds from the CDBG funds to provide for the homeless. Ms. Hines responded that there are a few agencies that provide homeless services and shelters funded through the CDBG program. She added that even though the Community Resource Center did not want to participate in the HOME program, they do offer some kind of assistance through their own private donations and other funding sources that do not have as many ties as the Federal programs do. ACTION: Motion by Commissioner Walker, and duly seconded, to ADOPT Housing Commission Resolution No. 98-004, recommending to the City Council that the reallocation of $13,400 in City of Carlsbad 1996-76 HOME Investment Partnership Program funds originally approved for the security assistance deposit program to the City of Carlsbad’s Single Family Residential Rehabilitation Program. Calverley, Escobedo, Noble, Rose, Walker, Wellman VOTE: 6-0-0 AYES: NOES: None ABSTAIN: None 2. CALAVERA HILLS VILLAGE L-1 - Recommendation of approval to the City Council to provide $75,000 in financial assistance from the City of Carlsbad’s Housing Trust Fund for the construction of five, for sale, affordable four bedroom single family detached units in order to help satisfy the requirements of the Inclusionary Housing Ordinance for the development of 35 residential units in Village L-1 of the Calavera Hills Master Plan. Craig Ruiz reminded the Commissioners that this project was before them in September of 1997. He said the project is located in the Calavera Master Plan with a total of 35 units, five of which will be affordable for-sale units for families earning 80 percent or less of the area median income. He added that the five affordable units are spread throughout the development and will be developed concurrently with the market-rate units. Each unit will include 1,300 square feet of living area with four bedrooms and two-car garages. At the September meeting, the Housing Commission recommended approval of this project for the construction. At that meeting there was not a discussion of financial assistance. Subsequent to that meeting, there was a transfer of the property and the property was sold to a home builder. The new developer has prepared a detailed proforma, which was included in the Commissioners’ packet as Attachment 5. Based on this profoma, the applicant has determined that financial assistance is necessary to help develop the project. HOUSING COMMISSION MINUTES FEBRUARY 12,1998 Page 3 Mr. Ruiz discussed the “Proforma Subsidy Analysis” that Staff provided in the Staff report (page 3), which summarizes the detailed proforma. He said that typically the Housing Commission has reviewed rental projects, which have a higher level of leverage than this project. Mr. Ruiz said that Staff is recommending $15,000 per unit for a total of $75,000 for five units. He said that this may seem high on a per-unit basis; but Staff feels there are extenuating circumstances that justify the cost. First, this is a for-sale project--only the second for-sale project in the City. Second, these are four bedroom units, and there are few, if any, affordable large for-sale units in the City; so these units will serve a very under-served segment of the City’s population. Chairperson Wellman asked if there were any questions of Staff. Chairperson Wellman asked for confirmation that the subsidy from the City is in the form of a loan. Mr. Ruiz responded affirmatively and said that the “gap” amount would be taken back against the property in the form of a second trust deed. The buyer would not have to make any payment on it, but when they go to re-sell the property, there will be no restrictions on who they can re-sell to, but the second deed would be repaid in full to the City plus the City’s subsidy at that time, which would go into the Housing Trust Fund to be used for other housing projects. No money would go to the developer, according to Mr. Ruiz. He said this is the same setup the City used with Sambi. The developer would, however, get the full purchase price of the homes. Chairperson Wellman invited the applicant to speak. Mike Howes, Hofhan Planning and Associates, 2386 Faraday Avenue, Suite 120, Carlsbad, CA, addressed the Commission, and said that Mr. Ruiz did a very good job in summing up the project and the applicant’s request. He stated that Phil Jones of Heritage Builders is available to answer questions about the proforma. Commissioner Calverley asked why a developer would buy a project that does not “pencil.” Mr. Howes responded that the applicant felt they could make it pencil. Commissioner Calverley said that it is not logical to close an escrow on a project with a $15,000 negative cash flow on five units. She is assuming that the negative cash flow does not exist. Mr. Howes asked Mr. Jones to explain the cash flow issue. Mr. Philip Jones, 4809 Dulin Road, Fallbrook, CA, addressed the Commission and said that the affordable houses do not pencil, and said they will be making up the losses in the market-rate units. Commissioner Calverley responded that prior to closing escrow part of the proforma would be knowing how much they were going to make per unit and how much of a difference they had to make on the market-rate units in order to make the affordable units pencil. She said she feels the applicant is before the Commission asking them for “gravy”; that they have already done their numbers and know the project pencils as is with nothing coming from the City, or else they would not have bought the project. Mr. Jones responded that when they did their proformas they figured they could sell the affordable units for a littler higher than what is on Mr. Ruiz’s proforma. He added that this is their fust affordable housing project, and they did not really understand all the rules that were applying to the affordable housing project. He said they assumed that they -would be able to sell the houses for at least $145,000. --_ HOUSING COMMISSION MINUTES FEBRUARY 12,1998 Page 4 Commissioner Calverley asked Mr. Jones where he got this number from. Mr. Jones responded that this was the number he was told. He said that they are still trying to figure out who the buyers are and how much they can afford. In reality, as Mr. Ruiz said, the buyer may not even be able to afford $141,000. They may be able to afford $125,000 to $126,000, making the applicant’s losses increase even more than Mr. Jones projected. Mr. Jones said that as a builder looking at the actual numbers and what it costs to build and what the units can be sold for, there is actually an increase loss. Chairperson Wellman asked if there were any follow-up questions of Staff. Commissioner Walker asked about the developer and City subsidies being a second returning to the City after the sale of the home, and about interest on the subsidies. Mr. Ruiz responded that instead of interest the City does a shared equity. For example, he said that if the City and developer contributions equal 25 percent of the total purchase, the City would take roughly 25 percent of the equity .when the unit is sold. Chairperson Wellman asked if the developers will ask for more money if it is difficult to find buyers who qualify for the affordable units. Mr. Ruiz responded that the developer would have to answer this question. Ms. Fountain added that the developer can come back and ask but the Commission can also make it clear that this is all they are willing to put into the project. If they do come back, the agreement will have to be amended and the Housing Commission would have to approve the agreement if the developer wanted to ask for additional money. Chairperson Wellman asked if the applicant would like to address this issue. Mr. Jones responded that at this time he assumes this is all they will be asking for. He said he has never been in this position before where he has had to build affordable units and said they are in the position to take the $50,000 loss on the affordable units. He said it depends on the kind of buyers they have. He is assuming that they will get a lot of buyers that can come in and afford the homes at $140,000. If that’s the case, then it is not a problem. Mr. Jones said it is difficult for him to say “absolutely, no way will I ever come back here.” He does not plan on it and hopes that the market increases enough to make up the difference with the other homes. He hopes and assumes buyers will come in that can fall within the qualifications of the program. The program, as he understands it, is a very tight program and it is a little difficult to get a person to qualify with this program. He said they are determined to make this thing work and will work really hard with Staff, the mortgage companies, and with the applicants of the homes to make it work. Chairperson Wellman asked when the applicant will start the project. Mr. Jones said they will file their final map in about two weeks, so they will probably start in July or August. There being no other persons desiring to address the Commission on this topic, Chairperson Wellman declared the public testimony closed and opened the item for discussion among the Commission members. ACTION: Motion by Commissioner Rose, and duly seconded, that the Housing Commission ADOPT Resolution No. 98-003 recommending APPROVAL to the City Council to provide $75,000 in financial assistance from the Housing Trust Fund to Heritage Builders, Inc., for construction of five, for sale, affordable four bedroom single family detached units in order HOUSING COMMISSION MINUTES FEBRUARY 12, 1998 Page 5 to satisfy the requirements of the Inclusionary Housing Ordinance for the development of 35 residential units in Village L-1 of the Calavera Hills Master Plan. Escobedo, Noble, Rose, Walker, Wellman VOTE: 5-1-0 AYES: NOES: Calverley ABSTAIN: None 3. RANCHO CARRILLO AFFORDABLE HOUSING PROJECT - Recommendation of approval to the City Council to provide up to a maximum of $1,160,000 in financial assistance from the City of Carlsbad’s Housing Trust Fund for the construction of one hundred sixteen (1 16) affordable apartment units to help satisfy a portion of the requirements of the Inclusionary Housing Ordinance for the Rancho Carrillo Master Plan. Craig Ruiz told the Commissioners that this project has been before them twice. He added that last month there was a Special Meeting where the Commission recommended approval of the developer’s affordable housing agreement and the site development plan. Tonight the Housing Commission is being asked to provide a recommendation on the financial assistance component of this project. Mr. Ruiz stated that the Staff report spells out that the developer is unsure of the exact financing source for the project. They are pursuing both a 4 percent tax credit program and a 9 percent tax credit program. Because of this the recommendation is a little different from what the Housing Commission has become accustomed to. He added that the recommendation is that the Commission provide up to a certain amount of money, that being $1.16 million in financial assistance, depending on the actual fmancing source that will be achieved at a later date. Depending on the source, the dollar amount will be significantly reduced. Mr. Ruiz stated that in the Staff report the two tax credit options are called Option A and Option B and there are two different project costs because the two different options have different requirements as far as different types of reserve .accounts they need to have and the amount of those reserves. Mr. Ruiz explained the two options in the “Proforma Subsidy Analysis” that Staff prepared (page 4 of the Staff report). Mr. Ruiz stated that the 4 percent tax credit project is one they consider to be “relatively certain” assuming the developer gets all their approvals and gets their application in on time to CHFA. He added that the City’s Inclusionary Housing Ordinance will require that the units be affordable to 80 percent of median income. With the 4 percent program, the developer is proposing restrictions that 20 percent of the units be at 50 percent of median income, 40 percent at 60 percent of median income, and the remaining 40 percent at 80 percent; so there will be a wide mixture of income levels in this project. About half the units will be three bedrooms, and the remainder will be two and one bedroom units, thus the project is going to be more affordable than the City’s requirements. Under Option B, the permanent loan is going to be greatly reduced compared to Option A. With the 9 percent option, they can raise a significantly greater amount of tax credit--$7.5 million--that that reduces the “gap” by about $2 million to $3.9 million. The developer will provide the $3 million and the land contribution. Staff has agreed with the developer to provide the same proportion of money with either plan, which is basically 55 percent from the developer and 45 percent from the City. Mr. Ruiz explained that Staff looked at dollars leveraged per the total cost of the project and they looked at dollars per the subsidy required. The developer is paying a significantly larger portion, he said. In the 9 percent option, the City’s leverage is $1 for every $1 1.5 of subsidy required, which is in line with Laurel Tree and Villa Loma. The 4 percent program only raises a small percentage of the equity, therefore, the City’s contribution would have to be much greater. The leveraging is less than half compared with what the City would get with the 9 percent project. ,- HOUSING COMMISSION MINUTES FEBRUARY 12,1998 Page 6 Mr. Ruiz said that the 9 percent project is a lot harder to get. Laurel Tree went through five or six “rounds” before they were awarded their tax credits. Mr. Ruiz added that there have been some changes in the tax credit program that will knock out a lot of the applicants, so the developers and Staff think there will be fewer people competing for the 9 percent credits giving the applicant a better chance to get the funding the first time around. It is still not anywhere near as certain as the 4 percent, and the developer will explain in detail when they will go with the 4 percent project and how long they will try for the 9 percent project. Next Mr. Ruiz went over the basic “deal points” regarding the distribution of money. He said Staff has modeled this project similarly with what they have done with the Villa Loma and the Laurel Tree projects where the City’s money would be in the form of a loan and the loan gets paid back through the money the project earns. Basically after all the expenses are paid, the cash surplus is used to repay the City’s loan. Mr. Ruiz explained that after the first year there is not a lot of cash surplus and later years there is cash surplus (as shown in the proforma). He said it takes about 15 years before there is enough positive cash flow to equal the payments, so the first few years there is negative amortization; and in year 15 it starts getting repaid. I Mr. Ruiz said that the Commission is being asked to recommend approval of the financial documents (Attachment 4 in their packets). He said the Commission will not be approving the exact language contained in the documents, but rather the basic deal points that have been spelled out. He added that there will be some changes to the document, but the basic deal points and content contained within those is what the Commission will be making their recommendation on. Some of the other deal points, according to Mr. Ruiz, include the permanent loan. He said there will be three different chances for money for the City to get repaid from. For permanent loan financing, if the project came in under budget, less than the loan amount, there would be money available, which the City would split that on a 50/50 basis. As far as the cash reserves, the applicant only needs to keep those cash reserves for a certain amount of time, then they can reduce those. The City would split those on a 70/30 basis, with the 70 percent going to the City to repay its loan. The same arrangement would occur with a cash surplus--70 percent to the City to repay the project’s loan, 30 percent back to the developer. Staff looks at this as an incentive to properly manage the property. Mr. Ruiz explained that the tax credits are determined on an “eligible basis,” which is mentioned in the Staff report. He said there are certain things that can be counted as eligible basis--certain costs--and that’s the percentage of tax credits one can get and return equity. In addition, there are certain things that do not count toward eligible basis. He explained that land costs do not count as eligible basis. For example, of the $13 million project, the $3 million land cost would come right off the top in determining the eligible basis. Other things would be the financing fees, legal fees, and reserve accounts. In the 9 percent project, the eligible basis comes down to about $9.5 million, and that is what is used to determine the tax credits. Mr. Ruiz said that Staffs recommendation is that the Housing Commission make a recommendation to the City Council to provide up to $1.16 million (for the 4 percent tax credit). If the applicant gets the 9 percent tax credit, the ,dollar amount would be significantly reduced--it would come down to $360,000. Ms. Fountain pointed out that there are a few errors in the Staff report in the Resolution with a couple of inconsistencies in the dollar figure. The correct figure is $1,160,000 (one million, one hundred sixty thousand) not $1,116,000 (one million, one hundred sixteen thousand) as reported in the Resolution and other places in the Staff report. The Resolution, therefore, needs to be changed to reflect the correct amount of $1,160,000. Ms. Fountain reiterated what Mr. Ruiz said about the documents--the financial assistance agreement before the Commission is basically set up for the CHFA loan and the 4 percent tax credit. If the applicant gets the 9 percent tax credit, Staff will have to rewrite a new agreement showing the new amount and the regulations related to the agreement. The form will basically stay the same and the basic deal points will remain the same, but the language may HOUSING COMMISSION MINUTES FEBRUARY 12, 1998 Page 7 change depending on which financing source they get. She added that the documents still need to go through attorney review, so there may be some language changes, but the basic deal points will not change. Chairperson Wellman asked if there were any questions of Staff. Chairperson Wellman asked Staff to address the language in the Staff report that states “the City’s loan is unsecured.” Mr. Ruiz responded that h4r. Galasso will address this issue. Chairperson Wellman asked about the developer fee. Mr. Ruiz responded that tax credit regulations spell out that the developer fee can be 15 percent of the adjusted eligible basis up to a maximum of $1.2 million. The applicant has an eligible basis of $9.5 million; 15 percent of this would exceed the $1.2 million; so they could be approved for a maximum of $1.2 million. He said that with Laurel Tree the developer fee was about 5.5 percent of total project costs. With Villa Loma it was closer to 8 percent. The 7 percent of total project cost, which this $900,000 represents, is in line with what the City has done previously, he said. Chairperson Wellman invited the applicant to speak. Michael Galasso, Barone Galasso and Associates, Inc., 600 West Broadway, Suite 1070, San Diego, CA, addressed the Commission and thanked Staff for their work on the project over the last several months. He said that over the last few months in their discussions with Staff, they have talked about the cost of the project, including the development fee, which was initially higher than the $903,000 which they finally negotiated. The applicant and Staff have discussed all the other costs associated with developing this project, including the City fees, operating expenses, and the profit sharing; and the applicant has reduced the property management fee in order to reduce the operating expenses. Mr. Galasso apologized for getting the “numbers” to the Commissioners so late. He said the numbers have been in flux up to about a week ago when they finally came to a conclusion on exactly what the project was going to cost. Some of the numbers have been the same throughout the negotiations, but some of them have changed. Mr. Galasso said that he .personally has done about 20 or 30 different proformas on this project to get to where they are at today. Mr. Galasso said that one of the reasons why they are before the Commission tonight and not in a month from now is that in December the Tax Credit Allocation Committee came out with their recommendations on the changes of what is known as their allocation plan. That plan is what determines how they allocate their tax credits to various projects. One of the things that they changed that was very important is that prior to this year, one could submit an application and in that application just state that you are going to go to your local government agency and get financial assistance. After getting the tax credits, you would try to get the funding from the local government agency. The Tax Credit Allocation Committee decided to make it a requirement that as part of the application the applicant has to have the local financial assistance in place along with City Council approval. What this did is knock out a lot of projects that were planning to go in on this round which ends in February. That meant there will not be in this particular round as many projects competing for those tax credits as there has been in previous years. Mr. Galasso said that part of the problem with Laurel Tree getting the tax credits was the amount of competition. With a lot of work fiom the people at MACC, they got the allocation plan changed so that San Diego county got a little more of a fair share. Mr. Galasso said they will have a good opportunity in this round, if they get the application in by February 27, to not only get the 9 percent Federal tax credits, but they are applying for State credit as well. Mr. Galasso said that up until December they were working with Staff just on Option A because of the uncertainty of getting the 9 percent credits. When Mr. Galasso saw the changes in the allocation plan, they started working on Option B which uses fewer of the City’s resources. The other thing they are doing is lowering the affordability. With the 9 percent tax credit project, the units will be available on an average to people who make 40 percent of median HOUSING COMMISSION MINUTES .FEBRUARY 12,1998 Page 8 income. For the $360,000 that the City is investing, they are buying a lot more affordability. The average affordability for the Option A project is about 65 percent. Mr. Galasso said they will be doing the same project with either option. Mr. Galasso said the applicant needs the Commission’s approval to move forward to the City Council next Tuesday to make the deadline and get the application in and leverage the City’s money to the maximum in order to get a more affordable project for the people who will be living in this project. Mr. Galasso stated he would like to make a correction to the developer fee stated in the Staff report. He explained that the developer fee is what Barone Galasso and Housing Opportunities make for the risk they take on the project He said they have been doing affordable housing for about 10 years, and even though the developer fee looks like a very large number, that fee gets used a lot of times for additional costs that go into the project. He added that they set up the budgets two to three years before actually starting construction on the project, and they have to live with those numbers. He said they do not put a lot of contingency into the hard construction numbers, and when lumber costs go up or they find something else out at the site that they didn’t know, one of the first places there is a pot of money to go after is the developer’s fee. Their intent is that they will be able to recoup the whole developer fee; but in this particular case, the applicant is going to set aside 25 percent of it and get paid over the life of the project. The other 75 percent would be paid during the term of construction versus what it says in the Staff report, which is at the time of permanent financing. This is something they have agreed to in their negotiations with Staff, according to Mr. Galasso, that they would get paid their developer fee as construction goes on over a 12-month period of time. Ms. Fountain explained that they agreed with the applicant that they could receive 75 percent of the developer fee during construction; therefore, the agreements would have to be amended to state that. Mr. Galasso added that they will get paid as the project goes along through monthly draws on the construction loan. He said that from the time they have been working on this project until the construction starts, everything has been out of pocket. When construction starts, they will get the fee in 12- to 16month increments. Mr. Galasso stated that Staff has done a very good job in negotiating the profit sharing for the project. He said that other cities typically split cash flow 50/50 along with other savings. With this project, however, the split is 70130 (for the City) because the City is putting in a little more money on a per unit basis than they have with previous projects. He added they are 50150 on any savings, which is a good provision in the agreement if they do a good job, and 50 percent of the savings go to the City. Chairperson Wellman asked if there were any questions of Mr. Galasso. Commissioner Escobedo asked if the applicant is going with Option B. Mr. Galasso responded that they are going to do things simultaneously because of their concern that there will not be any of Option A left after March or April. They are going to put in an application to the Tax Credit Allocation Committee before the end of February. They will also put together an application to CHFA for bond financing, for Option A. Because of the timing and the need for Continental and everybody else to get this project started, the -applicant cannot wait until April, which is when they would hear about Option A, to do nothing. They will fill out the lengthy application, pay the fees for Option B; and at the same time pay the fees and submit an application to the California Housing Financing Agency for Option A. Commissioner Walker asked Mr. Galasso if they will be submitting an application once for the 9 percent and if it does not go through if they will go with the 4 percent tax credit program. HOUSING COMMISSION MINUTES FEBRUARY 12, 1998 Page 9 Mr. Galasso responded that if they hear in April that they do not get the 9 percent tax credits, they may go in again for the second round in May. All along they will be processing their development plans and probably pulling their building permits in August. During this time they will be looking at both Options A and B. Commissioner Walker asked for further clarification. Mr. Galasso said that if they do not get the 9 percent tax credits (they will find out in April of 1998), they may try again for the second round, while still processing the 4 percent. In order to get the commitment on the 4 percent deal with .CHFA, the applicant will have to pay a lot of money to them to secure the bonds; so the applicant is going to try to stretch this as long as possible to see if they get an option to go in for a second round of the 9 percent tax credits. They will make the most effort that they can to get the 9 percent credits. If the timing works out, the applicant will try for both rounds of the 9 percent tax credits. Walter Heiberg, Housing Opportunities, Inc., 2727 Hoover Avenue, National City, CA, addressed the Commission and said he is representing the 116 families who will be moving into the affordable units. As a non-profit, Mr. Heiberg has been the chair of Housing Opportunities for about five years. He said he does this 100 percent voluntarily as does the board of directors. Housing Opportunities helps to interview the families who will be moving into the affordable units. He said that Mr. Galasso is the one who runs the numbers and does the management, while Housing Opportunities is the non-profit who helps to push the projects forward for the 116 people who will be moving in. He said he is available to answer any questions on Housing Opportunities’ behalf and added that the City is doing a great service to the community by offering these affordable units. Chairperson Wellman asked if there were any questions of Mr. Heiberg. Commissioner Calverley asked about the phasing of the project and the fact that Continental Homes is asking for the ability not to start this project for a number of months. Mr. Heiberg responded that as he understands the agreement, this project has to be started by a certain time or they will not be able to continue building their market-rate homes. Mr. Galasso responded that as soon as they pull building permits, it will be started. Commissioner Escobedo asked how Housing Opportunities determines who they will interview for living in the affordable units. Mr. Heiberg responded that as with the last project they did, they will sit down with Barone and Galasso, and may invite some local groups. He said they will probably get hundreds and hundreds of applications. They go through a process and interview each family in a fashion that they feel comfortable they have chosen the right families after weeding through quite a need for 116 units. He said he would be happy to hear if any of the Commissioners, or some other group in Carlsbad, would like to sit on the panel with them. Chairperson Wellman asked if Housing Opportunities, Inc. (HOI) is sharing in the developer fee. Mr. Heiberg responded affirmatively and said that according to the current agreement, 60 percent goes to Barone and Galasso and 40 percent to HOI. Chairperson Wellman asked if the agreement can be changed. Mr. Heiberg responded that it changes on how much the two partners truly do. If Barone and Galasso does more of the “lion’s” share of the processing and the planning, then the HOI board will re-negotiate the fee. HOUSING COMMISSION MINUTES FEBRUARY 12,1998 Page 10 Chairperson Wellman asked if the City of Carlsbad reviews the agreement between the developer and HOI. Mr. Hieberg responded that to his knowledge they do not. Ms. Fountain responded that the developer fee is something the City leaves between the two developers. Chairperson Wellman asked for clarification of what HOI does. Mr. Hieberg responded that Barone and Galasso has a management company, and they will be the manager of the project. As the non-profit, HOI will be the owner of the project and will be involved every month with Barone and Galasso in the management decisions of the project. Chairperson Wellman asked for clarification of the property taxes and said that the other two projects in the City that received tax credits were exempt from property taxes. Mr. Hieberg said that it is his understanding that the property taxes ad valorem they are able to get out of, but there are other taxes, Mello Roos taxes for payment of roads, that are listed under taxes, that Chairperson Wellman is probably questioning. .Chairperson Wellman said no, it is the two percent annual basis she is referring to. She added that the standard property tax situation makes a difference if the project is owned by a non-profit or by a for -profit. Mr. Galasso responded that as a non-profit owner, the applicant can “get out of‘ a 1 percent ad valorem Proposition 13 tax on an annual basis. He added that the reasons the taxes are in there, the numbers he thinks chairperson Wellman is referring to, is because of the Mello Roos and the other assessment districts that are on this project. He added that being able to get out of these taxes helps to make the project affordable. Chairperson Wellman added that other partners in the leveraging of this are the various governments that are not going to be receiving property taxes on this project. Chairperson Wellman recommended that before this goes to the City Council that the chart on taxes be clarified because she finds it confusing. Chairperson Wellman asked about the language in the agreement that states “once this project is up and running they can change the manager or change the non-profit and be notified six months after the fact.” Mr. Galasso responded that he believes Chairperson Wellman is referring to a change in the managing general partner of the partnership, which is HOI. They have to be the managing general partner, because without them, the applicant does not get the property tax abatement. Barone, Galasso and Associates are the co-general partners. He said that if the agreement says “we notify them after we change,” then that should be changed. He said that it would be their intent to notify anybody of any changes that are involved in a project the City has invested money in and that they would notify them before they make a change. Chairperson Wellman said the agreement states “up to six months after the changes” and she would like to see it say, “before the change.” Mr. Galasso said they have no problem with that. Chairperson Wellman asked that the record reflect this be changed in the agreement. Mr. Galasso said the agreement reads this way because sometimes non-profits disband and they have to make sure they have a provision in there if they need a new non-profit. HOUSING COMMISSION MINUTES FEBRUARY 12, 1998 Page 11 Mr. Galasso addressed the questions asked earlier about how the tenants are selected. He said that after they spend all the months and years putting together these projects with all the piles of paperwork, the gratifying part of the process for them is interviewing the families who become tenants of the projects. He added that it is a very thorough process that they go through because they want to select tenants who will be good for the community. He said that they typically have a selection committee that comprises not only the management and the ownership, but they like to get people who are involved in the community. Sometimes it is people from the Housing Commission, sometimes it is people from the Redevelopment Agency, and sometimes it is people from a neighborhood planning group. He said that it takes a lot of time and effort because they interview a lot of families to select the 1 16. He added that the project they did together in La Mesa, there were over 1,000 families who applied for 60 apartments and they interviewed close to 120 to 200 families to select the final 60. He said they number the applications as they come in and try to treat everyone fairly. In addition, he said it is not only income-qualifying, he said they interview EVERYONE in the family. If a brother or sister is missing, they re-interview the family. It is a very thorough process and the interviewing process makes a big difference in the type of communities they have. He said this is going to be right at the entrance to Continental Homes-a very large project that they have a lot of money invested into, so not only do they want to make sure that it looks good, they want to make sure it has the right people there too. He said sometimes they do home visits, but not all the time because it is time consuming. They will for somebody who is “on the edge.” Commissioner Escobedo asked Mr. Galasso how many projects they have completed. Mr. Galasso responded that they have completed 12 to 15 affordable projects in 12 years, mostly in San Diego, La Mesa, and Sacramento. Mr. David Lother, Continental Homes, 12636 High Bluff Drive, Suite 200, San Diego, CA addressed the Commission and also complimented Staff on their efforts in getting this “complicated” package to the Commission tonight. He stated that they do concur with Staffs summary of the deal points and said they are ready to move ahead with the agreement as outlined by Staff. He thinks they have teamed up a good affordable housing development group--Barone Galasso and Housing Opportunities, Inc. He added that they are anxious to see the project get started. Chairperson Wellman asked if there were any questions of Mr. Lother. Chairperson Wellman asked about the $3.2 million land appraisal. Mr. Lother responded that the appraisal was done over the course of three to four months ago. He said that it is required of them to do another appraisal as part of the agreement to verify this amount. He added that this is an internal appraisal they have done and which Staff has concurred with. The appraisal is not for the purchase price of the land because they purchased raw land and since that time they have done considerable improvements to the land which raises the value of the land. He said it is difficult to determine exactly how much they purchased the land for because it was not all purchased at the same time--some was purchased in 1986, some was purchased about a year and a half ago. Chairperson Wellman asked how many acres were included in the $3.132 subsidy of land. Mr. Lother responded roughly seven acres. Chairperson Wellman asked if the master developer (Continental Homes) will be reimbursed for the loans to the project. Mr. Lother said it is effectively a loan, but in reality it is not much of a loan. He added that the City has first priority over Continental’s repayment, and the City will get 70 percent of any surplus cash. The 30 percent of the surplus cash would go to pay back Continental’s loan. HOUSING COMMISSION MINUTES FEBRUARY 12,1998 Page 12 Chairperson Wellman reminded Mr. Lother that the 70130 is the money coming in, but the reserves and surplus cash are 501.50. Mr. Galasso responded that the 50150 savings go to the City and to HOI and Barone and Galasso. Chairperson Wellman stated that the way the agreement is structured is that the developer is not making a gift of the land to the project because they are getting reimbursed. Mr. Lother stated that they are getting reimbursed but will be lucky to get reimbursed over a 50-year period of time. Looking at the way the City’s loan is structured, with the 4 percent tax credit, the City’s loan is paid back over approximately 22 years. The developer loan will take 40 to 50 years to come back due to the way the cash is split. Mr. Galasso added that Continental will get a percentage of the 30 percent that they get. Splitting the 30 percent 50150, Continental will get 15 percent of the cash flow. Chairperson Wellman asked if Continental Homes is selling the land at a profit. Mr. Lother said that they are essentially giving the land away and are writing a check on top of that. There being no other persons desiring to address the Commission on this topic, Chairperson Wellman declared the public testimony closed and opened the item for discussion among the Commission members. Commissioner Noble commented that this is a good project. He added that it is the responsibility of the Housing and Redevelopment Director to make the changes in the agreement that were brought up this evening. Commissioner Calverley commented that she is having a problem with the lack of time given to review the documents before each meeting. She said that the Housing Commission is charged with several things, one being the HOME funds, one is whether these projects meet the Housing Element, and the third is the financial feasibility of the projects. She feels that the Housing Commission should not be getting numbers two days prior to the meeting, when Mr. Galasso says he has “run these numbers 20 times” and “has worked with Staff for six months.” She wondered how the Commission could make million dollar decisions based on numbers they have had no backup on whatsoever and have had no input by anyone on the numbers other than the questions asked this evening. She does not know if this is as Staff problem or a developer problem. She would like the record to reflect this concern and would like to make sure the Commission gets the numbers in a timely manner so they can review the data contained within the packets. She said she cannot make a million dollar recommendation on numbers she has no clue about. She added that they can trust Staff, but if Staff has known about this for six months, why hasn’t the Housing Commission known more. Commissioner Escobedo agreed with Commissioner Calverley’s comments; however, she said she is trusting Staff to do their homework. She added that they are on the road to having affordable homes in Carlsbad, which is sorely needed. She said that one of the things she likes about this project is that the apartments will not be isolated from the rest of the project. Commissioner Walker agreed that it would be nice to receive the material a little sooner; however, she said that she -believes the information provided is good information and feels confident that Staff has done some research on it. She likes the idea of Option B possibly going a second time, if necessary, so the City investment is less. Chairperson Wellman commented that the number sheets are so small and so hard to read--they are the most minute print in the application--and recommended that they require the applicants or Staff to provide documents with more legible type. Chairperson Wellman said that there are pages and pages of detailed documents included in this packet HOUSING COMMISSION MINUTES FEBRUARY 12,1998 Page 13 that an attorney needs to review. She commented that she would like to see the $903,000 developer fee reduced. She said the 7 percent developer fee is based on the project cost of $12.9 million. She added that the government does not include the land in the tax credit programs, and recommends the development fee be based on the numbers excluding the land cost. Ms. Fountain stated that Staff tries to get the information to the Housing Commissioners as quickly as possible. She said that unfortunately in some cases they do not think they are doing an appropriate job if they send proformas they are uncomfortable with. Ms. Fountain said that Staff has had a lot of discussions with the developer on their proforma. In fact, Staff did not agree with the numbers on several of their proformas and was not comfortable sending out information that is either inaccurate, in Staffs opinion, or needs to be refined. Generally Staff tries to wait until they have a proforma they are comfortable with to provide the Housing Commission. Unfortunately this project got -accelerated, as Mr. Galasso explained, because Staff decided to try to help them pursue the 9 percent tax credit program with the February 27 application deadline. Staff had to push pretty hard to get the information to the Housing Commission by this meeting so that it could go to the Council next week and meet the application deadline. The Council does not have a meeting on February 24, so Staff did not have the luxury of putting off the Housing Commission meeting another week to review the information. Ms. Fountain explained (which had been previously mentioned in a memo) that they have a new affordable housing policy team that has been put together in terms of internal staff which include the financial management director who is now the administrative services director, the planning director, the community development director, legal counsel-- Goodfarb and Lipman, Polly Marshall--and their own legal counsel from the City--Jane Mobaldi. Ms. Fountain explained that this team is actually reviewing all the proformas now, it’s not just Housing and Redevelopment staff. She added that it takes time to put the meetings together with the teams and they got into a time crunch. She apologized if this has caused problems for the Housing Commission to approve the project, but assured the Housing Commission that the project has been through thorough review with Staff. Ms. Fountain said that Staff feels comfortable with the numbers and has checked them against other projects. In addition, she said they have contacted different financing sources to see what they determine as eligible numbers. According to Ms. Fountain, Staff has put a lot of work into this project and realizes that the Housing Commission would like to do this themselves to make sure they are comfortable with the numbers as well. She said that Staff will try to get the information to the Housing Commission in a timely manner. She added that Staff was trying to push this as quickly as possible so that both the developer and the City could benefit from the 9 percent tax credit program. Commissioner Calverley suggested that a member of the Housing Commission participate on the policy team so there .is at least one member of the Housing Commission who knows where the numbers are coming from, etc. She said there is no way to know “that the Ts have been crossed and the Is have been dotted” and what Staff says has been done has been done. Ms. Fountain responded that Staff has spent a lot of internal time reviewing the numbers and negotiating the agreement. She stated that she will take back Commissioner Calverley’s recommendation to have somebody sit on the policy team. She added that it is a very comprehensive review; and the review of this project was more comprehensive than any other project brought before the Housing Commission. This was intentional so that Staff would fell comfortable representing the City that these projects were getting the proper review they need to make recommendations to the Housing Commission. Ms. Fountain said that they try to send the packets out Thursday afternoon, one week prior to the meeting, with the hope the Commissioners get the packets by the weekend. If the Commissioners are receiving the packets two days before the meeting then Staff needs to change their process, she said. The majority of the Commissioners responded that they received their packets on Thursday or Friday of the week prior to tonight’s meeting. Ms. Calverley acknowledged that she was out of town over the weekend. Therefore, she had only HOUSING COMMISSION MINUTES FEBRUARY 12, 1998 Page 14 .two days to review the staff report and related attachments. Ms. Calverley indicated that it would still be helpful to have the related information much earlier than one week prior to the meeting, especially on issues related to financing. Chairperson Wellman commented that she likes the new format of the Staff report. ACTION: Motion by Commissioner Noble, and duly seconded, that the Housing Commission ADOPT Resolution No. 98-002 recommending APPROVAL to the City Council to provide up to a maximum of $1 ,I 60,000 in financial assistance from the Housing Trust Fund to Carlsbad Family Housing Partnership for construction of one hundred sixteen (1 16) affordable apartment units to satisfy a portion of requirements of the Inclusionary Housing Ordinance for the Rancho Carrillo Master Plan. VOTE: 4-2-0 AYES: Escobedo, Noble, Rose, Walker NOES: Calverley, Wellman ABSTAIN: None There was some discussion about the number of affirmative votes needed to recommend a project to the City Council. Ms. Fountain responded that there has to be a minimum of five affirmative votes to approve a recommendation to the City Council. Chairperson Wellman said she would like to recommend the applicant not include the land in their development fee. -MS. Fountain responded that the City does not have a policy or ordinance defining the development fee. Instead Staff tries to determine if the fee is reasonable compared to what they have to do for the project and what they have seen on other projects. From a Staff standpoint, the $903,00O--whether it is 7 percent or whatever-is a reasonable fee for them. She added that if the Commission does not feel it is a reasonable fee and wants to make some other recommendation, they are getting into a negotiated point with the developer. There was some discussion about getting into policy negotiations with the developers. Commissioners Noble and Calverley said it is not their place to get into these negotiations. Chairperson Wellman thinks these applications will have a harder time being successful with the tax credits by including the land in the development fee. In addition, she said another problem is the value being used for the real estate is based upon an internal appraisal. She said that Laurel Tree failed and failed until they went back and revised their application and other partners put more of their own monies into the project. Mr. Ruiz responded that there will be an independent appraisal as required by the tax credit committee. In addition to Staffs review of the proforma, the tax credit committee, or if the project goes to CHFA, are also going to review the numbers to make sure they are reasonable. One of the requirements is a third-party appraisal. The reason the applicant has not had the appraisal at this point is because the appraisal they submit has to be within a certain time frame. Since they do not know exactly when they are going to apply, they did not want to pay for an appraisal twice. Staff will look at the appraisal when it is done to verify the data. ACTION: Minute Motion by Chairperson Wellman, and duly seconded, that the proposal be approved with the revision in the calculation of the developer fee; specifically that in calculating the basis for the developer fee that the value of the land not be included. VOTE: 2-4-0 AYES: Rose, Wellman NOES: Calverley, Escobedo, Noble, Walker HOUSING COMMISSION MINUTES FEBRUARY 12,1998 Page 15 ABSTAIN: None Commissioner Calverley said that she does not want to be the person who kept this project from going to tax credits and would like to reconsider her vote. She added that she wants it to be known by Staff that unless someone goes on the policy team, the Housing Commission is going to have to get these numbers sooner, have more time to work with them to better understand them, to believe in them, to understand why there are taxes in these numbers when a non- profit owns it, and a hundred other questions. She would like to be more involved in these numbers, she said. ACTION: Minute Motion by Commissioner Rose, and duly seconded, that the Housing Commission reconsider the original motion for this project. Calverley, Escobedo, Noble, Rose, Walker, Wellman VOTE: 6-0-0 AYES: NOES: None ABSTAIN: None ACTION: Minute Motion by Commissioner Noble, and duly seconded, that the Housing Commission ADOPT Resolution No. 98-002 recommending APPROVAL to the City Council to provide up to a maximum of $1,160,000 in financial assistance from the Housing Trust Fund to Carlsbad Family Housing Partnership for construction of one hundred sixteen (1 16) affordable apartment units to satisfy a portion of requirements of the Inclusionary Housing Ordinance for the Rancho Carrillo Master Plan. Calverley, Escobedo, Noble, Rose, Walker VOTE: 5-1-0 AYES: NOES: Wellman ABSTAIN: None Chairperson Wellman commented that she does want the project built but voted against it per her Minute Motion regarding the developer fee. ANNOUNCEMENTS: Ms. Fountain explained that the City Council reviewed the Housing Commission’s recommendation for the Rancho Carrillo Master Plan and decided to go with Staffs proposed agreement mainly because they feel the Affordable Housing Agreement really should not cover the entire Master Plan for Rancho Carrillo. They feel they have to have the Site Development Plans with the Affordable Housing Agreement, so in the hture that’s what the Housing Commission will be seeing (because the Council made this policy decision). Ms. Fountain added that there was a lot of discussion with a 3-2 vote. Ms. Fountain stated that the financial assistance requested tonight will be going to the Council next Tuesday. Hopefully the applicant will be able to meet the February 27 deadline for the 9 percent tax credits. The site development plan for the project will probably not go to Council until March 3, 1998, for final approval. It did go through the Planning Commission and was approved with the housing recommendation to approve the site development plan as well. The project is coming together, moving pretty quickly, thanks to the developers, she said, because they have pushed this pretty hard. In terms of Laurel Tree, the estimated start date is now June of 1998 instead of April as previously estimated. Lastly Ms. Fountain stated that Staff will take the Housing Commission’s recommendation forward to have someone sit on the Housing Policy Team. HOUSING COMMISSION MINUTES FEBRUARY 12, 1998 Page 16 ADJOURNMENT: By proper motion, the Regular meeting of February 12, 1998, was adjourned at 8:08 p.m. Respectfully submitted, n UFw DEBBIE FOUNTAIN Housing and Redevelopment Director KATHY VAN PELT Minutes Clerk MINUTES ARE ALSO TAPED AND KEPT ON FILE UNTIL THE WRITTEN MINUTES ARE APPROVED. The City of Carlsbad Woushgg Bt Redeudopment Department AREPORT TO TXB HOUSINGS- COMMXSSXON Seaif: CraigRuiz Management Anal- Xtem No. 1 DATE: FEBRUARY 12,1998 SUBJECT. RANCHO CARRILLO AFFORDABLE HOUSING PROTECT - RECOMMENDATION OF APPROVAL TO THE CITY COUNCIL TO PROVIDE UP TO A MAXIMUM OF $1,116,000 IN FINANCIAL ASSISTANCE FOR CONSTRUCTION OF ONE HUNDRED SIXTEEN AFFORDABLE APARTMENT UNITS TO SATISFY A PORTION OF THE REQUIREMENTS OF THE INCLUSIONARY HOUSING ORDINANCE FOR THE RANCHO CARRILLO MASTER PLAN. I. 11. 111. RECOMMENDATION That the Housing Commission ADOPT Resolution No. 98-002, recommending APPROVAL to the City Council to provide up to a maximum of $1,116,000 in financial assistance from the Housing Trust Fund to Carlsbad Family Housing Partnership for construction of one hundred sixteen (116) affordable apartment units to satisfy a portion of requirement of the inclusionary housing ordinance for the Rancho Carrillo Master Plan. PROJECT BACKGROUND On January 14, 1998, the Housing Commission recommended approval of the Site Development Plan for the construction of a 116 unit affordable apartment project and related Affordable Housing Agreement ordinance for the Rancho Carrillo Master Plan. At the January meeting, the issue of financial assistance was not discussed. PROTECT DESCRIPTION The project is located at the southeast corner of Palomar Airport Road and the future Melrose Drive in the Rancho Carrillo Master Plan. The affordable units will be located within Village B of the Master Plan. The developer of the affordable project will be the Carlsbad Family Housing Partnership ("Developer"). ' The proposed development includes twelve 723 square foot one bedroom units (lo%), forty eight 908 square foot two bedroom units (41%) and fifty six 1,127 square foot three bedroom units (49%). The project will feature a 2,235 square foot recreation building, laundry facilities; a "tot-lot" with playground equipment; a swimming pool; a 286 square foot maintenance building; and 267 uarking maces. " u1 RANCHO CARRILLO AFFORDABLE HOUSING PROJECT FEBRUARY 12,1998 PAGE 2 The developer of the Master Plan, Continental Homes (Master Developer), shall be required to begin construction of the affordable units prior to construction of the 229 market rate unit. After construction begins on the affordable housing units, builders will be permitted to obtain building permits for an additional 275 market rate housing units before construction must be compZete on the affordable housing project. The total number of building permits that may be pulled before construction must be complete on the affordable housing project (116 units) is 500. IV. FINANCIAL ASSISTANCE The Developer is exploring two distinct financing sources - the 4% tax credit bond allocation and the 9% tax credit allocation, to support the cost of constructing the subject affordable project. As such, the exact amount of financial assistance from the City will not be known until such time as the permanent financing source is determined. Thus, staff is recommending that the City commit to provide up to a maximum of $1.16 million in assistance based on analysis of the current project proformas. The two financing sources are discussed in further detail in Section D below. A. Development Team It is important that the developer have the capacity to successfully implement the proposed project. The development team is very experienced in the development and management of affordable multi-family developments. Further, the team is also very experienced in the area of tax credit financing. The affordable housing developer is Carlsbad Family Housing Partnership. The Partnership consists of Barone Galasso and Associates, a for-profit affordable housing developer and Housing Opportunities Inc. (HOI), a non-profit affordable housing developer. The Partnership developed and operates a 60 unit affordable project in La Mesa which is similar in nature to the proposed project in terms of affordability financing sources. The developers have experience in developing and managing affordable projects throughout California. The Architect for the project is Rodriguez Design Associates. This architect designed the Laurel Tree Affordable Apartment Project as well as numerous other affordable housing projects. B. Cost Reasonableness The developer has provided two detailed development proformas for review by staff and the Housing Commission (See Attachments 2 & 3). Since development costs are one of the key variables determining the need for subsidies, it is important that those costs be reasonable. At approximately $12.9 million, including land, the average unit cost of $111,000 is consistent with typical affordable multi-family development within the City. RANCHO CARRILLO AFFORDABLE HOUSING PROJECT FEBRUARY 12,1998 PAGE 3 C. UndueGain It is important that any financial assistance have the effect of making the units more affordable and not creating undue gain for any party. Under both financing options, the Developer will receive a "Developer Fee" of $903,000, or approximately 7% of total project costs. The Developer wdl receive 75% of the developer fee ($677,250) at time of permanent financing. The remainder of the fee, $225,750, will be repaid over the first ten years of the project from the Cash Balance after the City Loan has been repaid. Staff feels that the developer fee is within acceptable limits for a project of this size and affordability. D. Subsidv Analvsis As stated above, the Developer has proposed to separate financing sources, the 4% and 9% tax credit allocations, for the subject project. The two financing options are summarized below: Option A - Under Option A, the Developer will apply to the California Housing Finance Agency ("CHFA), for a 4% tax credit, bond allocation. Under this scenario, the developer would receive an approximately $5.8 Won loan from CHFA, and will raise $1.5 million through the sale of the tax credits, resulting in an approximate $5.6 million financing gap. Under this scenario, staff is recommending the City provide the full $1.16 million assistance while the Master Developer would provide $1.2 million in financial assistance and $3.2 million in land contribution. Under this option, the City's $1.16 million assistance equates to $10,000 per affordable unit. The 4% cre&t program is considered to be a "relatively certain" financing source. Generally speaking, qualified projects receive CHFA assistance on a first-come, first- serve basis, as long as funds are available. Thus, should the Developer submit their application to CHFA in a timely matter, the 4% financing will most likely be attained. The City's Inclusionary Housing Ordinance requires that affordable units be affordable to families earning less than 80% of the Area Median Income (AMI). Under Option A, the Developer has indicated that 20% of the units will be restricted to 50% of AMI, 40% at 60% of AMI and 40% at 80% of AMI. Thus, the project will be more affordable than the requirements of the City's Ordinance. Option B - Under Option B, the Developer will apply to the California Tax Credit Allocation Committee ("TCAC"), for a 9% tax credit allocation. Under this scenario, the developer would receive an approximately $1.2 million private loan, and will raise $7.5 don through the sale of the tax credits, resulting in an approximate $4 million financing gap. Under this scenario, staff is recommending the City provide $360,000 assistance while the Master Developer would provide $440,000 in financial assistance and $3.2 million in land contribution. With this option, the City's $360,000 assistance equates to $3,100 per affordable unit. RANCHO CARRILLO AFFORDABLE HOUSING PROJECT FEBRUARY 12,1998 PAGE 4 Option A 4% Tax Credit The 9% tax credit provides for much deeper subsidies than the 4% program. However, the 9% allocation is awarded through a much more complex and highly competitive lottery process. Based upon the City’s experience with the 9% program, the likelihood of receiving an allocation is much less than in the 4% program. With recent changes in the 9% allocation process it is anticipated that there may be fewer applications for the 9% credit. Thus, the developer believes the chances of receiving an allocation will be better than in previous years. Option B 9% Tax Credit Under Option B, the Developer has indicated that all of the units, on average, will be restricted to 40% of AMI. Thus, the project will be much more affordable than the requirements of the City’s Ordinance. PROJECT COST*: I $1 2,900,000 The following chart provides a proforma subsidy analysis for the two financing options noted above: $1 2,700,000 BSIDY ANA CARRI 110 PERMANENT LOAN 1 $5,790,000 $1,190,000 TAX CREDIT EQUITY 1 $1,520,000 $7,520,000 Financing Gap 1 $5,590,000 $3,990,000 MASTER DEVELOPER SUBSIDY Land Cash $3,132,000 $1,300,000 $3,132,000 $440,000 CITY LEVERAGE $ 11.5: $1 $ 35.2: $1 I I I Due to the varying reserve account requirements, the project cost will vary. RANCHO CARRILLO AFFORDABLE HOUSING PROJECT FEBRUARY 12,1998 PAGE 5 E. Form of Assistance City assistance will be in the form of a residual receipts loan secured by a note and deed of trust. Repayment of the loan will be deferred during construction of the Improvements. Once the City has issued a certificate of occupancy for all the affordable units, the outstanding principal and accrued interest on the City loan will be amortized over thirty years and repaid from cash surplus in equal annual installments of principal and interest. In the event that there is not adequate cash surplus to repay the City loan, the outstanding balance shall accrue with simple interest at 3% per annum. The financial assistance will be provided from the City of Carlsbads Housing Trust Fund. The Fund currently has a balance of approximately $2.4 million. . F. Security As indicated, the City takes a security interest in the property for the affordable housing project. In addition, the Developer will be required to provide Completion Bonds to both the City and the permanent lender to insure that construction is completed. G. Risks In its role as a lender to the project, the City is exposed to three risks inherent to real estate development. These risks generally include 1) predevelopment (project does not get to construction, 2) construction (project cannot be completed, cost overruns, contractor problems), and 3) operation (revenues do not cover expenses). Adding to this risk, any City financial assistance will be subordinated to conventional financing. A number of factors mitigate the risks. First, the development team has a strong track record with similar affordable housing projects. The presence of other major financial commitments, such as a tax credit investment, is also key as this means that other stakeholders depend on the success of the project both short and long term. By its nature, affordable housing presents some, but very limited market risk because of deeply discounted rents. Finally, the vulnerable position of City and financing. other subordinated financing is a feature which helps attract the necessary private V. AFFORDABLE HOUSING AGREEMENT The Housing Commission has previously reviewed and recommended approval the Affordable Housing Agreement for this project. Prior to final map the developer will be required to execute the agreement. The Agreement with the City will bind the Developer and subsequent owners to the specifics of the affordable housing project RANCHO CARRILLO AFFORDABLE HOUSING PROJECT FEBRUARY 12,1998 PAGE 6 including affordable rental rates, household income limits; a construction schedule; amount and form of City assistance; compliance reporting requirements and implementation agreements (e.g. loan agreements, regulatory agreements, trust deed, etc.). . VI. VI1 FINANCIAL ASSISTANCE AGREEMENT A copy of the draft Financial Assistance Agreement and related documents are provided as the exhibits (Exhibit 4) to this report for review by the Housing Commission. The Commission is being requested to review and recommend approval of this agreement and related documents in substantially the for presented and subject to approval by the City Attorney. SUMMARY It is the role of the Housing Commission to make recommendations to the City Council based on several considerations with respect to affordable housing projects. These are: The proposal's effectiveness in serving the City's needs and priorities as expressed in the Housing Element of the General Plan and the HUD Consolidated Plan. The proposal's consistency with the City's affordable housing policies and ordinances as expressed in the Housing Element, Inclusionary Housing Ordinance, Density Bonus Ordinance, etc. The proposal's development and operating feasibility, emphasizing the development team capacity, financing sources and the role of the City in providing financial assistance or incentives. The Rancho Carrillo Apartments is proposed by a capable development team led by a credible for-profit developer that is committed to affordable housing. The financing structure of the project is creative and sound. The proposed City assistance under both Option A and B, meet the City's three key underwriting goals of a strong borrower, reasonable project costs and a high degree of leveraging. The project quality includes good design and location. City housing goals are supported by the project's unit mix and affordability. It is the Affordable Housing Policy Team's (staff) recommendation that the Housing Commission approve the resolution of support recommending that the proposed financial assistance be approved by the City Council, under both financing and affordability scenarios. Also, the Staff Team recommends that the Commission recommend approval of the Financial Assistance Agreement and related documents in substantially the for presented and subject to approval by the City Attorney. RANCHO CARRILLO AFFORDABLE HOUSING PROJECT FEBRUARY 12,1998 PAGE 7 VIII. EXHIBITS 1. Housing Commission Resolution No. 98-002 2. Proforma - Option A 3. Proforma - Option B 4. Draft Financial Assistance Agreement, Loan Agreement, Deed of Trust, and Regulatory Agreement. 1 2 3 4 5 6 7 0 9. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 HOUSING COMMISSION RESOLUTION NO. 98-002 THAT THE HOUSING RECOMMEND APPROVAL TO THE CITY COUNCIL TO PROVIDE UP TO A MAXIMUM OF $1,116,000 IN FINANCIAL ASSISTANCE FOR THE CONSTRUCTION OF ONE HUNDRED SIXTEEN AFFORDABLE APARTMENT UNITS TO HELP SATISFY A PORTION OF THE REQUIREMENTS OF THE INCLUSIONARY HOUSING ORDINANCE FOR THE RANCHO CARRILLO MASTER PLAN. APPLICANT: CARLSBAD FAMILY HOUSING PARTNERSHIP CASE NO: SDP 97- 15 ~ ~ ~~ WHEREAS, the master developer of the Rancho Carrillo Master Plan, Continental Homes has proposed to construct 1 16 apartment units affordable to lower income households as a means to satisfjr a portion of their affordable housing obligation as permitted by Carlsbad Municipal Code Section 21.85 of the City’s Inclusionary Housing Ordinance; and WHEREAS, the master developer’s proposal to construct said units has been submitted to the City of Carlsbad’s Housing Commission for review and consideration; and WHEREAS, said Housing Commission did, on the 14th day of January, 1998, hold a special public meeting to consider said proposal to construct 116 affordable housing apartment units; and WHEREAS, at the conclusion of said special public meeting, the Housing Commission recommended approval of the proposal to the Planning Commission; and WHEREAS, said Housing Commission did, on the 12th day of February, 1998, hold a public meeting to consider the request for City financial assistance for the construction of said 116 affordable housing apartment units by of the affordable housing developer, Carlsbad Family Housing Partners; and WHEREAS, upon hearing and considering all testimony, if any, of all persons desiring to be heard, said Commission considered all factors relating to the proposal to construct said affordable housing units. NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing Commission of the City of Carlsbad, California, as follows: 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 1. 2. 3. 4. 5. The above recitations are true and correct. The request for City financial assistance is consistent with the goals and objectives of the City of Carlsbad’s Housing Element and Comprehensive Housing Affordability Strategy, the Inclusionary Housing Ordinance, and the Carlsbad General Plan. The request for City financial assistance will assist the affordable housing developer to construct a total of 116, one, two and three bedroom affordable apartment units. The project, therefore, has the ability to effectively serve the City’s housing needs and priorities as expressed in the Housing Element and the Consolidated Plan. That based on the information provided within the Housing Commission Staff Report and testimony presented during the public meeting of the Housing Commission on February 12, 1998, the Housing Commission hereby ADOPTS Resolution No. 98-002, recommending APPROVAL to the City Council to provide up to a maximum of $1,116,000 in financial assistance from the City of Carlsbad’s Housing Trust Fund to Carlsbad Family Housing Partnership for the construction of one hundred sixteen (1 16) affordable apartment units to help satisfy a portion the requirement of the Inclusionary Housing Ordinance for the Rancho Carrillo Master Plan. That the Housing Commission recommends that the City Manager or his designee be authorized by the City Council to execute all documents related to provision of the City assistance, including but not limited to a Loan Agreement, Note, Deed of Trust and Regulatory Agreement, in substantially the form presented to the Housing Commission on February 12, 1998 and subject to review and approval by the City Attorney. PASSED, APPROVED, AND ADOPTED at a meeting of the Housing Commission of the City of Carlsbad, California, held on the 12th of February, 1998, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: KATHLEEN WELLMAN, CHAIRPERSON CARLSBAD HOUSING COMMISSION DEBORAH K. FOUNTAIN HOUSING & REDEVELOPMENT DIRECTOR HC RES0 NO. 98-002 1 ! - - RANCHO CARRILLO APARTM ,T! SOURCES AND USES SUMMARY Exhibit : 2 ____-- ---- - SOURCE OF FUNDS: PERMANENT LOAN(S) $1,050,000 TAX CREDIT EQUITY - FEDERAL AND STATE 7,516,093 DEFERREDDEVELOPERFEE 227,500 LAND LOAN (CONTINENTAL) 3,132,000 CONTINENTAL CASH CONTRIBUTION 403,172 CITY LOAN 360,320 TOTAL SOURCES: USES OF FUNDS: ACQUISITION: PROJECT CONSULTANTS: PERMITS AND FEES: CONSTRUCTION: DEVELOPMENT EXPENSES: FINANCING: $12,689,085 $3,139,500 353,500 1,131,185 6,180,000 I ,I 92,000 692.900 TOTAL USES OF FUNDS: FUNDING OVERAGU(SH0RTFALL) $12,689,085 $0 ' 1 23karls bad/rch ocrlo/f ea si bi2. wk4 02/03/98,05:03 PM Barone Galasso and Associates, Inc. _- RANCHO CARRILLO APARTMLsJTS DEVELOPMENT BUDGET Number of Dwelling Units: 116 Gross Land Area: 0 Gross Building Area: 115,375 Commercial Area: 0 Eligible Basis 100.00% Commercial Cost 0.00% TOTAL COMMERCIAL RESIDENTIAL $ PER ELIGIBLE COST COST COST UNIT BASIS 1. ACQUISITION: 100 LAND AND IMPROVEMENTS $3,132,000 $0 53,132,000 $27.000.00 $0 101 CLOSING COSTS 7,500 0 7,500 64.66 7,500 TOTAL ACQUISITION $3,139,500 $0 $3,139,500 627,065 $7,500 II. PROJECT CONSULTANTS: 200 ARCHITECT 201 CIVIL ENGINEER 202 SOILS ENGINEER 203 UTILITIES CONSULTANT 204 LEGAL 205 ACCOUNTING 206 APPRAISAL 207 ACOUSTICAL ENGINEER 208 CONSTRUCTION TESTING 209 LANDSCAPING ARCHITECT 210 MARKET STUDY 21 1 CONTINGENCY TOTAL CONSULTANTS 111. 300 301 302 303 304 305 306 307 308 309 31 0 31 1 312 31 3 314 315 31 6 $200,000 30,000 20.000 10,000 20,000 8,500 10.000 7,500 15,000 15,000 7,500 10,000 $353,500 PERMITS AND FEES: SCHOOL FEES PLAN CHECK FEE BUILDING PERMIT HOUSING TRUST FUND WATER CONNECTION FEE SEWER CAPACITY FEE COUNTY WATER FEES PLANNING DEPARTMENT TRAFFIC IMPACT FEE IMPROVEMENT CONST. INSPECTION CFD #1 UTILITY PLAN REVIEW BRIDGE AND THOROUGHFARE LANDSCAPE PLAN CHECK SDG&E TCAC FEES CONTINGENCY TOTAL PERMITS AND FEES IV. CONSTRUCTION: 400 SITE IMPROVEMENTS 401 UNDERGROUND GARAGE 402 STRUCTURES 403 RETAIL SHELL CONSTRUCTION 404 GENERAL REQUIREMENTS 405 CONTRACTORS LIABILITY INS. 406 CONTRACTORS FEE 407 CONTINGENCY 408 RETAIL TENANT IMPROVEMENTS TOTAL CONSTRUCTION $0 7,000 10,650 0 51,300 208,800 175,856 15,000 62,640 11.800 362.600 0 37,000 3.000 75,000 60,539 50,oOo S1,131,185 $750,000 0 4,700,000 0 225,000 30,000 275,000 200,000 0 $6,180,000 $0 0 0 0 0 0 0 0 0 0 0 0 so $200,000 30,000 20,000 10,000 20,000 10,000 7,500 8,500 15.000 15,000 7,500 10,000 $353,500 $1,724.14 258.62 172.41 86.21 172.41 73.28 86.21 64.66 129.31 129.31 64.66 86.21 $3,047.41 so $0 0 7,000 0 10,650 0 0 0 51,300 0 208,800 0 175,856 0 15,000 0 62,640 0 11 $800 0 362,600 0 0 0 37,000 0 3,000 0 75,000 0 60,539 0 5o.Ooo $0.00 60.34 91.81 0.00 442.24 1,800.00 1,516.00 129.31 540.00 101.72 3,125.86 0.00 318.97 25.86 646.55 521.89 431.03 $0 0 0 0 0 0 0 0 0 0 $0 $1,131,185 $750,000 0 4,700,000 0 225,000 30,000 275,000 200,000 0 $6,180,000 $9,751.59 $6,465.52 0.00 40,517.24 0.00 1,939.66 258.62 2.370.69 1.724.14 0.00 $63,276.86 $200,000 30,000 20.000 10,000 20,000 8,500 10,000 7,500 15.000 15,000 7,500 10,000 $353,500 $0 7,000 10,650 0 51,300 208,800 175.856 15,000 62 I 640 11,800 362.600 0 37,000 3,000 75,000 0 50,000 $1,070,646 $750,000 0 4,700,000 0 225.000 30,000 275,000 200,000 0 $6,180,000 'I 23/carlsbadlrchocrlo/feasibi2.wk4 02/03/98,05:07 PM Barone Galasso and Associates, Inc, V. DEVELOPMENT EXPENSES. 500 REAL ESTATE TAXES 501 CONSTRUCTION INSURANCE 502 BOND PREMIUMS 503 BLUEPRINTS I REIMBURSABLES 504 LOBBY FURNITURE 508 MARKETING (CHFA) 509 OPERATING EXPENSES RESERVE 510 DEVELOPER FEE AND ADMIN. COSTS TOTALDEVELOPMENTEXPENSES VI. FINANCING: $30,000 42,000 10,000 25,000 25,000 50,000 100,000 910,000 $1,192,000 0 0 0 0 0 0 0 0 so $30,000 42.000 10,000 25,000 25,000 50,ooo 100,000 910,000 $1,192,000 $258.62 362.07 86.21 215.52 215.52 431.03 862.07 7,844.83 $10,276 $30,000 42,000 10,000 25,000 25,000 0 0 910,000 $1,042,000 600 CONSTRUCTION LOAN POINTS $7,700,000 $77,000 0 $77,000 $663.79 $77,000 601 INTEREST RESERVE ACCOUNT 9.50% 438,900 0 438,900 3,783.62 438,900 602 CONSTRUCTION LOAN TITLE & RECORD 10.000 0 10,m 86.21 10,000 603 FUND CONTROL 8 INSPECTION 12,000 0 12,000 103.45 12,000 604 PERM LOAN POINTS 30,000 0 30,000 258.62 0 605 CHFA APPLICATION FEES 0 0 0 0.00 0 606 CONSTRUCTION LENDER COST (LACE) 25,000 0 25,000 215.52 25,000 607 RENT-UP ACCOUNT (CHFA) 100,Ooo 0 100,000 862.07 0 TOTAL FINANCING $692,900 $0 $692,900 $5,973 $562,900 $109,389 $9,216,546 TOTALDEVELOPMENTCOSTS $12,689,085 $0 $12,689,085 SOURCE OF FUNDS: PERMANENT LOAN(S) $1,050,000 TAX CREDIT EQUITY - FEDERAL AND STATE 7,516,093 DEFERREDDEVELOPERFEE LAND LOAN (CONTINENTAL) CONTlN ENTAL CASH CONTRIBUTION CITY LOAN TOTAL SOURCES: TOTAL DEVELOPMENT COSTS BALANCE (DEVELOPER'S CASH EQUITY) TAX CREDIT CALCULATION: FEDERAL TOTAL ELIGIBLE BASIS LESS: GRANT PROCEEDS QUALIFIED BASIS HIGH COST AREA ADJUSTMENT (30%)? TOTAL ADJUSTED ELIGIBLE BASIS APPLICABLE PERCENTAGE ANNUAL CREDIT TEN YEARS TOTAL CREDIT ESTIMATED NET PROCEEDS @ '1 23/carlsbad/rchocrlo/feasibi2.wk4 25.0% 227,500 3,132,000 403,172 360,320 $12,689,085 12,689,085 so STATE $9,216,546 TOTAL ELIGIBLE BASIS 0 LESS: GRANT PROCEEDS $9,216,546 QUALIFIED BASIS N 0.00% HIGH COST AREA ADJUSTMENT (30%)? $9,216,546 TOTAL ADJUSTED ELIGIBLE BASIS 8.6500% APPLICABLE PERCENTAGE $797,231 (a) TOTAL STATE CREDIT 10 FUNDING GAP $7,972,312 (b) STATE CREDIT NEEDED $0.70 $0.70 $5,580,619 LESSER OF (a) and (b) ESTIMATED NET PROCEEDS $9,216,546 0 $9,216,546 0.00% 9,216,546 30.00% 2,764,964 5,830,966 8,329,952 $2,764,964 $1,935,475 02/03/98,05: 10 PM Barone Galasso and Associates, Inc. ln 0 3 ln Y o_ 0 C m -I - __ . Exhibit 3 m z I- 8 n 4 L 02 k c"g u) u) 0 N ul mu a N H H m- 0 0 0 d 0- c z oi r r r E i r E f -- E In W ul z u1 8 z ro(o030 (oomm (D b.03 CD 696'36969 - P 2 s 3 0 I m io J OI 6 0 ?R%% 69696'369 Lj W I- P - txhibit - 4 AGREEMENT DRAFT AFFORDABLE HOUSING DEVELOPMENT (FIN AN ClNG AGREEMENT) THIS AFFORDABLE HOUSING DEVELOPMENT AGREEMENT ("Agreement") is entered into as of , 1998, among CARLSBAD FAMILY HOUSING PARTNERSHIP, a California limited partnership ("Borrower"), the CITY OF CARLSBAD, a municipal corporation ("City"), and CONTINENTAL RANCH, INC., a Delaware corporation ("Master Developer"). ARTICLE 1 Recitals 7.7 The Property. Master Developer owns that certain real property in the City of Carlsbad, County of San Diego, which is depicted as a portion of Village B on Exhibit A ("Land"). Village B is part of Master Developer's master-planned community known as "Rancho Carrillo", ("CT - 'I), as reflected on the approved tentative map therefor ("Tentative Map"). The Land does not now exist as one or more legally conveyable parcels, and will not be legally conveyable until recordation of the New Map (defined below). being (one of the vi/lagess/ encompassed within Carlsbad Tract - 1.2 Development Plan. The Land, as well as other real property owned by Master Developer adjacent thereto, has been and will be subjected to and developed in accordance with City zoning and use regulations designed to produce a p1ar;lned community for the entire project known as "Rancho Carrillo". 1 .3 Borrower Intends To Build Affordable Multi-Family Housing. The following additional agreements are being entered into: (a) Affordable Housina Aareeme nt. An Affordable Housing Agreement is being entered into concurrently herewith between Master Developer and the City to fulfill the City's affordable housing requirements as those requirements are further described in the Affordable Housing Agreement. (b) Purchase Aareement and Escro w Instruct ions. A Purchase Agreement and Escrow Instructions between Master Developer and Borrower is being entered into concurrently herewith which, among other matters provides for Borrower to acquire the Land from Master Developer to permit Borrower to construct the first phase of the affordable housing units required by the Affordable Housing Agreement (the first phase of affordable housing requirements are referred to in this Agreement as the "Develop- ment"), with Master Developer providing Borrower with purchase money financing to Borrower for its purchase of the Land. The Development improvements will consist of one hundred sixteen (1 16) affordable multi-family housing units, which shall be rented to low income households at affordable housing cost. 1.4 Reliance On Borrower. The development of the Rancho Carrill0 master planned community is dependent upon fulfilling the City's affordable housing requirements pursuant to the Affordable Housing Agreement. Master Developer is relying on Borrower's strict compliance -1 - with each requirement Agreement and Escrow Developer would suffer of this Agreement and Borrower's performance under the Purchase Instructions, and should Borrower default in its performance, Master substantial damages. Therefore, Master Developer carefully screened potential builders of affordable housing to whom Master Developer would be willing to sell the Land, and selected Borrower based on its reputation for honoring its contractual obligations and the express representations regarding its ability to perform under this Agreement and under the Purchase Agreement and Escrow Instructions. 1 -5 Master Developer Financial Assistance to Borrower. The Master Developer desires to provide financial assistance to Borrower for development costs in the form of a loan for a total amount not to exceed One Million Two Hundred Ninety-Seven Thousand Nine Hundred Sixty-Seven Dollars ($1,297,967) (the "Master Developer Loan"). 1.6 City Financial Assistance to Borrower. The City desires to provide financial assistance to Borrower for development costs in the form of a loan for a total amount not to exceed One Million One Hundred Sixty Thousand Dollars ($1 , 160,000) (the "City Loan"). The City intends to fund the City Loan with City Housing Trust Fund monies. The funds utilized to fund the City Loan are not federal funds or the proceeds of a tax-exempt bond issue. The City is required by law to place restrictions on developments assisted with City Housing Trust Funds, ensuring that such developments remain affordable to low and moderate income households for the longest feasible time. ARTICLE 2 Definitions Unless the context otherwise indicates, the following shall have the meanings as set forth in this Article: 2.1 "Agency" means the Carlsbad Redevelopment Agency, Carlsbad, California, a public body corporate and politic. 2.2 2.3 "Agreement" means this Affordable Housing Development Agreement. "Borrower" means Carlsbad Family Housing Partnership, a California limited partnership. 2.4 "Cash" means (i) currency, (ii) a check or checks currently dated, payable to Escrow Holder or order and honored upon presentation for payment, or (iii) funds wire-transferred or otherwise deposited into Escrow Holder's account at Escrow Holder's direction. 2.5 2.6 "City" means the City of Carlsbad, California, a municipal corporation. "City Loan" means the loan for an amount not to exceed One Million One Hundred Sixty Thousand Dollars ($1 , 160,000) by the City to Borrower, which loan is the subject of this Agreement. Rancho Carrillo Affordable Housing Development Agreement 01120l98 -2- H:\. . .\ContHornes\RhoCarrilla\AHDA. vO2 Draft 2.7 "City Loan Deed of Trust" means the deed of trust to be placed on the Development, in substantially the form shown in Exhibit D attached hereto and incorporated herein, securing the City Note and naming the City as beneficiary. 2.8 "City Loan Documents" means the following documents evidencing the City Loan: (i) the City Note; (ii) the City Regulatory Agreement: (iii) the City Loan Deed of Trust; (ivl this Agreement. 2.9 "City Note" means the promissory note, in substantially the form shown in Exhibit C attached hereto and incorporated herein, in the principal amount of One Million One Hundred Sixty Thousand Dollars ($1,160,000), evidencing the City Loan. 2.10 "City Regulatory Agreement" means the City Regulatory Agreement in the form attached as Exhibit E to this Agreement to be recorded against the Land pursuant to Section 5.2 below. 2.1 1 "Close of Escrow" means the date that Master Developer's Grant Deed to Borrower for the Land is filed for record. 2.12 "Construction and Permanent Financing" means any of the following loans acquired by the Borrower for the purpose of financing the Improvements, in addition to the City Loan and the Master Developer Loan: 2.12.1 to exceed Seven Million Seven Hundred Thousand Dollars ($7,700,000; Bank construction loan in an amount not 2.1 2.2 California Housing Finance Agency or other permanent loanfs) in the approximate total amount of Five Million Seven Hundred Ninety Thousand Dollars ($5,790,000); and 2.12.3 Any loans refinancing the above-described loans. 2.13 "County" means the County of San Diego, State of California. 2.14 "Development" means the Land and the Improvements to be constructed on the Land. 2.15 "Escrow Holder" means FIRST AMERICAN TITLE INSURANCE COMPANY, whose address is 41 1 Ivy Street, San Diego, California 921 01. 2.16 "General and special real estate taxes" means all charges evidenced by the secured tax bill issued by the Tax Collector of the County, including, but not limited to, amounts allocated to (i) County or City general governmental purposes, (ii) bonded indebtedness of the County or City, (iii) bonded or other indebtedness and operating expenses of any school, college, sewer, water, irrigation, hospital, library, utility, county service, community facilities district or other district, and (iv) any other lawful purpose. Rancho Cartillo Affordable Housing Development Agreement 0 1 /20/98 -3- H:\. . .\ContHomes\RhoCarriIlo\AHDA.v02 Draft 2.17 "Improvements" means the grading of the Land, the buildings and improvements to be constructed on the Land, including the Units, and the parking spaces and landscaping appurtenant to such buildings and improvements, in accordance with City Site Development Plan SDP 97-1 5, Rancho Carrillo Village B, Phase 1. 2.18 "Land" means the real p.roperty on which the Borrower shall construct the Improvements, which real property is more particularly described in Exhibit A attached hereto and incorporated herein. 2.19 "Master Developer Loan" means a loan for an amount not to exceed One Million Two Hundred Ninety-Seven Thousand Nine Hundred Sixty-Seven Dollars ($1,297,967) by the Master Developer to Borrower, which loan is the subject of this Agreement. 2.20 "Master Developer Loan Deed of Trust" means the deed of trust to be placed on the Development, in substantially the form shown in Exhibit G attached hereto and incorporated herein, securing the Master Developer Note and naming the Master Developer as beneficiary. 2.2 1 "Master Developer Loan Documents" means the following documents evidencing the Master Developer Loan: (i) the Master Developer Note; (ii) the Master Developer Loan Deed of Trust; (iii) this Agreement. 2.22 "Master Developer Note" means the promissory note, in substantially the form shown in Exhibit F attached hereto and incorporated herein, in the principal amount of One Million Two Hundred Ninety-Seven Thousand Nine Hundred Sixty-Seven Dollars ($1,297,967), evidencing the Master Developer Loan. 2.23 "Master Developer Purchase Money Loan" means the loan for an amount equal to Three Million One Hundred Thirty-Two Thousand Dollars ($3,132,000) by the Master Developer to Borrower, for Borrower's purchase of the Land, which loan is the subject of the Purchase Agreement and Escrow Instructions between Master Developer as seller and Borrower as buyer. 2.24 "Master Developer Purchase Money Loan Deed of Trust" means the deed of trust to be placed on the Development, in the form provided for in the Purchase Agreement and Escrow Instructions, 'securing the Master Developer Purchase Money Note and naming the Master Developer as beneficiary. 2.25 "Master Developer Purchase Money Loan Documents" means the following documents evidencing the Master Developer Purchase Money Loan: (i) the Master Developer Purchase Money Note; (ii) the Master Developer Purchase Money Loan Deed of Trust; (iii) the Purchase Agreement and Escrow Instructions between Master Developer as seller and Borrower as buyer. 2.26 "Master Developer Purchase Money Note" means the promissory note, in substantially the form shown in Exhibit B-1 attached to the Purchase Agreement and Escrow Instructions, in the principal amount of Three Million One Hundred Thirty-Two Thousand Dollars ($3,132,000), evidencing the Master Developer Purchase Money Loan. Rancho Carrillo Affordable Housing Development Agreement 01120198 -4- H:\.. .\ContHomes\RhoCarriIlo\AHDA.v02 Draft 2.27 "New Map" refers to the final subdivision map which will show the Property consisting of a separate legal lot or lots (additional property within Village B may also, at Master Developer's discretion, be shown on the New Map). The New Map is being prepared by Master Developer, at Master Developer's sole cost and expense, and shall be submitted to City for signature and recording, at Master Developer's sole cost and expense. 2.28 "Parties". means the City, the Master Developer and the Borrower collectively; "Party" means one of the City, the Master Developer or the Borrower as the context indicates. 2.29 "Permanent Loan" means the loan(s) obtained by Borrower through programs administered by the California Housing Finance Ayency ("CHFA") or other lender, described in Section 2.12.2 above. 2.30 "Term" means the term of the City Loan commencing on the date of disbursement of the City Loan and ending fifty-five (55) years following the date of issuance of a certificate of occupancy for all Units in the Development, but in no event later than I 2056. 2.3 1 "Title Insurer" means FIRST AMERICAN TITLE INSURANCE COMPANY, whose address is 41 1 Ivy Street, San Diego, California 921 01. 2.32 the Development. "Unit" means one of the one hundred sixteen (1 16) dwelling units located within ARTICLE 3 Summary of Financing and Borrower's Financing and Acquisition Obligations 3.1 Summary of Development Financing. Borrower's current sources and uses of funds summary for the Development is attached hereto as Exhibit B. Borrower contemplates a total project budget of $1 2,900,000. Master Developer is providing financing for Borrower's acquisition of the Land with the Master Developer Purchase Money Note for $3,132,000 secured by the Master Developer Purchase Money Loan Deed of Trust as provided in the Purchase Agreement and Escrow Instrudtions. The Master Developer Purchase Money Loam Deed of Trust shall be subordinate to Borrower's Construction ($7,700,000) and Permanent Financing ($5,790,000) and to the City Loan Deed of Trust securing the City Loan to the Borrower. City shall loan to Borrower an amount equal to $10,000 for each Unit of multi-family housing in the Development, or a total of $1,160,000, secured by the City Loan Deed of Trust which shall be subordinate to Borrower's Construction and Permanent Financing. Master Developer shall provide additional financing to Borrower, either by means of an equity contribution to Borrower or by the Master Developer Loan to Borrower which shall be subordinate to Borrower's Construction and Permanent Financing, to the City Loan to Borrower, and to the Master Developer Purchase Money Loan to Borrower for the Land. Borrower may apply for a Permanent Loan funded by bonds issued by the California Housing Finance Agency ("CHFA") in the approximate amount of $5,790,000. Construction financing in the amount of $7,700,000 will be obtained by Borrower from . Borrower will also apply for an allocation of tax credits for the Development from the California Tax Credit Allocation Committee ("TCAC'O which will support an equity investment in Borrower by an investor limited partner in the amount of approximately $1,520,000. Rancho Carrillo Affordable Housing Development Agreement 01 120/98 -5- H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft 3.2 Borrower's Obligation to Apply For A Permanent Loan. Borrower shall prepare and file, as soon as possible following the City's approval of, and the Parties' execution of, this Agreement, an application with CHFA or other permanent lender for a Permanent Loan contemplated by Borrower's budget for the Development, and shall exercise its best efforts to diligently pursue such application, including, but not limited to, any necessary supplements or amendments thereto, to a final determination resulting in a commitment for the Permanent Loan. The City and Master Developer shall cooperate with Borrower to the extent reasonably necessary by each in Borrower's pursuit of a Permanent Loan. 3.3 Borrower's Obligation to Apply For Tax Credit Allocation through TCAC. Borrower shall prepare and file, as soon as possible following the City's approval of this Agreement, an application with TCAC for the allocation of tax credits to the Development contemplated by Borrower's budget for the Development, and shall exercise its best efforts to diligently pursue such application, including, but not limited to, any necessary supplements or amendments thereto, to a final determination by TCAC resulting in an allocation of tax credits to the Development as evidenced by a tax credit reservation letter. The City and Master Developer shall cooperate with Borrower to the extent reasonably necessary by each in Borrower's pursuit of an allocation of tax credits to the Development through TCAC. 3.4 Borrower's Obligation to Satisfy Conditions of the Purchase Agreement and Escrow Instructions with Master Developer. Borrower shall exercise its best efforts to diligently pursue satisfaction of all conditions benefitting Borrower as Buyer under the Purchase Agreement and Escrow Instructions with Master Developer as Seller and to acquire fee title to the Land from Master Developer. ARTICLE 4 City Loan 4.1 Amount. The City hereby agrees to loan, and the Borrower hereby agrees to borrow, an amount not to exceed One Million One Hundred Sixty Thousand Dollars ($1,160,000), subject to the terms and conditions set forth in this Agreement, and subject further to the terms and conditions set forth within the documents and instruments executed by the Borrower in connection with this transaction, including: (a) The City Note; (b) The City Regulatory Agreement; and (c) The City Loan Deed of Trust. 4.2 Interest. The outstanding principal amount of the City Loan shall accrue interest at three percent (3%) per annum, compounded annually. 4.3 Repayment. (a) Repayment of the City Loan shall be deferred during construction of the Improvements. Commencing on the date of recordation of the deed of trust securing the Permanent Loan, the outstanding principal and accrued interest on the City Loan shall be amortized over the next fifty-five (55) years of the Term such that equal payments of principal and interest (the "Amortized Payments") shall be due and payable on May 1 of each calendar Rancho Carrillo Affordable Housing Development Agreement 01 /20/98 .6- H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft year, commencing on the first May 1 following recordation of the deed of trust securing the Permanent Loan; provided however, that the Amortized Payments shall be due and payable only to the extent of seventy percent (70%) of Surplus Cash (as defined below) generated by the Development in the previous calendar year. (b) "Surplus Cash" means, in a particular calendar year, the amount by which Gross Revenue (as defined below) exceeds Annual Operating Expenses (as defined below). (i) Gross Revenue. "Gross Revenue," with respect to a particular calendar year, shall mean all revenue, income, receipts, and other consideration actually received from operation and leasing of the Development. "Gross Revenue" shall include, but not be limited to: all rents, fees and charges paid by tenants, Section 8 payments or other rental subsidy payments received for the dwelling units, all cancellation fees, price index adjustments and any other rental adjustments to leases or rental agreements; proceeds from vending and laundry room machines; the proceeds of business interruption or similar insurance; the proceeds of casualty insurance to the extent not utilized to repair or rebuild the Development; and condemnation awards for a taking of part or all of the Development for a temporary period. "Gross Revenue" shall also include the fair market value of any goods or services provided in consideration for the leasing or other use of any portion of the Development. "Gross Revenues" shall not include tenants' security deposits, loan proceeds, capital contributions or similar advances. (ii) Annual Operating Expenses. "Annual Operating Expenses," with respect to a particular calendar year, shall mean the following costs reasonably and actually incurred for operation and maintenance of the Development to the extent that they are consistent with an annual independent audit performed by a certified public accountant using generally accepted accounting principles: property and other taxes and assessments imposed on the Development; premiums for property damage and liability insurance; utility services not paid for directly by tenants, including but not limited to water, sewer, trash collection, gas and electricity; maintenance and repair including but not limited to pest control, landscaping and grounds maintenance, painting and decorating, cleaning, common systems repairs, general repairs, janitorial, supplies, and others; fees and assessments of the Rancho Carrillo Master Association; any annual license or certificate of occupancy fees required for operation of the Development; general administrative expenses including but not limited to advertising and marketing, security services and systems, and professional fees for legal, audit and accounting; property management fees and reimbursements including on-site manager and assistant manager expenses, not to exceed fees and reimbursements which are standard in the industry; partnership management fees in an annual amount not to exceed $8,500; asset management fees in an annual amount not to exceed $5,000; cash deposited into a reserve for capital replacements of Development improvements and an operating reserve in such reasonable amounts as are required by Development lenders and investors; and debt service payments (excluding debt service due from residual receipts or surplus cash of the Development) on financing for the Development approved by the City. "Annual Operating Expenses" shall not include the following: depreciation, amortization, depletion or other non-cash expenses or any amount expended from a reserve account. Rancho Carrillo Affordable Housing Development Agreement 01 /20/98 -7- H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft (c) If seventy percent (70%) of Surplus Cash in any year is less than the amount of the Amortized Payment due on May 1 of the following year, the difference berween seventy percent (70%) of Surplus Cash and the Amortized Payment shall accrue with simple interest at three percent (3%) per annum, and shall be paid on the next May 1 when and to the extent Surplus Cash becomes available. All payments on the City Loan shall be applied first to accrued, but unpaid, amounts for prior years and then to the current Amortized Payment due, beginning with the earliest year for which an Amortized Payment accrued. (d) If seventy percent (70%) of Surplus Cash in any year exceeds the amount necessary to make the Amortized Payment due on May 1 of the following calendar year, plus any amounts due pursuant to subsection (c) above, such excess amount shall be paid to the City as prepayment of the City Loan. Such prepayment shall not reduce the amounts of subsequent Amortized Payments due, except to the extent that the City Loan is fully repaid. (e) Prepayment of the City Loan may also occur pursuant to Section 4.13 below. Such prepayment shall not reduce the amounts of subsequent Amortized Payments due, except to the extent the City Loan is fully repaid. (f) Any portion of the principal and interest on the City Loan not sooner paid shall be due and payable upon the earlier of: (i) the occurrence of an Event of Default hereunder; (ii) expiration of the Term; or (iii) sale or transfer of the Development other than a transfer described in Section 4.5 below. 4.4 Prepayment. Borrower may prepay the principal and any interest due the City under the City Note prior to or in advance of the time for payment thereof as provided in the City Note, without penalty; provided, however, that Borrower acknowledges that the provisions of the City Regulatory Agreement will be applicable to the Development even though Borrower may have prepaid the City Note. 4.5 Assumption. In the event the Development is sold or transferred to the General Partners of Borrower or a nonprofit affiliate of the General Partners of Borrower, the City Loan shall be fully assumable by such transferee, subject to Section 1 1,16 below. The City Loan shall not be assumable by any other transferee. 4.6 Loan Disbursement. Upon satisfaction of the preconditions to disbursement set forth in Sections 5.1 and 5.2 below and pursuant to the disbursement procedures set forth in Sections 5.1 and 5.3 below, the City will disburse to Borrower the City Loan Amount. 4.7 Use of Loan Proceeds. Borrower shall use City Loan Proceeds only to pay the costs of the items set forth in Exhibit 6. 4.8 Security for Loan. The City Loan shall initially be unsecured and shall be secured when it is available by the Tax Credit Reservation Assignment (as defined in Section 5.1 below). Following Borrower's acquisition of the fee interest in the Land from Master Developer on the Close of Escrow, the City Loan shall be secured by the City Loan Deed of Trust on Borrower's fee interest in the Land. The Borrower shall provide the City with an ALTA policy of title insurance, issued by Title Insurer, insuring the City Loan Deed of Trust as a lien against the Rancho Carrillo Affordable Housing Development Agreement 01/20/98 -8- H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft Borrower's fee interest in the Land, subject only to the lien or liens of the Construction and Permanent Financing mortgages. 4.9 Approval of Additional Financing. The Borrower shall not place any encumbrances on the Land other than the Construction and Permanent Financing, the Master Developer Purchase Money Loan, and the Master Developer.Loan, without the prior written consent of the City, which consent shall not be withheld unreasonably. 4.10 Subordination of City Loan Deed of Trust. The City agrees to subordinate the City Loan Deed of Trust to the liens of the deeds of trust securing the Construction and Permanent Financing. 4.1 1 Subordination of the City Regulatory Agreement. The City agrees that the City Manager shall subordinate the City Regulatory Agreement to the lien or encumbrance of any construction or permanent financing provided for the Development upon the finding of the City Manager that (i) an economically feasible loan is not reasonably available on comparable terms and conditions without subordination, and (ii) the mortgage to which the City Regulatory Agreement is being subordinated contains provisions meeting the requirements of Health and Safety Code Section 33334.14(a) reasonably designed to protect the City's interest in the event of default under such mortgage. The City agrees that the City Regulatory Agreement shall be subordinated to any federal or state governmental agency regulating the Development which requires that the City Regulatory Agreement be subordinate to such government agency's documents and liens. The City will execute subordination agreements in a form reasonably acceptable to the lending entity or government agency to subordinate the City Regulatory Agreement as provided in this Section. 4.1 2 Admission of Investor Limited Partner. Borrower shall inform the City of the identity of its investor limited partner prior to the admission of the investor limited partner to Borrower's partnership. The City hereby consents to the admission as investor limited partner of Boston Capital or any limited partnership in which Boston Capital is a limited partner. 4.13 Developer Fee; Use of Net Proceeds of Permanent Financing. . (a) For purposes of this Section 4.1 3, the term "Net Proceeds of Permanent Financing" shall mean the portion of the capital contributions of the investor limited partner of the Borrower and the proceeds of the Permanent Loan that is not required to repay the - Bank construction loan and pay other costs of the Development (including but not limited to the funding of reserves), other than the Borrower's development fee. Borrower shall be entitled to a developer fee of Nine Hundred Three Thousand Dollars ($903,000). Borrower shall be eligible to receive seventy-five percent (75%) of the developer fee ($677,250) payable in equal monthly installments during the construction of the Development. The balance of the developer fee ($225,750) may be paid from Net Proceeds of Permanent Financing (as provided below), cash reserves, or Borrower's thirty percent (30%) share of Surplus Cash. (b) The Net Proceeds of Permanent Financing shall be utilized as follows: Rancho Carrillo Affordable Housing Development Agreement 01/20/98 -9- H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft (i) to pay the balance of developer fees ($225,750) until Borrower has received total developer fees in the amount of Nine Hundred Three Thousand Dollars ($903,000) including any amounts previously paid to the Borrower as developer fees from other sources; (ii) the remainder, if any, of Net Proceeds of Permanent Financing shall be paid one-half to the Borrower for its uses and purposes and one-half to the City as partial repayment of the City Loan. 4.14 Reports and Accounting of Surplus Cash. (a) Audited Financial Statement. In connection with the annual repayment of the City Loan, the Borrower shall furnish to the City an audited statement duly certified by an independent firm of certified public accountants approved by the City, setting forth in reasonable detail the computation and amount of Surplus Cash during the preceding calendar year. (b) Books and Records. The Borrower shall keep and maintain at the Development, or elsewhere with the City's written consent, full, complete and appropriate books, records and accounts relating to the Development, including all such books, records and accounts necessary or prudent to evidence and substantiate in full detail Borrower's calculation of Surplus Cash. Books, records and accounts relating to Borrower's compliance with the terms, provisions, covenants and conditions of this Agreement shall be kept and maintained in accordance with generally accepted accounting principles consistently applied, and shall be consistent with requirements of this Agreement which provide for the calculation of Surplus Cash on a cash basis. All such books, records, and accounts shall be open to and available for inspection by the City, its auditors or other authorized representatives at reasonable intervals during normal business hours. Copies of all tax returns and other reports that Borrower may be required to furnish any governmental agency shall at all reasonable times be open for inspection by the City at the place that the books, records aQd accounts of the Borrower are kept. The Borrower shall preserve records on which any statement of Surplus Cash is based for a period of not less than five (5) years after such statement is rendered. ARTICLE 5 Disbursement of City Loan 5.1 Initial Disbursement. The City shall make an initial disbursement to Borrower of Two Hundred Thousand Dollars ($250,000) of City Loan proceeds prior to the Close of Escrow for Borrower's acquisition of the Land and recordation of the City Loan Deed of Trust, to be used by Borrower to pay (or to reimburse Borrower for prior payment of) tax credit application and reservation fees due the California Tax Credit Allocation Committee, application costs and fees associated with obtaining Permanent Financing, and other costs associated with the Development. Such disbursement shall be made to Borrower upon receipt of Borrower's written request for such funds, provided Borrower executes the City Note. If and when it is available, Borrower shall provide to the City as initial security for the Loan an assignment of the tax credit reservation for the Development, in a form to be approved by the City (the "Tax Credit Reservation Assignment"). The Tax Credit Reservation Assignment shall be cancelled by the City and the Borrower upon recordation of the City Loan Deed of Trust. Rancho Carrillo Affordable Housing Development AQreement 0112Ol90 ,lo- H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft 5.2 Conditions Precedent to Disbursement of Remaining City Loan Proceeds. Except for the initial disbursement pursuant to Section 5.1 above, the City shall not disburse City Loan proceeds to the Borrower until all of the following conditions precedent are satisfied. (a) Budget. Borrower shall have submitted to the City and obtained City approval of a development budget for the Development, in the form attached as Exhibit B, and the City has determined that the undisbursed proceeds of the City Loan, together with other funds or firm commitments for funds that the Borrower has obtained in connection with the Development, are not less than the amount that the City determines is necessary to pay for the construction of the Development and to satisfy all of the covenants contained in this Agreement. (b) Partnership and General Partners' Authorizations; Good Standing. Borrower shall provide the City (i) with a certified copy of a partnership authorizing resolution, approving the City Loan and the Borrower's execution of all City Loan Documents, (ii) with certified copies of corporate authorizing resolutions of Borrower's corporate general partners, approving the City Loan and the general partner's execution on behalf of the Borrower of all City Loan Documents, and fiii) with evidence reasonably satisfactory to the City that the Borrower and each of its corporate general partners exist in good standing at the time of the proposed disbursement. (c) Purchase of Land. Borrower shall hold fee title to the Land pursuant to a Grant Deed from Master Developer which has been duly recorded in the Official Records of the County,' or a Grant Deed is signed and deposited into escrow. (d) Close of Construction Loan. Borrower shall have closed the Construction Loan for the Development described in Section 2.12.1 above. (e) Execution, Delivery and Recordation of City Loan Documents. Borrower shall have executed and delivered to the City the City Note, the City Deed of Trust, and the City Regulatory Agreement, and any other documents and instruments required to be executed and delivered, all in form and substance satisfactory to the City, and the City Deed of Trust and the City Regulatory Agreement shall have been recorded against Borrower's fee interest in the Land. If) Insurance. Borrower shall have furnished the City with evidence of the insurance coverage required pursuant to Sections 9.4 and 9.5 below. (9) Construction Contracts. Prior to any disbursement for hard construction costs, the City has received and approved all contracts that the Borrower has entered or proposed to enter for construction of the Development. The City shall have seven (7) days from its receipt of a contract in which to give Borrower written notice of its approval or disapproval of a contract that Borrower has entered or proposes to enter for construction of the Development; if the City has not given written notice of disapproval of a contract within the seven (7) day period, the contract shall be deemed approved. All construction work and professional services shall be performed by persons or entities licensed or otherwise authorized to perform the applicable construction work or service in the State of California. Each construction contract that the Borrower enters for construction of the Development shall provide that at least ten percent (1 0%) Rancho Carrillo Affordable Housing Development Agreement oi12019a 11- H:\. , .\ContHomes\RhoCarriIlo\AHOA.vOZ Draft of the costs incurred shall be payable only upon completion of said contractor's construction and shall include the nondiscrimination language set forth in Section 9.14 below. (h) No Default. There shall exist no condition, event or act constituting an Event of Default (as hereinafter defined) hereunder or which, upon the giving of notice or the passage of time, or both, would constitute an Event of Default. 5.3 Procedure for Disbursement of Remaining Loan Proceeds. Upon satisfaction of the conditions set forth in Section 5.2 above, the City shall promptly disburse the remaining City Loan Amount to Borrower from time to time upon receipt of written requests from the Borrower: (a) reaffirming the accuracy as of the date of the disbursement request of Borrower's representations and warranties set forth in Article 8 below; (b) certifying that Borrower is not in default under the City Loan Documents or loan documents for other Approved Financing; and (c) setting forth the proposed uses of funds consistent with Section 4.7 above, the amount of funds needed, and, where applicable, a copy of the bill or invoice covering a cost incurred or to be incurred. When a disbursement is requested to pay any contractor in connection with construction of the Improvements, the written request must be accompanied by a certification by the architect for the Borrower that the work for which disbursement is requested has been completed (although the City reserves the right to inspect the Development and make an independent evaluation within five (5) days from receipt of the written request), and lien releases or mechanics' lien title insurance endorsements reasonably acceptable to the City. All of the City Loan Amount shall be disbursed before any of the Master Developer Loan Amount is required to be disbursed. ARTICLE 6 Master Developer Loan 6.1 Amount. The Master Developer hereby agrees to loan, and the Borrower hereby agrees to borrow, an amount not to exceed One Million Two Hundred Ninety-Seven Thousand Nine Hundred Sixty-Seven Dollars ($1,297,9671, subject to the terms and conditions set forth in this Agreement, and subject further to the terms and conditions set forth within the documents and instruments executed by the Borrower in connection with this transaction, including: (a) The Master Developer Note; and (b) The Master Developer Loan Deed of Trust. 6.2 Interest. The outstanding principal amount of the Master Developer Loan shall accrue interest at the rate agreed upon by Borrower and Master Developer for the Master Developer Purchase Money Loan under the Purchase Agreement and Escrow Instructions between Borrower and Master Developer. 6.3 Repayment. (a) Repayment of the Master Developer Loan shall be deferred during construction of the Improvements. Commencing on the date of recordation of the deed of trust securing the Permanent Loan, the outstanding principal and accrued interest on the Master Developer Loan shall be amortized over the period and by such payments as are agreed upon by Borrower and Master Developer for the Master Developer Purchase Money Loan under the Purchase Agreement and Escrow Instructions between Borrower and Master Developer. Rancho Carrillo Affordable Housing Development Agreement 01120198 .12- H:\. ..\ContHomes\RhoCarrillo\AHDA.vOZ Draft (b) Prepayment of the Master Developer Loan may also occur pursuant to Section 4.1 3 above. Such prepayment shall not reduce the amounts of subsequent payments due, except to the extent the Master Developer Loan is fully repaid. (c) Any portion of the principal and interest on the Master Developer Loan not sooner paid shall be due and payable upon the earlier of: (i) the occurrence of an Event of Default hereunder; (ii) expiration of the Term; or (iii) sale or transfer of the Development other than a transfer described in Section 6.5 below. 6.4 Prepayment. Borrower may prepay the principal and any interest due the Master Developer under the Master Developer Note prior to or in advance of the time for payment thereof as provided in the Master Developer Note, without penalty. 6.5 Assumption. In the event the Development is sold or transferred to the General Partners of the Borrower or a nonprofit affiliate of the General Partners of the Borrower, the Master Developer Loan shall be fully assumable by such transferee. The Loan shall not be assumable by any other transferee. 6.6 Loan Disbursement. After disbursement of the entire City Loan Amount, and upon satisfaction of the preconditions to disbursement set forth in Sections 5.1 and 5.2 above and pursuant to the disbursement procedures set forth in Sections 5.1 and 5.3 above, the Master Developer will disburse to Borrower the Master Developer Loan Amount. 6.7 Use of Loan Proceeds. Borrower shall use Master Developer Loan Proceeds only to pay the costs of the items set forth in Exhibit B. 6.8 Security for Loan. The Master Developer Loan shall be secured by the Master Developer Loan Deed of Trust on Borrower's fee interest in the Land. The Borrower shall provide the Master Developer with an ALTA policy of title insurance, issued by Title Insurer, insuring the Master Developer Loan Deed of Trust as a lien against the Borrower's fee interest in the Land, subject only to the lien or liens of the Construction and Permanent Financing mortgages, the City Loan Deed of Trust, and the Master Developer Purchase Money Loan Deed of Trust. 6.9 . Approval of Additional Financing. The Borrower shall not place any encumbrances on the Land other than the Construction and Permanent Financing, the City Loan, the Master Developer Purchase Money Loan, and the Master Developer Loan, without the prior written consent of the Master Developer, which consent shall not be withheld unreasonably. 6.10 Subordination of Master Developer Loan Deed of Trust. The Master Developer agrees to subordinate the Master Developer Loan Deed of Trust only to the liens of the deeds of trust securing the Construction and Permanent Financing, the City Loan Deed of Trust, and the Master Developer Purchase Money Loan Deed of Trust. 6.1 1 Reports and Accounting of Surplus Cash. (a) Audited Financial Statement. In connection with the annual repayment of the Master Developer Loan, or annually on the due date if no payment is due under the terms of the Master Developer Note, the Borrower shall furnish to the Master Developer a copy of Rancho Carrillo Affordable Housing Development Agreement 01 /20/98 13- H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft the audited statement duly certified by an independent firm of certified public accountants furnished to the City pursuant to Section 4.14(a) above, (b) Books and Records. The Borrower shall keep and maintain the books, records and accounts relating to the Development required under Section 4.14(b) above. All such books, records, and accounts shall be open to and available for inspection by the Master Developer, its auditors or other authorized representatives at reasonable intervals during normal business hours. Copies of all tax returns and other reports that Borrower may be required to furnish any governmental agency shall at all reasonable times be open for inspection by the Master Developer at the place that the books, records and accounts of the Borrower are kept. The Borrower shall preserve records on which any statement of Surplus Cash is based for a period of not less than five (5) years after such statement is rendered. ARTICLE 7 Development of the Improvements 7.1 Commencement of Construction. Subject to Section 1 1.2 below, the Borrower hereby covenants and agrees to commence construction of the Development no later than sixty (60) days following the later of: (i) the date Borrower obtains fee title to the Land; or (ii) the date Borrower obtains the first building permit required for construction of the Development. 7.2 Completion of Construction. The Borrower hereby covenants and agrees to diligently prosecute to completion the construction of the Development within twelve (1 2) months from the date of commencement of construction, subject to Section 1 1.2 below. 7.3 Construction Pursuant to Plans. The Borrower shall construct the Improvements in accordance with the plans approved by the City in connection with issuance of the building permit(s), and with the terms and conditions of all land use permits and approvals required by the City, including, but not limited to, Site Development Plan SDP 97-1 5. 7.4 Construction in Compliance with Law. Borrower shall cause all work performed in connection with the Development, including construction of the Improvements, to be performed in compliance with all governmental requirements, including (without limitation and where applicable) the following: fa) All directions, rules, and regulations of any fire marshal, health officer, building inspector, or other officer of any governmental agency having jurisdiction. The work shall proceed only after procurement of each permit, license, or other authorization that may be required by any governmental agency having jurisdiction, and the Borrower shall be responsible to the City and the Master Developer for the procurement and maintenance thereof, as may be required of the Borrower and all entities engaged in work on the Development. 7.5 Entry by the City or Master Developer. Borrower shall permit the City or the Master Developer, through their respective officers, agents, or employees, at all reasonable times to enter into the Development and inspect the work of construction to determine that the same is in conformity with the construction plans approved by the City, Borrower acknowledges that neither the City nor the Master Developer is under no obligation to supervise, inspect, or Rancho Carrillo Affordable Housing Development Agreement 01120198 , 14- H:\ ... \ContHornes\RhoCarrillo\AHOA.vOZ Ora f t inform Borrower of the progress of construction, and Borrower shall not rely upon the City or the Master Developer therefor. Any inspection by the City or the Master Developer is entirely for its purposes in determining whether Borrower is in default under this Agreement and is not for the purpose of determining or informing Borrower of the quality or suitability of construction. Borrower shall rely entirely upon its own supervision and inspection in determining the quality and suitability of the materials and work, and the performance of architects, subcontractors, and material suppliers. 7.6 Equal Opportunity. During the construction of the Improvements there shall be no discrimination on the basis of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, or handicap in the hiring, firing, promoting, or demoting of any person engaged in the construction work. 7.7 Mechanics Liens, Stop Notices, and Notices of Completion. (a) If any claim of lien is filed against the Development or a stop notice affecting the City Loan or the Master Developer Loan is served on the City, the Master Developer, or any other lender or other third party in connection with the Development, then the Borrower shall, within thirty (30) days after such filing or service, either pay and fully discharge the lien or stop notice, effect the release of such lien or stop notice by delivering to the City and the Master Developer a surety bond in sufficient form and amount, or provide the City and the Master Developer with other assurance satisfactory to the City and the Master Developer that the claim of lien or stop notice will be paid or discharged. (b) If the Borrower fails to discharge any lien, encumbrance, charge, or claim in the manner required in Section 7.7(a), then in addition to any other right or remedy, the City or the Master Developer may (but shall be under no obligation to) discharge such lien, encumbrance, charge, or claim at the Borrower's expense. .Alternately, the City or the Master Developer may require the Borrower to immediately deposit with the City the amount necessary to satisfy such lien or claim and any costs, pending resolution thereof. The City shall use such deposit to satisfy any claim or lien that is adversely determined against the Borrower. (c) the Borrower shall file a valid notice of cessation or notice of completion upon cessation of construction on the Development for a continuous period of thirty (30) days or more, and take all other reasonable steps to forestall the assertion of claims of lien against the Development. The Borrower authorizes the City or the Master Developer, but without any obligation, to record any notices of completion or cessation of labor, or any other notice that the City or the Master Developer deems necessary or desirable to protect its respective interest in the Development. 7.8 Estoppel Certificate of Completion. When the Borrower has determined it has met its obligations under this Article 7, the Borrower may request that the City issue an Estoppel Certificate of Completion, in the form shown in Exhibit H. Within ten (1 0) days of such a request, the City shall issue an Estoppel Certificate of Completion or shall provide the Borrower with a written explanation of its refusal to issue the Estoppel Certificate of Completion. If and when the Borrower has taken the specified measures or met the specified standards the City shall issue an Estoppel Certificate of Completion. Rancho Carrillo Affordable Housing Developmenf Agreement 01 /20/98 -1 5- I+:\.. .\ContHomes\RhoCarriIlo\AHDA.v02 Draft The Estoppel Certificate of Completion shall not be deemed a notice of completion under the California Civil Code, nor shall it constitute evidence of compliance with or satisfaction of any obligation of the Borrower to any holder of a deed of trust securing money loaned to finance the Development. ARTICLE 8 Representations and Warranties of Borrower 8.1 Representations and Warranties. Borrower hereby represents and warrants to the City and the Master Developer as follows: (a) Organization. Borrower is duly organized, validly existing and in good standing under the laws of the State of California and has the power and authority to own its property and carry on its business as now being conducted. (b) Authority of Borrower. Borrower has full power and authority to execute and deliver this Agreement and to make and accept the borrowings contemplated hereunder, to execute and deliver the City Loan Documents, the Master Developer Loan Documents, and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, and to perform and observe the terms and provisions of all of the above. (c) Authority of Persons Executing Documents. This Agreement, the City Loan Documents, the Master Developer Loan Documents, and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement have been executed and delivered by persons who are duly authorized to execute and deliver the same .for and on behalf of Borrower, and all actions required under Borrower's organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement, the City Loan Documents, the Master Developer Loan Documents, and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, have been duly taken. (d) Valid Binding Agreements. This Agreement, the City Loan Documents, the Master Developer Loan Documents, and all other documents or instruments which have been executed and delivered pursuant to or in connection with this Agreement constitute or, if not yet executed or delivered, will when so executed and delivered constitute, legal, valid and binding obligations of Borrower enforceable against it in accordance with their respective terms, subject to: (i) bankruptcy, insolvency, reorganization, moratorium, and other similar laws relating to or affecting the rights of creditors generally, and (ii) general equity principles and the effect of Code of Civil Procedure Sections 580a, 580d and 726, and any other statutory provisions limiting proceedings for recovery of a debt. (e) Pending Proceedings. There are no claims, actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower or the Development, at law or in equity, before or by any court, board, commission or agency whatsoever which might, if determined adversely to Borrower, materially affect Borrower's ability to repay the City Loan or the Master Developer Loan, or impair the security to be given to the City or the Master Developer pursuant hereto. Rancho Carrillo Afiordable Housing Development Agreement 01 noisa .16- H:\. . .\ContHornes\RhoCarrillo\AHDA.vOZ Draft (f) Financial Statements. The financial statements of Borrower and Borrower's general partners and other financial data and information furnished by Borrower to the City and the Master Developer fairly present the information contained therein. As of the date of this Agreement, there has not been any adverse, material change in the financial condition of Borrower and Borrower's general partners from that shown by such financial statements and other data and information. ARTICLE 9 Continuing Obligations of Borrower 9.1 Applicability. For the longer of the entire Term, or so long as the City Note or the Master Developer Note remains outstanding, the Borrower shall comply with the provisions of this Article 9. 9.2 Compliance with Loan Documents. Borrower shall comply with all the terms and provisions of the City Loan Documents and the Master Developer Loan Documents. 9.3 Rental of Units. The Borrower shall comply with the occupancy and affordability restrictions for the rental of the Units as set forth in the City Regulatory Agreement and in any other regulatory agreement(s1 required by Borrower's lenders. 9.4 Required Insurance Coverage. (a) Fire and Extended Coverage Endorsement. The Borrower shall during the Term keep the Development insured against loss or damage by a standard all risk policy in amounts not less than the replacement value of the Development, or should insurance in such amount not be reasonably and commercially available, such lesser amount as may be acceptable to the City and the Master Developer. The amount of such insurance shall be adjusted by reappraisal of the Improvements by the insurer or its designee at least once every five (5) years during the Term, if requested by the City or the Master Developer. If an all risk policy insuring the full replacement value of the Development is not reasonably and commercially available, the Borrower shall use best efforts to obtain and maintain an extended coverage endorsement that ensures the full replacement value of the Development as soon as such coverage becomes commercially and reasonably available. (b) Liability and Property Damage Insurance. During the Term, the Borrower shall keep in full force and effect a policy or policies of comprehensive general liability and property damage insurance against liability for bodily injury to or death of any person or property damage arising out of an occurrence on or about the Development. The limits of such insurance shall be not less than one million dollars ($1,000,000) combined single limit for bodily injury and property damage. The limits of the insurance shall be adjusted once every five (5) years if and as reasonably required by the City or the Master Developer. (c) Workers' Compensation Insurance. The Borrower shall carry or cause to be carried workers' compensation insurance covering all persons employed by the Borrower in connection with the Development and with respect to whom death, bodily injury, or sickness insurance claims could be asserted against the Borrower, the City or the Master Developer. Rancho Carrillo Affordable Housing Development Agreement 01/20198 -1 7- H:\ ... \ContHomes\RhoCanillo\AHDA.vOZ Draft (d) Builders' Risk Insurance. During the course of any alteration, construction or reconstruction, the cost of which exceeds one hundred thousand dollars ($100,000), the Borrower shall provide or require any contractor to provide builders' risk insurance for not less than, in the event of new construction, the full insurable value of the Development or, in the event of alteration or reconstruction, the insurable value of the alteration or reconstruction, insuring the interests of the City, the Master Developer, the Borrower and any contractors and subcontractors. 9.5 Insurance Policies and Premiums (a) All liability policies required by this Agreement shall name the City and the Master Developer as additional insureds. Duplicate copies of such policies or certificates of such insurance shall be promptly furnished to the City and the Master Developer. (b) To the extent obtainable, any policy of insurance shall provide that any change or cancellation of said policy must be made in writing and sent to the Borrower, the City and the Master Developer at their respective principal offices at least thirty (30) days before the effective date of change or cancellation. , 9.6 Proceeds of Insurance. All fire and standard risk or extended coverage (casualty) insurance proceeds shall be applied to the payment of the costs of repairing or rebuilding that part of the Development damaged or destroyed if (i) the Borrower agrees in writing within ninety (90) days after payment of the proceeds of insurance that such repair or rebuilding is economically feasible, and (ii) each lender of an outstanding Construction and Permanent Loan permits such repairing or rebuilding, provided that the extent of Borrower's obligation to restore the Development shall be limited to. the amount of the insurance proceeds. If the Development is not repaired or rebuilt as provided in this Section 6.6, all such proceeds shall be applied to repayment of outstanding loans including the City Loan, the Master Developer Purchase Money Loan and the Master Developer Loan, in the order of lien priority. 9.7 Taxes and Assessments. So long as Borrower owns the Development, Borrower shall pay all real and personal property taxes, assessments and charges and all franchise, income, unemployment, old age benefit, withholding, sales, and other taxes assessed against it, or payable by it, at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Development; provided, however, that Borrower shall have the right to contest in good faith any such taxes, assessments, or charges. In the event Borrower exercises its right to contest any tax, assessment, or charge against it, Borrower, on final determination of the proceeding or contest, shall immediately pay or discharge any judgment rendered against it, together with all costs, charges, and interest. 9.8 Compliance with Laws. Borrower shall comply with all laws and regulations of the United States and of California and of any political subdivision thereof, or of any governmental authority which may be applicable to it or to its business, subject to Borrower's right to contest the validity or applicability of laws or regulations. 9.9 Changes. Borrower shall promptly notify the City and the Master Developer in writing of any changes in the location of any place of business or material assets of the Borrower. Rancho Carrillo Affordable Housing Development Agreement o 112019a 18- I+:\, ..\ContHomes\RhoCarrillo\AHDA.v02 Draft ARTICLE 2 MAINTENANCE AND MODIFICATION OF THE PROPERTY AND SECURITY Section 2.1 Maintenance and Modification of the Property by Trustor. The Trustor agrees that at all times prior to full payment of the sum owed under the Note, the Trustor will, at the Trustor's own expense, maintain, preserve and keep the Security or cause the Security to be maintained and preserved in good condition, subject to Article 4 below. The Trustor will from time to time make or cause to be made all repairs, replacements and renewals deemed proper and necessary by it. The Beneficiary shall have no responsibility in any of these matters or for the making of improvements or additions to the Security. Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all claims for labor done and for material and services furnished in connection with the Security, diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation of labor on the work or construction on the Security for a continuous period of thirty (301 days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Security of any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary as its agent (said agency being coupled with an interest) with the authority, but. without any obligation, to file for record any notices of completion or cessation of labor or any other notice that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the Loan Documents; provided, however, that Beneficiary shall exercise its rights as agent of Trustor only in the event that Trustor shall fail to take, or shall fail to diligently continue to take, those actions as hereinbefore provided, after notice and expiration of all applicable cure periods. Notwithstanding anything to the contrary contained in this Deed of Trust, Trustor shall not be obligated to pay any claims for labor, materials or services which Trustor in good faith disputes and is diligently contesting provided that Trustor shall, at Beneficiary's written request, within thirty (30) days after the filing of any claim of lien, record in the Office of the Recorder of San Diego County, a surety bond in an amount 1 and YZ times the amount of such claim item to protect against a claim of lien, or provide such other security reasonably satisfactory to Beneficiary. Section 2.2 Granting of Easements. Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in the nature of easements with respect to any property or rights included in the Security except those required or desirable for installation and maintenance of public utilities including, without limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law. As to these exceptions, Beneficiary will grant and/or direct the Trustee to grant such easements. Rancho Carrillo Affordable Housing Development Agreement 0112Ol98 G-5 H:\.. .\ContHomes\RhoCarriIlo\AHDA.vOZ Draft ARTICLE 3 TAXES AND INSURANCE; ADVANCES Section 3.1 Taxes, Other Governmental Charges and Utility Charges. Trustor shall pay, or cause to be paid, prior to delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company which are or may become a lien affecting the Security or any part thereof; provided, however, if such taxes, assessments or charges may be paid in installments, Trustor may pay in such installments; and provided further, that Trustor shall not be required to pay and discharge any such tax, assessment, charge or levy so long as Trustor is contesting the legality thereof in good faith and by appropriate proceedings and Trustor has adequate funds to pay any liabilities contested pursuant to this Section 3.1. The provisions of this Section 3.1 shall not be construed to require that Trustor maintain a reserve account, escrow account, impound account or other similar account for the payment of future taxes, assessments, charges and levies. In the event that Trustor shall fail to pay any of the foregoing items required by this Section to be paid by Trustor, Beneficiary may (but shall be under no obligation to) pay the same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to fully pay such items within seven (7) business days after receipt of such notice or, alternatively, provides Beneficiary with evidence Trustor is contesting such items in accordance with this Section. Any amount so advanced therefor by Beneficiary, together with interest thereon from the date of such advance at the maximum rate permitted by law, shall become an additional obligation of Trustor to the Beneficiary and shall be secured hereby, and Trustor agrees to pay all such amounts. Section 3.2 Provisions Respecting Insurance. Trustor agrees to provide insurance conforming in all respects to that required under the Loan Documents during the course of construction and following completion, and at all times until all amounts secured by this Deed of Trust have been paid obligations secured hereunder fulfilled, and this reconveyed. All such insurance policies and coverages shall be Trustor's sole cost and expense. Certificates of all of the above insurance policies, showing the full force and effect, shall be delivered to the Beneficiary upon demand therefor at any time prior to the Beneficiary's receipt of the entire Principal and all amounts secured by this Deed of Trust. Section 3.3 Advances. In the event the Trustor shall fail to maintain the full insurance coverage required by this Deed of Trust, the Beneficiary, after at least seven (7) days prior notice to Beneficiary, may (but shall be under no obligation to) take out the required policies of insurance and pay the premiums on the same; and all amounts so advanced therefor by the Beneficiary shall become an additional obligation of the Trustor to the Beneficiary (together with interest as set forth below) and shall be secured hereby, which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, shall bear interest from the date of the advance at the rate of six percent (6%) per annum. Rancho Carrillo Affordable Housing Development Agreement 01120198 G-6 H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft ARTICLE 4 DAMAGE, DESTRUCTION OR CONDEMNATION Section 4.1 Awards and Damages. All judgments, awards of damages, settlements and compensation made in connection with or in lieu of (1 1 taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (2) any damage to or destruction of the Property or any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property ("Funds") are hereby assigned to and shall be paid to the Beneficiary by a check made payable to the Beneficiary. Upon the occurrence of an Evect of Default (as defined in the Development Agreement), the Beneficiary shall be entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All fire and standard risk or extended coverage (casualty) insurance proceeds shall be applied to the payment of the costs of repairing or rebuilding that part of the improvements on the Property damaged or destroyed if (i) the Trustor agrees in writing within ninety (90) days after payment of the proceeds of insurance that such repair or rebuilding is economically feasible, and (ii) each lender of an outstanding Construction and Permanent Loan (as defined in the Development Agreement) permits such repairing or rebuilding, provided that the extent of. Trustor's obligation to restore the improvements shall be limited to the amount of the insurance proceeds. If the improvements are not repaired or rebuilt as provided in this Section 4.1 , all such proceeds shall be applied to repayment of outstanding loans including the loan secured by this Deed of Trust, in the order of lien priority. Application of all or any part of the Funds collected and received by the Beneficiary or the release thereof shall not cure or waive any default under this Deed of Trust. The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior mortgage lender. ARTICLE 5 AGREEMENTS AFFECTING TW PROPERTY; FURTHER ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST Section 5.1 Other Agreements Affecting Property. The Trustor shall duly and punctually perform all terms, covenants, conditions and agreements binding upon it under the Loan Documents and any other agreement of any nature whatsoever now or hereafter involving or affecting the Security or any part thereof. Section 5.2 Agreement to Pay Attorneys' Fees and Expenses. In the event of any Event of Default (as defined below) hereunder, and if the Beneficiary should employ attorneys or incur other expenses for the collection of amounts due or the enforcement of performance or observance of an obligation or agreement on the part of the Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so incurred by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the indebtedness secured by the lien of this Deed of Trust, and shall bear interest from the date such expenses are incurred at the six percent (6%) per annum. Rancho Carrillo Affordable Housing DEVElOpment Agreement 0112Ol98 G-7 H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft Section 5.3 Payment of the Principal. The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth in the Note in the amounts and at the times set out therein. Section 5.4 Personal Property. To the maximum extent permitted by law, the personal property subject to this Deed of Trust shall be deemed to be fixtures and part of the real property and this Deed of Trust shall constitute a fixtures filing under the California Commercial Code. As to any personal property not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement under the California Commercial Code. Section 5.5 Financing Statement. The Trustor shall execute and deliver to the Beneficiary such financing statements pursuant to the appropriate statutes, and any other documents or instruments as are reasonably required to convey to the Beneficiary a valid perfected security interest in the Security. The Trustor agrees to perform all acts which the Beneficiary may reasonably request so as to enable the Beneficiary to maintain such valid perfected security interest in the Security in order to secure the payment' of the Note in accordance with its terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdictions) as it shall deem appropriate from time to time in order to protect the security interest established pursuant to this instrument. Section 5.6 Operation of the Security. The Trustor shall operate the Security (and, in case of a transfer of a portion of the Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in full compliance with the Loan Documents. Section 5.7 Inspection of the Security. At any and all reasonable times upon seventy-two (72) hours' notice, subject to the rights of tenants, the Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and representatives shall have the right, without payment of charges or fees, to inspect the Security. Section 5.8 Nondiscrimination. The Trustor herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, age, disability, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Security, nor shall the Trustor itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Security. The foregoing covenants shall run with the land. Rancho Carrillo Affordable Housing Development Agreement 01 120198 G-8 H:\ ... \ConfHomes\RhoCarrillo\AHDA.vOZ Draft Section 5.9 Subordination. The lien of this Deed of Trust shall be subordinate to the lien of the Bank Deed of Trust, recorded concurrently herewith, the lien of the City Loan Deed of Trust, recorded concurrently herewith, the lien of the Master Developer Purchase Money Loan Deed of Trust, recorded concurrently herewith, and the lien of the deed(s) of trust to , securing the permanent loan(s) for the improvements on the Property. ARTICLE 6 EVENTS OF DEFAULT AND REMEDIES Section 6.1 Acceleration of Maturity. If an Event of Default, (as defined in the Development Agreement), shall have occurred and be continuing, then at the option of the Beneficiary, the amount of any payment related to the Event of Default and the unpaid Principal of the Note shall immediately become due and payable, upon written notice by the Beneficiary to the Trustor (or automatically where so specified in the Loan Documents), and no omission on the part of the Beneficiary to exercise such option when entitled to do so shall be construed as a waiver of such right. Section 6.2 The Beneficiary's Right to Enter and Take Possession. If an Event of Default shall have occurred and be continuing, the Beneficiary may: (a) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Security and take possession thereof (or any part thereof), in its own name or in the name of Trustee, and do any acts which it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security shall not cure or waive any Event of Default or Notice of Default (as defined below) hereunder or invalidate any act done in response to such Event of Default or pursuant to such Notice of Default and, notwithstanding the continuance in possession of the Security, Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; (b) commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (c) Deliver to Trustee a written declaration of default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of Default and Election to Sell"), which notice Trustee or Beneficiary shall cause to be duly filed for record in the official Records of San Diego County; or (dl Exercise all other rights and remedies provided herein, or in any other document or agreement now or hereafter evidencing, creating or securing all or any portion of the obligations secured hereby, or provided by law. Rancho Carrillo Affordable Housing Development Agreement 01/20/98 G-9 ti:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft Section 6.3 Foreclosure By Power of Sale. Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained following an Event of Default, the Beneficiary shall give notice to the Trustee (the "Notice of Sale") and shall deposit with Trustee this Deed of Trust which is secured hereby (and the deposit of which shall be deemed to constitute evidence that the unpaid principal amount of the Note is immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require, (a) Upon receipt of such notice from the Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Default and Election to Sell as then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such Notice of Default and Election to Sell and after Notice of Sale having been given as required by law, sell the Security, at the time and place of sale fixed by it in said Notice of Sale, whether as a whole or in separate lots or parcels or items as Trustee shall deem expedient and in such order as it may determine unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed or any matters of facts shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale, and Trustor hereby covenants to warrant and defend the title of such purchaser or purchasers. f b) After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to payment of: (i) the unpaid Principal amount of the Note; (ii) all other amounts owed to Beneficiary under the Loan Documents: (iii) all other sums then secured hereby; and (iv) the remainder, if any, to Trustor. (c) Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or ray, in its discretion, give a new Notice of Sale. Section 6.4 Receiver. If an Event of Default shall have occurred and be continuing, Beneficiary, as a matter of right and without further notice to Trustor or anyone claiming under the Security, and without regard to the then value of the Security or the interest of Trustor therein, shall have the right to 'apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of entry as provided herein, and shall continue as such and exercise all such powers until the date of confirmation of sale of the Security, unless such receivership is sooner terminated. Rancho Carrillo Atfordable Housing Development Agreement 01/20/98 G-10 H:\. . .\ConrHomes\RhoCarriIlo\AHDA .v02 Draft Section 6.5 Remedies Cumulative. Subject to Section 7,13 below, no right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other right, power or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other right, .power and remedy given hereunder or now or hereafter existing at law or in equity. Section 6.6 No Waiver. (a) No delay or omission of the Beneficiary to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy, or shall be construed to be a waiver of any such Event of Default or acquiescence therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from time to time and as often as may be deemed expeditious by the Beneficiary. No consent or waiver, expressed or implied, by the Beneficiary to any breach by the Trustor in the performance of the obligations hereunder shall be deemed or construed to be a consent to or waiver of obligations of the Trustor hereunder. Failure on the part of the Beneficiary to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Beneficiary of its right hereunder or impair any rights, power or remedies consequent on any Event of Default by the Trustor. (b) If the Beneficiary (i) grants forbearance or an extension of time for the payment of any sums secured hereby, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the granting of any easement or other right affecting the Security, or (iv) makes or consents to any agreement subordinating the lien hereof, any such act or omission shall not release, discharge, modify, change or affect the obligations under this Deed of Trust, or any other obligation of the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co- signer, endorser, surety or guarantor (unless expressly released); nor shall any such act or omission preclude the Beneficiary from exercising any right, power or privilege herein granted or intended to be granted in any Event of Default then made or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by the Beneficiary shall the lien of this Deed of Trust be altered thereby. Section 6.7 Suits to Protect the Security. The Beneficiary shall have power to (a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Security and the rights of the Beneficiary as may be unlawful or any violation of this Deed of Trust, (b) preserve or protect its interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment, rule or order would impair the Security thereunder or be prejudicial to the interest of the Beneficiary. Rancho Carrillo Affordable Housing Development Agreement 01 /20/98 G-1 1 H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft Section 6.8 Trustee May File Proofs of Claim. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting the Trustor, its creditors or its property, the Beneficiary, to the extent permitted by law, shall be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of the Beneficiary allowed in such proceedings and for any additional amount which may become due and payable by the Trustor hereunder after such date. Section 6.9 Waiver. The Trustor waives presentment, demand for payment, notice of dishonor, notice of protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in taking any action to collect any sums owing under the Note or in proceedings against the Security, in connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust. ARTICLE 7 MI SCELLAN EO US Section 7.1 Amendments. This instrument cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by Beneficiary and Trustor. Section 7.2 Reconveyance by Trustee. Upon written request of Beneficiary stating that all sums secured hereby have been paid or forgiven, and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor of Trustee's.reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto. Section 7.3 Notices. If at any time after the execution of this Deed of Trust it shall become necessary or convenient for one of the parties hereto to serve any notice, demand or communication upon the other party, such notice, demand or communication shall be in writing and shall be served personally or by depositing the same in the registered United States mail, return receipt requested, postage prepaid and (1 1 if intended for Beneficiary shall be addressed to: Continental Ranch, Inc. Attn: Dave Lother 12636 High Bluff Drive, Suite 300 San Diego, CA 921 30 and (2) if intended for Trustor shall be addressed to: Rancho Carrillo Affordable Housing Development Agreement 01 120198 G-12 H:\. . .\ContHomes\RhoCarriIlo\AHDA.vOZ Draft Carlsbad Family Housing Partnershp, a California Limited Partnership c/o Barone Galasso and Associates, Inc. Attn: Michael B. Galasso 600 West Broadway, Suite 1070 San Diego, California 92 101 and, following notice to Beneficiary that Boston Capital (or its affiliate) has become a limited partner of the Trustor, with a copy to: Boston Capital Any notice, demand or communication shall be deemed given, received, made or communicated on the date personal delivery is effected or, if mailed in the manner herein specified, on the delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either party may change its address at any time by giving written notice of such change to Beneficiary or Trustor as the case may be, in the manner provided herein, at least ten (1 0) days prior to the date such change is desired to be effective. Section 7.4 Captions. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust. Section 7.5 Invalidity of Certain Provisions. Every provision of this Deed of Trust is intended to be severable. In the event any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or other body of competent jurisdiction, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid or applied to the full payment of that portion of the debt which is not secured or partially secured by the lien of this Deed of Trust. Section 7.6 Governing Law. This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California. Section 7.7 Gender and Number. In this Deed of Trust the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires. Rancho Carrillo Affordable Housing Development Agreement 01/20/98 G-I 3 H:\.. .\ContHomes\RhoCarriIlo\AHDA. vOZ Draft Section 7.8 Deed of Trust, Mortgage. Any reference in this Deed of Trust to a mortgage shall also refer to a deed of trust and any reference to a deed of trust shall also refer to a mortgage. Section 7.9 Actions. Trustor agrees to appear in and defend any action or proceeding purporting to affect the Security. Section 7.10 Substitution of Trustee. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Trust. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the Property is situated, shall be conclusive proof of proper appointment of the successor trustee. Section 7.1 1 Statute of Limitations. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law. Section 7.12 Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law the Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trust or of any action of proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written. TRUSTOR: CARLSBAD FAMILY HOUSING PARTNERSHIP, a California limited partnership By: Housing Opportunities, Inc., a California nonprofit public benefit corporation, Managing General Partner By: Title: Rancho Carrillo Affordable Housing Development Agreement 01 /20/98 G-14 H:\. ..\ContHomes\RhoCerrillo\AHDA.vOZ Draft By: Barone Galasso and Associates, Inc., a Delaware corporation, Co-General Partner By: Title: STATE OF CALIFORNIA 1 COUNTY OF SAN DIEGO 1 ss. On , 19 , before me, Notary Public in and for said State, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s). whose name(s) idare subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s1 on the instrument, the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and.officia1 seal. Signature Rancho Carrillo Affordable Housing Development Agreement oii2019a G-15 (Seal) H:\.. .\ContHomes\AhoCarriIlo\AHDA.vOZ Draft EXHIBIT H Form of Estoppel Certificate of Completion Recording Requested By And When Recorded Mail To: City of Carlsbad Housing and Redevelopment Department 2965 Roosevelt Street, Suite B Carlsbad, CA 92008 Attn: Housing and Redevelopment Director No fee for recording pursuant to Government Code Section 27383 TOPPEL CFRTIFICATE OF COMPLETION Pursuant to Section 7.8 of the Affordable Housing Development Agreement (the "Agreement") by and among the City of Carlsbad, a municipal corporation (the "City"), Carlsbad Family Housing Partnership, a California limited partnership (the "Borrower"), and Continental Ranch, Inc., a Delaware corporation (the "Master Developer"), the City certifies that the Borrower has met its obligations under Article 7 of the Agreement. This Estoppel Certificate of Completion shall not constitute evidence of compliance with or satisfadon of any obligation of the Borrower to any holder of a deed of trust securing money loaned to finance the Development or any part thereof and shall not be deemed either a notice of completion under the California Civil Code or a certificate of occupancy. City of Carlsbad, a municipal corporation By: Its: [Notarize signature and attach legal description] Rancho Canillo Estoppel Certlflcafe of Completion 1 II 5/98 H-2 H:\,..\ContHomea\RhoCarriilo\CityLoan.EatpCert Draft Rancho Carrillo Affordable Housing Development Agreement oinoiga EXHIBIT H Form of Estoppel Certificate of Completion H-1 H:\ ... \ContHomes\AhoCarrillo\AHDA.v02 Draft 9.10 Notification of Litigation. Borrower shall promptly notify the City and the Master Developer in writing of any litigation affecting the Borrower or the Development and of any claims or disputes that involve a material risk of litigation, which may materially adversely affect the City Loan or the Master Developer Loan. 9.1 1 Indemnity. Borrower shall.defend, indemnify, save and hold the City, its council members, officers, employees, agents, and contractors, and the Master Developer, its directors, officers, employees, agents, and contractors, utilizing attorneys approved by the City and the Master Developer, harmless from any and all claims, actions, demands, costs, expenses, and attorneys' fees, arising out of, attributable to, or otherwise occasioned, in whole or in part, by any act or omission of Borrower arising from or related to the Development after the date of Borrower's acquisition of fee title to the Land, except as such claim may arise from the negligence or wilful misconduct of an indemnified party. 9.12 Hazardous Materials. (a) The Borrower shall keep and maintain the Development in compliance with, and shall not cause or permit the Development to be in violation of, any federal, state, or local laws, ordinances, or regulations relating to industrial hygiene or to the environmental conditions on or under the Development, including (but not limited to) soil and ground water conditions. The Borrower shall not use, generate, manufacture, store, or dispose of, on, under, or about the Development, or transport to or from the Development, any flammable explosives, radioactive materials, hazardous wastes, toxic substances, or related materials, including (without limitation) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes, I' "hazardous materials," or "toxic substances" under any applicable federal or state laws or regulations (collectively referred to as "Hazardous Materials") except such of the foregoing as may be customarily and lawfully kept and used in and about multifamily residential property. (b) The Borrower shall immediately advise the City and the Master Developer in writing if at any time it receives written notice of (i) any and all enforcement, cleanup, removal, or other governmental or regulatory actions instituted, completed, or threatened against the Borrower or the Development pursuant to any applicable federal, state, or local laws, ordinances, or regulations relating to any Hazardous Materials ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party against the Borrower or the Development relating to damage, contribution, cost recovery compensation, loss, or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above are referred to as "Hazardous Materials Claims"); and (iii) the Borrower's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Development that could cause the Development or any part thereof to be classified as "border-zone property" under California Health and Safety Code Sections 25220 a m. or corresponding regulations, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability, or use of the Development under any Hazardous Materials Law. (c) The Borrower shall permit the City and the Master Developer to join and participate in, as a party if either so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials. The Borrower shall indemnify, defend (with counsel reasonably chosen by the City and the Master Developer, at the option of the City or the Master Developer), and hold harmless the City, and the Agency, and their respective council members, board Rancho Carrillo Affordable Housing Development Agreement 01/20/98 .19- H:\ ... \ContHornes\RhoCarrillo\AHDA.vOZ Draft members, officers, agents, and employees, and the Master Developer and its directors, officers, employees and agents, from and against any loss, damage, cost, expense, or liability directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence of Hazardous Materials on or under the Development, including (without limitation): (i) all foreseeable consequential damages; (iil the costs of any required or necessary repair, cleanup, or detoxification of the Development and the preparation and implementation of any closure, remedial, or other required plans; and (iii) all reasonable costs and expenses incurred by the City or the Master Developer, or the City or the Master Developer in connection with clauses (i) and (ii), including (but not limited to) reasonable attorneys' fees. This paragraph shall survive termination of this Agreement. (d) Without the prior written consent of the City and the Master Developer, which shall not be unreasonably withheld, the Borrower shall not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Development, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in the City's or the Master Developer's reasonable judgment, impair the value of the City's or the Master Developer's security hereunder; provided, however, that the City's or the Master Developer's prior consent shall not be necessary in the event that the presence of Hazardous Materials on, under, or about the Development either poses an immediate threat to the health, safety, or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain the City's or the Master Developer's consent before taking such action, provided that in such event the Borrower shall notify the City and the Master Developer as soon as practicable of any action so taken. The City and the Master Developer each agrees not to withhold its consent, where such consent is required hereunder, if either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) the Borrower will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) the Borrower establishes to the reasonable satisfaction of the City and the Master Developer that there is no reasonable alternative to such remedial action which would result in less impairment of the City:s or the Master Developer's security hereunder; or (iv) the action has been agreed to by the City and the Master Developer. (e) The Borrower hereby acknowledges and agrees that (i) this Section 9.12 is intended as the City's and the Master Developer's written request for information (and the Borrower's response) concerning the environmental condition of the Development as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Agreement (together with any indemnity obligation applicable to a breach of any such representation and warranty) with respect to the environmental condition of the Development is intended by the Parties to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. 9.13 Non-Discrimination. The Borrower covenants by and for itself and its successors and assigns that there shall be no discrimination against or segregation of a person or of a group of persons on account of race, color, religion, creed, sex, sexual orientation, marital status, ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Development, nor shall the Borrower or any person claiming under or through the Borrower establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, Rancho Carrillo Affordable Housing Development Agreement 01/20/98 -20- H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft subtenants, sublessees or vendees in the Development. The foregoing covenant shall run with the land and shall survive termination of this Agreement. 9.14 Mandatory Language in All Subsequent Deeds, Leases and Contracts. The Borrower and its agents shall not, in the selection or approval of tenants or provision of services or in any other matter, discriminate against any person or group of persons on the grounds of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, age, or disability. All deeds, contracts, or leases made or entered into by Borrower, its successors or assigns, as to any portion of the Development shall contain the following language: (a) In Deeds: "Grantee herein covenants by and for itself, its successors and assigns that there shall be no discrimination against or segregation of a person or of a group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property herein conveyed nor shall the grantee or any person claiming under or through the grantee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the property herein conveyed. The foregoing covenant shall run with the land". (b) In Contracts: "There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin or ancestry in the sale, transfer or use of the property". (c) In Leases: "The lessee herein covenants by and for the lessee and lessee's heirs, personal representatives and assigns and all persons claiming under the lessee or through the lessee that this lease is made subject to the condition that there shall be no discrimination against or segregation of any person or of a group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin or ancestry in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein leased nor shall the lessee or any person claiming under or through the lessee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants, or vendees in the land herein leased". 9.15 Records. (a) The Borrower shall maintain complete, accurate, and current records pertaining to the Development for a period of five (5) years after the creation of such records, and shall permit any duly authorized representative of the City or the Master Developer to inspect Rancho Carrillo Affordable Housing Development Agreement 01120198 H:\ ... \ContHomer\RhoCarrillo\AHDA.vOZ Draft I. and copy records, including records pertaining to income and household size of residents of the Development. Such records shall include records regarding the occupancy and rent levels of the residential units in the Development, as well as records that accurately and fully show the date, amount, purpose, and payee of all expenditures drawn from City Loan funds and Master Developer Loan funds. Such records shall also include all invoices, receipts, and other documents related to expenditures from the City Loan funds and the Master Developer Loan funds. Records must be kept accurate and current. (b) The City or the Master Developer shall notify the Borrower of any records it deems insufficient. The Borrower shall have fifteen (1 5) calendar days after the receipt of such a notice to correct any deficiency in the records specified by the City or the Master Developer in such notice, or if a period longer than fifteen (1 5) days is reasonably necessary to correct the deficiency, then the Borrower shall begin to correct the deficiency within fifteen (1 5) days and correct the deficiency as soon as reasonably possible. (c) The Borrower shall promptly comply with all requirements or conditions of the City Loan Documents and the Master Developer Loan Documents relating to notices, extensions, and other events required to be reported or requested. The Borrower shall promptly supply, upon the request of the City or the Master Developer, any and all information and documentation involving the Development. 9.16 Transfers. (a) For purposes of this Agreement, "Transfer" shall mean any sale, assignment, or transfer, whether voluntary or involuntary, of (i) any rights and/or duties under this Agreement, and/or (ii) any interest in the Development, including (but not limited to) a fee simple interest, a joint tenancy interest, a life estate, a partnership interest, a leasehold interest, a security interest, or an interest evidenced by a land contract by which possession of the Development is transferred and the Borrower retains title. The term "Transfer" shall exclude the leasing of any single Unit in the Development to an occupant in compliance with the City Regulatory Agreement. (b) No Transfer shall be permitted without the prior written consent of the City and the Master Developer. Pursuant to Sections 4.3(f) and 6.3(e) above, the City Loan or the Master Developer Loan shall automatically accelerate and be due in full upon any unauthorized Transfer. (c) The City and the Master Developer hereby approve any subsequent Transfer of the Development from the Borrower to the nonprofit, managing general partner and co-general partner of the Borrower, provided that the transferees expressly assume the obligations of the Borrower under this Agreement, the City Loan Documents, the Master Developer Purchase Money Loan Documents, and the Master Developer Loan Documents, utilizing a form of assignment and assumption agreement approved by the City and the Master Developer for their respective Loan Documents. (d) The City approves the grant of the security interests in the Development described in Section 2.12 [Construction and Permanent Financing] above and evidenced by the Master Developer Purchase Money Deed of Trust and the Master Developer Loan Deed of Trust. Rancho Carrillo Affordable Housing DeVelOpmerIt Agreement o 112019a .2 2- H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft (e) The Master Developer approves the grant of the security interests in the Development described in Section 2.12 [Construction and Permanent Financing] above and evidenced by the City Loan Deed of Trust. ARTICLE 10 Default and Remedies 10.1 Events of Default. Each of the following shall constitute an "Event of Default" by Borrower under this Agreement: (a) Failure to Construct. Subject to Section 11.2, failure of Borrower to construct all of the Development within the time set forth in Article 7 above. (b) Failure to Make Payment. Failure to make prompt payments of the principal and interest on the City Note or the Master Developer Note when due and such failure having continued uncured for thirty (30) days after receipt of written notice thereof by the Borrower from the City or the Master Developer. (c) Breach of Covenants. Failure by Borrower to duly perform, comply with, or observe any of the conditions, terms, or covenants of any of the City Loan Documents or the Master Developer Loan Documents, and such failure having continued uncured for thirty (30) days after receipt of written notice thereof by the Borrower from the City or the Master Developer or, if the breach cannot be cured within thirty (30) days, the Borrower shall not be in breach so long as Borrower is diligently undertaking to cure such breach; provided, however, that if a different period or notice requirement is specified under any other section of this Article 10, the specific provisions shall control. (d) Default Under Other Loans. Failure to make any payment or perform any of Borrower's covenants, agreements, or obligations under the Construction and Permanent Financing loans, following expiration of all applicable notice and cure periods. (e) Insolvency. A court having jurisdiction shall have made or entered any decree or order (i) adjudging Borrower to be bankrupt or insolvent, (ii) approving as properly filed a petition seeking reorganization of Borrower or seeking any arrangement for Borrower under the bankruptcy law or any other applicable debtor's relief law or statute of the United States or any state or other jurisdiction, (iii) appointing a receiver, trustee, liquidator, or assignee of Borrower in bankruptcy or insolvency or for any of their properties, or (iv) directing the winding up or liquidation of Borrower, if any such decree or order described in clauses (i) to (iv), inclusive, shall have continued unstayed or undischarged for a period of ninety (90) days; or Borrower shall have admitted in writing its inability to pay its debts as they fall due or shall have voluntarily submitted to or filed a petition seeking any decree or order of the nature described in clauses (i) to (iv), inclusive. The occurrence of any of the events of default in this paragraph shall act to accelerate automatically, without the need for any action by the City or the Master Developer, the indebtedness evidenced by the City Note or the Master Developer Note. The occurring of any of the events described in this subsection with respect to a general partner of the Borrower shall also constitute an Event of Default hereunder. Rancho Carrillo Affordable Housing Development Agreement 01/20/98 -23- H:\. , .\ContHomes\RhoCarrillo\AHDA.v02 Draft (f) Assignment; Attachment. Borrower shall have assigned its assets for the benefit of its creditors or suffered a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon shall have been returned or released within ninety (90) days after such event or prior to sooner sale pursuant to such sequestration, attachment, or execution. The occurrence of any of the events of default in this paragraph shall act to accelerate automatically, without the need for any action by the City or the Master Developer, the indebtedness evidenced by the City Note or the Master Developer Note. (9) Suspension; Termination. Borrower shall have voluntarily suspended its business or, if Borrower is a partnership, the partnership shall have been dissolved or terminated, other than a technical termination of the partnership for tax purposes. (h) Liens on Development. There shall be filed any claim of lien (other than liens approved in writing by the City and the Master Developer) against the Development or any part thereof, or any interest or right made appurtenant thereto, or the service of any notice to withhold proceeds of the City Loan or the Master Developer Loan and the continued maintenance of said claim of lien or notices to withhold for a period of twenty (20) days without discharge or satisfaction thereof or provision therefor satisfactory to the City and the Master Developer. In the event that Borrower is diligently working to remove a claim of lien or to remove a notice to withhold proceeds and neither the City's interests under the City Loan Documents nor the Master Developer's interests under the Master Developer Loan Documents are imminently threatened, neither the City nor the Master Developer shall declare a default under this subsection. (i) Condemnation. The condemnation, seizure, or appropriation of all or the substantial part of the Land and the Development. (j) Unauthorized Transfer. Any Transfer other than as permitted by Article 8. (k) Representation or Warranty Incorrect. Any Borrower representation or warranty contained in this Agreement, or in any application, financial statement, certificate, or report submitted to the City or the Master Developer in connection with any of the City Loan Documents or the Master Developer Loan Documents, proving to have been incorrect in any material respect when made. 10.2 Limited Partner Cure Periods. (a) Notwithstanding anything to the contrary contained in this Agreement, the City Loan Documents, or the Master Developer Loan Documents, and in addition to any other cure provisions contained in this Agreement, the limited partner of the Borrower shall have the right but not the obligation to cure any defaults of the Borrower hereunder, and the City and the Master Developer agrees to accept cures tendered by the limited partner on behalf of the Borrower within the cure periods described below: the limited partner of Borrower shall have the right to cure all monetary and non-monetary defaults within sixty (60) days after receipt of notice thereof. However, if a default is non-monetary and is not reasonably capable of being cured within sixty (60) days or if the limited partner notifies the City and the Master Developer that it is in the process of removing the managing general partner of the Borrower (as such process may be stayed by injunction, bankruptcy or similar proceedings), the limited partner shall have such additional tine as is reasonably necessary to cure such default or remove the managing general partner, provided the limited partner has commenced and is Rancho Carrillo Affordable Housing Development Agreement 01/20/98 -24- H:\ ... \CantHomes\RhoCarrillo\AHDA.vOZ Draft diligently proceeding to cure such default or remove the managing general partner, as applicable (taking into account the effect of injunction, bankruptcy or similar proceedings). (b) If, after the time provided in Sections 10.1 and 10.2, Borrower or the limited partner has not cured the default, the City or the Master Developer may apply to any court, state or federal, for specific performance of this Agreement or an injunction against any violation of this Agreement, or any other remedies at law or in equity or any such other actions as shall be necessary or desirable so as to correct non-compliance with this Agreement. 10.3 Remedies. The occurrence of any Event of Default following the expiration of all applicable notice and cure periods will, either at th2 option of the City or the Master Developer, or automatically where so specified, relieve the City and the Master Developer of any obligation to make or continue the City Loan or the Master Developer Loan and, subject to Section 1 1.16 below, shall give the City or the Master Developer the right to proceed with any and all remedies set forth in this Agreement, the City Loan Documents or the Master Developer Loan Documents, respectively, including but not limited to the following: (a) Acceleration of Note. The City and the Master Developer shall each have the right to cause all indebtedness of the Borrower to each of the City or the Master Developer, respectively, under this Agreement and their respective City Note or Master Developer Note, together with any accrued interest thereon, to become immediately due and payable. The Borrower waives all right to presentment, demand, protest or notice of protest or dishonor. The City or the Master Developer may each proceed to enforce payment of the indebtedness to each of them, respectively, and to exercise any or all rights afforded to the City or the Master Developer as a creditor and secured party under the law including the Uniform Commercial Code, including foreclosure under the City Loan Deed of Trust or the Master Developer Loan Deed of Trust. The Borrower shall be liable to pay the City or the Master Developer on demand all expenses, costs and fees (including, without limitation, attorney's fees and expenses) paid or incurred by the City or the Master Developer, respectively, in connection with the collection of their respective Loan and the preservatiop, maintenance, protection, sale, or other disposition of the security given for their respective Loan. (b) Specific Performance. The City and the Master Developer shall each have the right to mandamus or other suit, action or proceeding at law or in equity to require Borrower to perform its'obligations and covenants under their respective City Loan Documents or Master Developer Loan Documents, or to enjoin acts on things which may be unlawful or in violation of the provisions of the City Loan Documents or the Master Developer Loan Documents, respectively. (c) Right to Cure at Borrower's Expense. The City and the Master Developer shall each have the right to cure any monetary default by Borrower under a loan other than their respective Loan. The Borrower agrees to reimburse the City or the Master Developer for any funds advanced by the City or the Master Developer to cure a monetary default by Borrower upon demand therefor, together with interest thereon at the rate of three percent (3%) per annum from the date of expenditure until the date of reimbursement. 10.4 Right of Contest. Borrower shall have the right to contest in good faith any claim, demand, levy, or assessment the assertion of which would constitute an Event of Default Rancho Carrillo Affordable Housing Development Agreement 01/20/98 ,25- H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft hereunder. Any such contest shall be prosecuted diligently and in a manner unprejudicial to the City and the Master Developer or the rights of the City or the Master Developer hereunder. 10.5 Remedies Cumulative. Subject to Section 1 1.16 below, no right, power, or remedy given to the City or the Master Developer by the terms of this Agreement, the City Loan Documents, or the Master Developer Loan Documents, respectively, is intended to be exclusive of any other right, power, or remedy; and each and every such right, power, or remedy shall be cumulative and in addition to every other right, power, or remedy given to the City or the Master Developer by the terms of any such instrument, or by any statute or otherwise against Borrower and any other person. Neither the failure nor any delay on the part of the City or the Master Developer to exercise any such rights and remedies shall operate as a waiver thereof, nor shall any single or partial exercise by the City or the Master Developer of any such right or remedy preclude any other or further exercise of such right or remedy, or any other right or remedy. 10.6 Waiver of Terms and Conditions. The City Manager for the City or the Division President for the Master Developer may at his or her discretion waive in writing any of the terms and conditions of this Agreement for the benefit of the City or the Master Developer, respectively, without the Borrower completing an amendment to this Agreement, No waiver of any default or breach by Borrower hereunder shall be implied from any omission by the City or the Master Developer to take action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the waiver, and such waiver shall be operative only for the time and to the extent therein stated. Waivers of any covenant, term, or condition contained herein shall not be construed as a waiver of any subsequent breach of the same covenant, term, or condition. The consent or approval by the City or the Master Developer to or of any act by Borrower requiring further consent or approval shall not be deemed to waive or render unnecessary the consent or approval to or of any subsequent similar act. The exercise of any right, power, or remedy shall in no event constitute a cure or a waiver of any default under this Agreement or the respective Loan Documents of the City or the Master Developer, nor shall it invalidate any act done pursuant to notice of default, or prejudice the City or the Master Developer in the exercise of any right, power, or remedy hereunder or under their respective Loan Documents, unless in the exercise of any such right, power, or remedy all obligations of Borrower to City or the Master Developer, respectively, are paid and discharged in full. 10.7 Removal of Managing General Partner by Limited Partner. The City and the Master Developer agree that the removal of the managing general partner of the Borrower under this Agreement by the limited partner of Borrower pursuant to the terms of the Borrower’s limited partnership agreement will not constitute a default under any of the City Loan Documents or the Master Developer Loan Documents or allow acceleration of the City Loan or the Master Developer Loan. If any other entity becomes the managing general partner of Borrower, the limited partner shall obtain the approval of the City and the Master Developer of such replacement managing general partner within six 16) months thereafter, which approval shall not be unreasonably withheld or delayed. Rancho Carrillo Affordable Housing Development Agreement 01/20/98 -26- H:\ ... \ContHornes\RhoCarriIlo\AHOA.v02 Draft ARTICLE 11 Miscellaneous 1 1.1 Time. Time is of the essence in this Agreement. 1 1.2 Force Majeure. Performance by any Party hereunder shall not be deemed to be in default where defaults are due to war; insurrection; strikes; lock-outs; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; governmental restrictions or priority; litigation (including suits filed by third parties concerning or arising out of this Agreement); weather or soils conditions which, in the opinion of the Borrower's contractor, will necessitate delays; inability to secure necessary labor, materials or tools; delays of any contractor, sub-contractor or supplier; acts of the other Party; acts or failure to act of any public or governmental agency or entity (other than the acts or failure to act of the City or the Master Developer); or any other causes (other than Borrower's inability to obtain financing for the Development) beyond the control or without the fault of the Party claiming an extension of time to perform. Times of performance under this Agreement may also be extended in writing by the City, the Master Developer and the Borrower. 1 1.3 Notices. All notices, demands and communications between the Borrower, the Master Developer and the City shall be sufficiently given and shall not be deemed given unless dispatched by certified mail, postage prepaid, return receipt requested, or delivered by express delivery service with a delivery receipt, to the principal officers of the Borrower, the Master Developer and the City as follows: Borrower: City: Master Developer: CARLSBAD FAMILY HOUSING PARTNERSHIP 70 Barone Galasso and Associates, Inc. Attn: Michael B. Galasso 600 West Broadway, Suite 1070 San Diego, California 921 01 CITY OF CARLSBAD Housing and Redevelopment Department Attn: Housing and Redevelopment Director 2965 Roosevelt Street, Suite B Carlsbad, California 92008-2389 CONTINENTAL RANCH, INC. Attn: Dave Lother 12636 High Bluff Drive, Suite 300 San Diego, California 921 30 Such addresses may be changed by notice to the other Party given in the same manner as provided above. Notice shall be deemed to have been effective on the date shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was returned as undelivered. Rancho Carrillo Affordable Housing Development Agreement 0112Ol98 .27- H:\. ..\ContHomes\RhoCarrillo\AHDA.v02 Draft 1 1.4 Financial Statements; Rights of Inspection. The Borrower shall deliver copies of its audited financial statements to the City and the Master Developer annually promptly following completion of preparation of such statements. The City and the Master Developer shall each have the right, upon reasonable notice to Borrower, to inspect Borrower's books and records related to the Development. 1 1.5 Attorneys' Fees. If any Party brings a legal or administrative action or proceeding to enforce, protect or establish any right or remedy hereunder or under any of the City Loan Documents or the Master Developer Loan Documents, the prevailing Party shall be entitled to recover from the other Party its costs of suit and reasonable attorneys' fees which shall be fixed by the court. 1 1.6 No Third Parties Benefitted. Boston Capital is the sole third party beneficiary of this Agreement, and no person or persons other than the Borrower, the City, the Master Developer, and Boston Capital shall have any right of action hereon. 1 1.7 Actions. The City or the Master Developer shall each have the right to commence, appear in, or defend any action or proceeding purporting to affect the rights, duties, or liabilities of the Parties hereunder, or the disbursement of any proceeds of the City Loan or the Master Developer Loan. 11.8 Signs. The Borrower agrees that the City and the Master Developer may place signs mutually satisfactory to the Borrower, the City and the Master Developer upon the Development at locations selected by the Borrower, the City, and the Master Developer, advising of the financing of the Development by the City and the Master Developer. The City and the Master Developer may also announce such placement through press releases to newspapers and trade publications. 1 1.9 Successors and Assigns. The terms hereof shall be binding upon and inure to the benefit of the successors and assigns of the Parties hereto; provided, however, that no assignment of Borrower's rights hereunder shall be made, voluntarily or by operation of law, without the prior written consent of the City and the Master Developer, and that any such assignment without such consents shall be void. 1 1.10 Construction of Words. Except where the context otherwise requires, words imparting the singular number shall include the plural number and vice versa, words imparting persons shall include firms, associations, partnerships and corporations, and words of either gender shall include the other gender. 1 1.11 Partial Invalidity. If any provision of this Agreement shall be declared invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. 1 1.12 Governing Law. This Agreement, the City Loan Documents, the Master Developer Loan Documents, and other instruments given pursuant hereto shall be construed in accordance with and be governed by the laws of the State of California. Rancho Carrillo Affordable Housing Development Agreement 01/20/98 -28- H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft 1 1.13 Amendment. This Agreement may not be changed orally, but only by agreement in writing signed by the Borrower, the City and the Master Developer. 11.14 Captions and Headings. Captions and headings in this Agreement are for convenience of reference only, and are not to be considered in construing the Agreement. 1 1.15 Action by the City. Except as may be otherwise specifically provided herein, whenever any approval, notice, direction, consent, request, or other action by the City is required or permitted under this,Agreement, such action may be given, made, or taken by the City Manager, or by any person who shall have been designated in writing to the Borrower by the City Manager, without further approval by the City Council, and any such action shall be in writing. The City Manager is also hereby authorized to approve, on behalf of the City, requests by Borrower for reasonable extensions of time deadlines set forth in this Agreement. 1 1.16 Nonrecourse Obligations on City Loan. The Borrower shall not have any direct or indirect personal liability for payment of the principal of, or interest on, the City Note or the Performance of the covenants of Borrower under this Agreement, the City Regulatory Agreement, or the City Loan Deed of Trust. The sole recourse of the City with respect to the principal of, or interest on, the City Note and defaults by Borrower in the performance of its covenants under this Agreement, the City Regulatory Agreement, or the City Loan Deed of Trust shall be to the property described in the City Loan Deed of Trust. No judgment, or execution thereon, entered in any action, legal or equitable, on the City Note, this Agreement, the City Regulatory Agreement or the City Loan Deed of Trust shall be enforced personally against the Borrower but shall be enforced only against the property described in the City Loan Deed of Trust. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first written above. BORROWER: Date: CARLSBAD FAMILY HOUSING PARTNERSHIP, a California limited partnership By: Housing Opportunities, Inc., a California nonprofit public benefit corporation, Managing General Partner By: Title: By: Barone Galasso and Associates, Inc., a Delaware corporation, Co-General Partner By: Title: Rancho Carrillo Affordable Housing Development Agreement 01 /20/98 -29- H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Ora f t MASTER DEVELOPER: Date: CITY: Date: CONTINENTAL RANCH, INC., a Delaware corporation By: Title: By: Title: CITY OF CARLSBAD, a municipal corporation By: Its: APPROVED AS TO FORM: By: Ronald R. Ball City Counsel Rancho Cerrillo Affordable Housing Development Agreement 01 /20/98 -30- H:\ ... \ContHomes\AhoCarrillo\AHDA.v02 Draft EXHIBIT A Legal Description of the Land Rancho Carrillo Affordable Housinp Development Agreement 01 120198 A- 1 H:\.. .\ContHornes\RhoCarriIlo\AHDA.vOZ Dfaft EXHIBIT B Permitted Uses of Loan Proceeds (Borrower's Sources and Uses of Funds) Rancho Carrillo Affordable Housing Development Agreement 011zo19a B- 1 ti:\, . .\ContHomes\AhoCarriIlo\AHDA.v02 Draft W W U EXHIBIT C City Note $1 , 160,000 , 1998 Carlsbad, California FOR VALUE RECEIVED, CARLSBAD FAMILY HOUSING PARTNERSHIP, a California Limited Partnership ("Borrower"), promises to pay to the City of Carlsbad ("City"), or order, the principal sum of One Million One Hundred Sixty Thousand Dollars ($l,lSO,OOO), or so much thereof as is advanced to Borrower by the City pursuant to Section 4.6 of the Development Agreement (defined below), plus simple interest accruing at the rate of three percent (3%) per annum. 1. DeveloDment Aareement. This City Note is made pursuant to an Affordable Housing Development Agreement dated as of , 1998 (the "Development Agreement") by and among the Borrower, the City, and Continental Ranch, Inc., a Delaware corporation ("Master Developer"), and as contemplated by a Regulatory Agreement to be executed by the. Borrower and the City (the "City Regulatory Agreement"). 2. Jerm. The term of this City Note (the "Term") shall commence on the date of this City Note and shall end fifty-five (55) years from the date of recordation of the deed of trust securing the Permanent Loan (as defined in the Development Agreement) (the "Due Date"). 3. Amount and Time of Pavments. All amounts due under this City Note shall be due and payable as set forth in Section 4.3 of the Development Agreement. 4. PreDavment . Borrower shall have the right to prepay all or a portion of the principal and interest due under this City Note without any charge or penalty being made therefor. 5. Deed o f Trust. This City Note is secured by a deed of trust of even date herewith (the "City Loan Deed of Trust"). ' . 6. Acceler-. Upon the occurrence of a default under the Development Agreement, City Regulatory Agreement or City Loan Deed of Trust, and expiration of all applicable notice and cure periods (an "Event of Default"), the City shall have the right to accelerate the Due Date of this City Note and declare all of the unpaid principal and accrued interest immediately due and payable. Any failure by the City to pursue its legal and equitable remedies upon an Event of Default shall not constitute a waiver of the City's right to declare an Event of Default and exercise all of its rights under this City Note, the City Regulatory Agreement, the City Loan Deed of Trust, and the Development Agreement. Nor shall acceptance by the City of any payment provided for herein constitute a waiver of the City's right to require prompt payment of any remaining principal and interest owed. 7. No Offset. Borrower hereby waives any rights of offset it now has or may hereafter have against the City, its successors and assigns. c- 2 a. Waiver: Atto rnevs' Fees. Borrower and any endorsers or guarantors of this City Note, for themselves, their heirs, legal representatives, successors and assigns, respectively, severally waive diligence, presentment, protest, and demand, and notice of protest, dishonor and non-payment of this City Note, and expressly waive any rights to be released by reason of any extension of time or change in terms of payment, or change, alteration or release of any security given for the payments hereof, and expressly waive the right to plead any and all statutes of limitations as a defense to any demand on this City Note or agreement to pay the same,.and jointly and severally agree to pay all costs of collection when incurred, including reasonable attorneys' fees. If an action is instituted on this City Note, the undersigned promises to pay, in addition to the costs and disbursements allowed by law, such sum as a court may adjudge reasonable as attorneys' fees in such action. 9. Manner and Place of Pavment. All payments of principal and interest due under this City Note, as well as any additional payments set forth in the City Loan Deed of Trust, shall be payable in lawful money of the United States of America at the office of the City of Carlsbad, Housing and Redevelopment Department, 2965 Roosevelt Drive, Suite B, Carlsbad, California 92008, or such other address as the City may designate in writing. 10. Nonrecourse Ob liaation. The Borrower shall not have any direct or indirect personal liability for payment of the principal of, or interest on, this City Note, the Development Agreement,. or the City Regulatory Agreement or the performance of the covenants of the Borrower under the City Loan Deed of Trust securing this City Note. The sole recourse of the City with respect to the principal of, or interest on, the City Note and defaults by Borrower in the performance of its covenants under the City Loan Deed of Trust shall be to the property described in the City Loan Deed of Trust. No judgment, or execution thereon, entered in any action, legal or equitable, on the City Note or the City Loan Deed of Trust shall be enforced personally against the Borrower, but shall be enforced only against the property described in the City Loan Deed of Trust. BORROWER: Date: Rancho Carrillo Affordable Housing Oeve!opment Agreement 0 1 /20/98 CARLSBAD FAMILY HOUSING PARTNERSHIP, a California limited partnership By: Housing Opportunities, Inc., a California nonprofit public benefit corporation, Managing General Partner By: Title: By: Barone Galasso and Associates, Inc., a Delaware corporation, Co-General Partner By: Title: c-3 H:\. . .\ContHomes\RhoCarriIlo\AHDA.vOZ Dr8ft EXHIBIT D FORM OF CITY LOAN DEED OF TRUST RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Carlsbad Housing and Redevelopment Department 2965 Roosevelt Drive, Suite B Carlsbad, CA 92008 Attention: Housing and Redevelopment Director No fee for recording pursuant to Government Code Section 27383 CITY LOA N DEFD O F TRUST AND SECU RITY AGREE MENT THIS CITY LOAN DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust") is made as of this day of , 1998, by and among Carlsbad Family Housing Partnership, a California Limited Partnership ("Trustor"), First American Title Insurance Company, a California corporation ("Trustee"), and the City of Carlsbad, a municipal corporation ("Beneficiary"). FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's fee interest in the property located in the County of San Diego, State of California, that is described in the attached Exhibit A, incorporated herein by this reference (the "Property"). TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH Trustor's interest in all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including (without limiting the generality of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH Trustor's interest in any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of the Trustor now or hereafter affixed to or placed upon the Property; D-2 TOGETHER WITH Trustor's interest in all building materials and equipment now or hereafter delivered to said property and intended to be installed therein; TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to or used in connection with the Property; TOGETHER WITH Trustor's estate, interest, right, title, other claim or demand, of every nature, in and to such property, including the Property, both in law and in equity, including, but not limited to, all deposits made with or other security given by Trustor to utility companies, the proceeds from any or all of such property, including the Property, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire, any and all awards made for the taking by eminent domain or purchase in lieu thereof of the whole or any part of such property, including without limitation, any awards resulting from a change of grade of streets and awards for severance damages to the extent Beneficiary has an interest in such awards for taking as provided in Paragraph 4.1 herein; and TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to said building or buildings in any manner. All of the foregoing, together with the Property, is herein referred to as the "Security." To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever. FOR THE PURPOSE OF SECURING: (a) Payment of just indebtedness of Trustor to Beneficiary as set forth in the Note and the Development Agreement (both as defined in Article I below) until paid or cancelled. Said principal and other payments shall be due and payable as provided in the Note and the Loan Agreement. The Note, the Development Agreement, and the Regulatory Agreement (defined below), and all their terms are incorporated herein by reference, and this conveyance shall secure any and all extensions thereof, however evidenced; and (b) Payment of any sums advanced by Beneficiary to protect the Security pursuant to the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein; and (c) Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents (defined in Section 1.2 below). AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: Rancho Carrillo Affordable Housing Development Agreement oitzo/ga D-3 H:\ ... \ContHornes\RhoCarr1llo\AHDA.v02 Draft ARTICLE 1 DEFINITIONS In addition to the terms defined elsewhere in this Deed of Trust, the following terms shall have the following meanings in this Deed of Trust: Section 1.1 The term "Development Agreement" means that certain Affordable Housing Development Agreement by and among Trustor, Beneficiary, and Continental Ranch, Inc., a Delaware corporation, dated as of , 1998, providing for the Beneficiary to loan to the Trustor One Million One Hundred Sixty Thousand Dollars ($1 , 160,000) for the development on the Property of improvements. Section 1.2 The term "Bank Deed of Trust" means the Construction Deed of Trust with Assignment of Leases and Rents, Security Agreement and Fixture Filing to , as beneficiary, from Trustor, as trustor, securing a loan from , to Trustor in the amount of Seven Million Seven Hundred Thousand Dollars ($7,700,000). Section 1.3 The term "Loan Documents" means this Deed of Trust, the Note, the Development Agreement, and the Regulatory Agreement. Section 1.4 The term "Note" means the City Note in the principal amount of One Million One Hundred Sixty Thousand Dollars ($1 , 1 60,000) dated , 1998, executed by the Trustor in favor of the Beneficiary, the payment of which is secured by this Deed of Trust. (A copy of the Note is on file with the Beneficiary and terms and provisions of the Note are incorporated herein by reference.) Section 1.5 The term "Principal" means the aggregate of the amounts required to be paid under the Note. Section 1.6 The term "Regulatory Agreement" means the Regulatory Agreement by and between the Trustor and the Beneficiary of even date herewith. ARTICLE 2 MAINTENANCE AND MODIFICATION OF THE PROPERTY AND SECURITY Section 2.1 Maintenance and Modification of the Property by Trustor. The Trustor agrees that at all times prior to full payment of the sum owed under the Note, the Trustor will, at the Trustor's own expense, maintain, preserve and keep the Security or cause the Security to be maintained and preserved in good condition, subject to Article 4 below. The Trustor will from time to time make or cause to be made all repairs, replacements and renewals deemed proper and necessary by it. The Beneficiary shall have no responsibility in any of these matters or for the making of improvements or additions to the Security. Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all claims for labor done and for material and services furnished in connection with the Security, Rancho Carrillo Affordable Housing Development Agreement 01 120196 D-4 H:\ ... \ContHomea\AhoCarrillo\AHDA.vOZ Draft diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation of labor on the work or construction on the Security for a continuous period of thirty (30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Security of any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary as its agent (said agency being coupled with an interest) with the authority, but without any obligation, to file for record any notices of completion or cessation of labor or any other notice that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the Loan Documents; provided, however, that Beneficiary shall exercise its rights as agent of Trustor only in the event that Trustor shall fail to take, or shall fail to diligently continue to take, those actions as hereinbefore provided, after notice and expiration of all applicable cure periods. Notwithstanding anything to the contrary contained in this Deed of Trust, Trustor shall not be obligated to pay any claims for labor, materials or services which Trustor in good faith disputes and is diligently contesting provided that Trustor shall, at Beneficiary's written request, within thirty (30) days after the filing of any claim of lien, record in the Office of the Recorder of San Diego County, a surety bond in an amount 1 and '/2 times the amount of such claim item to protect against a claim of lien, or provide such other security reasonably satisfactory to Beneficiary. Section 2.2 Granting of Easements. Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in the nature of easements with respect to any property or rights included in the Security except those required or desirable for installation and maintenance of public utilities including, without limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law. As to these exceptions, Beneficiary will grant and/or direct the Trustee to grant such easements. ARTICLE 3 TAXES AND INSURANCE; ADVANCES Section 3.1 Taxes, Other Governmental Charges and Utility Charges. Trustor shall pay, or cause to be paid, prior to delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company which are or may become a lien affecting the Security or any part thereof; provided, however, if such taxes, assessments or charges may be paid in installments, Trustor may pay in such installments; and provided further, that Trustor shall not be required to pay and discharge any such tax, assessment, charge or levy so long as Trustor is contesting the legality thereof in good faith and by appropriate proceedings and Trustor has adequate funds to pay any liabilities contested pursuant to this Section 3.1. The provisions of this Section 3.1 shall not be construed to require that Trustor maintain a reserve account, escrow account, impound account or other similar account for the payment of future taxes, assessments, charges and levies, In the event that Trustor shall fail to pay any of the foregoing items required by this Section to be paid by Trustor, Beneficiary may (but shall be under no obligation to) pay the same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to fully pay such items within seven (7) business days after receipt of such notice or, alternatively, provides Rancho Carrillo Affordable Housing Development Agreement 01/20/98 D-5 H:\ ... \ContHornes\AhoCarrillo\AHDA.v02 Dmft Beneficiary with evidence Trustor is contesting such items in accordance with this Section. Any amount so advanced therefor by Beneficiary, together with interest thereon from the date of such advance at the maximum rate permitted by law, shall become an additional obligation of Trustor to the Beneficiary and shall be secured hereby, and Trustor agrees to pay all such amounts. Section 3.2 Provisions Respecting Insurance. Trustor agrees to provide insurance conforming in all respects to that required under the Loan Documents during the course of construction and following completion, and at all times until all amounts secured by this Deed of Trust have been paid obligations secured hereunder fulfilled, and this reconveyed. All such insurance policies and coverages shall be Trustor's sole cost and expense. Certificates of all of the above insurance policies, showing the full force and effect, shall be delivered to the Beneficiary upon demand therefor at any time prior to the Beneficiary's receipt of the entire Principal and all amounts secured by this Deed of Trust. Section 3.3 Advances. In the event the Trustor shall fail to maintain the full insurance coverage required by this Deed of Trust, the Beneficiary, after at least seven (7) days prior notice to Beneficiary, may (but shall be under no obligation to) take out the required policies of insurance and pay the premiums on the same; and all amounts so advanced therefor by the Beneficiary shall become an additional obligation of the Trustor to the Beneficiary (together with interest as set forth below) and shall be secured hereby, which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, shall bear interest from the date of the advance at the rate of six percent (6%) per annum. ARTICLE 4 DAMAGE, DESTRUCTION OR CONDEMNATION Section 4.1 Awards and Damages. All judgments, awards of damages, settlements and compensation made in connection with or in lieu of (1 1 taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (2) any damage to or destruction of the Property or any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property ("Funds") are hereby assigned to and shall be paid to the Beneficiary by a check made payable to the Beneficiary. Upon the occurrence of an Event of Default (as defined in the Development Agreement), the Beneficiary shall be entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All fire and standard risk or extended coverage (casualty) insurance proceeds shall be applied to the payment of the costs of repairing or rebuilding that part of the improvements on the Property damaged or destroyed if (i) the Trustor agrees in writing within ninety (90) days after payment of the proceeds of insurance that such repair or rebuilding is economically feasible, and (ii) each lender of an outstanding Construction and Permanent Loan (as defined in the Rancho Carrillo Affordable Housing Development Agreement 01120198 D-6 H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft Development Agreement) permits such repairing or rebuilding, provided that the extent of Trustor's obligation to restore the improvements shall be limited to the amount of the insurance proceeds. If the improvements are not repaired or rebuilt as provided in this Section 4.1, all such proceeds shall be applied to repayment of outstanding loans including the loan secured by this Deed of Trust, in the order of lien priority. Application of all or any part of the Funds collected and received by the Beneficiary or the release thereof shall not cure or waive any default under this Deed of Trust. The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior mortgage lender. ARTICLE 5 AGREEMENTS AFFECTING THE PROPERTY; FURTHER ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST Section 5.1 Other Agreements Affecting Property. The Trustor shall duly and punctually perform all terms, covenants, conditions and agreements binding upon it under the Loan Documents and any other agreement of any nature whatsoever now or hereafter involving or affecting the Security or any part thereof, Section 5.2 Agreement to Pay Attorneys' Fees and Expenses. In the event of any Event of Default (as defined below) hereunder, and if the Beneficiary should employ attorneys or incur other expenses for the collection of amounts due or the enforcement of performance or observance of an obligation or agreement on the part of the Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so incurred by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the indebtedness secured by the lien of this Deed of Trust, and shall bear interest from the date such expenses are incurred at the six percent (6%) per annum. Section 5.3 Payment of the Principal. The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth in the Note in the amounts and at the times set out therein. Section 5.4 Personal Property. To the maximum extent permitted by law, the personal property subject to this Deed of Trust shall be deemed to be fixtures and part of the real property and this Deed of Trust shall constitute a fixtures filing under the California Commercial Code. As to any personal property not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement under the California Commercial Code. Section 5.5 Financing Statement. The Trustor shall execute and deliver to the Beneficiary such financing statements pursuant to the appropriate statutes, and any other documents or instruments as are reasonably required to convey to the Beneficiary a valid perfected security interest in the Security. The Trustor agrees Rancho Carrillo Affordable Housing Development Agreement 0 1/20/98 D-7 H:\ ... \ContHomes\RhoCarrillo\AHOA.v02 Draft to perform all acts which the Beneficiary may reasonably request so as to enable the Beneficiary to maintain such valid perfected security interest in the Security in order to secure the payment of the Note in accordance with its terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdictions) as it shall deem appropriate from time to time in order to protect the security interest established pursuant to this instrument. Section 5.6 Operation of the Security. The Trustor shall operate the Security (and, in case of a transfer of a portion of the Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in full compliance with the Loan Documents. Section 5.7 Inspection of the Security. At any and all reasonable times upon seventy-two (72) hours' notice, subject to the rights of tenants, the Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and representatives shall have the right, without payment of charges or fees, to inspect the Security. Section 5.8 Nondiscrimination. The Trustor herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, age, disability, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Security, nor shall the Trustor itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Security. The foregoing covenants shall run with the IaQd. Section 5.9 Subordination. The lien of this Deed of Trust shall be subordinate to the lien of the Bank Deed of Trust, , securing the permanent loan(s) for the improvements on the Property. recorded concurrently herewith, and the lien of the deed(s) of trust to ARTICLE 6 EVENTS OF DEFAULT AND REMEDIES Section 6.1 Acceleration of Maturity. If an Event of Default, (as defined in the Development Agreement), shall have occurred and be continuing, then at the option of the Beneficiary, the amount of any payment related to the Event of Default and the unpaid Principal of the Note shall immediately become due and payable, upon written notice by the Beneficiary to the Trustor (or automatically where so specified in the Loan Documents), and no omission on the part of the Beneficiary to exercise such option when entitled to do so shall be construed as a waiver of such right. Rancho Carrillo Affordable Housing Development Agreement 01/20/98 D-8 H:\,. .\ContHomes\RhoCarrillo\AHDA.v02 Draft Section 6.2 The Beneficiary's Right to Enter and Take Possession. If an Event of Default shall have occurred and be continuing, the Beneficiary may: (a) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Security and take possession thereof (or any part thereof), in its own name or in the name of Trustee, and do any acts which it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security shall not cure or waive any Event of Default or Notice of Default (as defined below) hereunder or invalidate any act done in response to such Event of Default or pursuant to such Notice of Default and, notwithstanding the continuance in possession of the Security, Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; (b) commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (c) Deliver to Trustee a written declaration of default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of Default and Election to Sell"), which notice Trustee or Beneficiary shall cause to be duly filed for record in the official Records of San Diego County; or (d) Exercise all other rights and remedies provided herein, or in any other document or agreement now or hereafter evidencing, creating or securing all or any portion of the obligations 'secured hereby, or provided by law. Section 6.3 Foreclosure By Power of Sale. Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained following an Event of Default, the Beneficiary shall give notice to the Trustee (the "Notice of Sale") and shall deposit with Trustee this Deed of Trust which is secured hereby (and the deposit of which shall be deemed to constitute evidence that the unpaid principal amount of the Note is immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require, (a) Upon receipt of such notice from the Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Default and Election to Sell as then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such Notice of Default and Election to Sell and after Notice of Sale having been given as required by law, sell the Security, at the time and place of sale fixed by it in said Notice of Sale, whether as a whole or in separate lots or parcels or items as Trustee shall deem expedient and in such order as it may determine unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant Rancho Carrillo Alfordable Housing Development Agreement 01 120198 D-9 H:\. . .\ContHomes\RhoCarrtllo\AHDA.vOZ Dreft or warranty, express or implied. The recitals in such deed or any matters of facts shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale, and Trustor hereby covenants to warrant and defend the title of such purchaser or purchasers. (b) After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to payment of: (i) the unpaid Principal amount of the Note: (ii) all other amounts owed to Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the remainder, if any, to Trustor. (c) Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or ray, in its discretion, give a new Notice of Sale. Section 6.4 Receiver. If an Event of Default shall have occurred and be continuing, Beneficiary, as a matter of right and without further notice to Trustor or anyone claiming under the Security, and without. regard to the then value of’the Security or the interest of Trustor therein, shall have the right to ‘apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of entry as provided herein, and shall continue as such and exercise all such powers until the date of confirmation of sale of the Security, unless such receivership is sooner terminated. Section 6.5 Remedies Cumulative. Subject to Section 7.13 below, no right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other right, power or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and shall be in.addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity. Section 6.6 No Waiver. (a) No delay or omission of the Beneficiary to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy, or shall be construed to be a waiver of any such Event of Default or acquiescence therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from time to time and as often as may be deemed expeditious by the Beneficiary. No consent or waiver, expressed or implied, by the Beneficiary to any breach by the Trustor in the performance of the obligations hereunder shall be deemed or construed to be a consent to or waiver of obligations of the Trustor hereunder. Failure on the part of the Beneficiary to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure Aancho Carrillo Affordable Housing Development Agreement 01120/98 0-1 0 H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft continues, shall not constitute a waiver by the Beneficiary of its right hereunder or impair any rights, power or remedies consequent on any Event of Default by the Trustor. (b) If the Beneficiary (i) grants forbearance or an extension of time for the payment of any sums secured hereby, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (VI consents to the granting of any easement or other right affecting the Security, or (iv) makes or consents to any agreement subordinating the lien hereof, any such act or omission shall not release, discharge, modify, change or affect the obligations under this Deed of Trust, or any other obligation of the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co- signer, endorser, surety or guarantor (unless expressly released); nor shall any such act or omission preclude the Beneficiary from exercising any right, power or privilege herein granted or intended to be granted in any Event of Default then made or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by the Beneficiary shall the lien of this Deed of Trust be altered thereby. Section 6.7 Suits to Protect the Security. The Beneficiary shall have power to (a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Security and the rights of the Beneficiary as may be unlawful or any violation of this Deed of Trust, (b) preserve or protect its interest (as described in this Deed of Trust) in the Security, and {c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise .invalid, if the enforcement for compliance with such enactment, rule or order would impair the Security thereunder or be prejudicial to the interest of the Beneficiary. Section 6.8 Trustee May File Proofs of Claim. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting the Trustor, its creditors or its property, the Beneficiary, to the extent permitted by law, shall be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of the Beneficiary allowed in such proceedings and for any additional amount which may become due and payable by the Trustor hereunder after such date. Section 6.9 Waiver. The Trustor waives presentment, demand for payment, notice of dishonor, notice of protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in taking any action to collect any sums owing under the Note or in proceedings against the Security, in connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust. Rancho Carrillo Affordable Housing DEvdOpInent Agreement 01 120l98 D-1 1 H:\. . .\ContHornes\RhoCarriIlo\AHDA.v02 Draft ARTICLE 7 MISCELLANEOUS Section 7.1 Amendments. This instrument cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by Beneficiary and Trustor. Section 7.2 Reconveyance by Trustee. Upon written request of Beneficiary stating that all sums secured hereby have been paid or forgiven, and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor of Trustee's reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto. Section 7.3 Notices. If at any time after the execution of this Deed of Trust it shall become necessary or convenient for one of the parties hereto to serve any notice, demand or communication upon the other party, such notice, demand or communication shall be in writing and shall be served. personally or by depositing the same in the registered United States mail, return receipt requested, postage prepaid and (1) if intended for Beneficiary shall be addressed to: City of Carlsbad Housing and Redevelopment Department 2965 Roosevelt Drive, Suite B Carlsbad, CA 92008 Attention: Housing and Redevelopment Director and (2) if intended for Trustor shall be addressed to: Carlsbad Family Housing Partnershp, a California Limited Partnership c/o Barone Galasso and Associates, Inc. Attn: Michael B. Galasso 600 West Broadway, Suite 1070 San Diego, California 921 01 and, following notice to Beneficiary that Boston Capital (or its affiliate) has become a limited partner of the Trustor, with a copy to: Boston Capital Any notice, demand or communication shall be deemed given, received, made or communicated on the date personal delivery is effected or, if mailed in the manner herein specified, on the delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either party may change its address at any time by giving written notice of such change to Beneficiary Rancho Carrillo Affordable Housing Development Agreement 0 1 /20/98 D-12 H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft or Trustor as the case may be, in the manner provided herein, at least ten (10) days prior to the date such change is desired to be effective. Section 7.4 Captions. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust. Section 7.5 Invalidity of Certain Provisions. Every provision of this Deed of Trust is inteided to be severable. In the event any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or other body of competent jurisdiction, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid or applied to the full payment of that portion of the debt which is not secured or partially secured by the lien of this Deed of Trust. Section 7.6 Governing Law. This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California. Section 7.7 Gender and Number. In this Deed of Trust the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if, the context so requires. Section 7.8 Deed of Trust, Mortgage. Any reference in this Deed of Trust to a mortgage shall also refer to a deed of trust and any reference to a deed of trust shall also refer to a mortgage. Section 7.9 Actions. Trustor agrees to appear in and defend any action or proceeding purporting to affect the Security. Section 7.10 Substitution of Trustee. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Trust. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference Rancho Carrillo Affordable Housing Development Agreement oi12019a D-13 H:\ ... \ContHomes\RhoCarrillo\AHDA.vO2 Draft to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the Property is situated, shall be conclusive proof of proper appointment of the successor trustee. Section 7.1 1 Statute of Limitations. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law. Section 7.12 Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law the Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trust or of any action of proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. Section 7.1 3 Nonrecourse Obligations The Trustor shall not have any direct or indirect personal liability for payment of the principal of, or interest on, the Note or the performance of the covenants of the Trustor under. the Loan Documents. The sole recourse of the Beneficiary with respect to the principal of, or interest on, the Note and defaults by Trustor in the performance of its covenants under the Loan Documents shall be to the Security. No judgment, or execution thereon, entered in any action, legal or equitable, on the Loan Documents shall be enforced personally against the Trustor but shall be enforced only against the Security. IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written. TRUSTOR: CARLSBAD FAMILY HOUSING PARTNERSHIP, a California limited partnership By: Housing Opportunities, Inc., a California nonprofit public benefit corporation, Managing General Partner Rancho Carrillo Affordable Housing Development Agreement 01 noiga By: Title: By: Barone Galasso and Associates, Inc., a Delaware corporation, Co-General Partner By: Title: D-14 H:\. . .\ContHomes\RhoCarriIlo\AHOA.v02 Draft STATE OF CALIFORNIA 1 COUNTY OF SAN DIEGO 1 ) ss. On , 19-, before me, Notary Public in and for said State, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s1 is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument, the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Rancho Carrillo Affordable Housing Development Agreement 01/20/98 D-15 (Seal) H:\ ... \ContHornes\RhoCarrillo\AHDA.v02 Draft EXHIBIT E Recording requested by and when recorded, mail to: City of Carlsbad Housing and Redevelopment Departmeqt 2965 Roosevelt Street, Suite B Carlsbad, CA 92008 Attn: Housing and Redevelopment Director No fee for recording pursuant to Government Code Section 27383. CITY REGULATORY AGREEMENT (Rancho Carrillo Development - Phase 1) This City Regulatory Agreement is made this day of , 1998, by and between the City of Carlsbad, a municipal corporation (the "City"), and Carlsbad Family. Housing Partnership, a California Limited Partnership, (the "Borrower"). RECITALS A. The Borrow er has a fee interest in a parcel of real property located in the City of Carlsbad as more particularly described in Exhibit A attached to this Agreement. The Borrower's fee interest in the real property is referred to as the "Property" in this City Regulatory Agreement. The Borrower intends to develop one hundred sixteen (1 16) units of multi-family housing (the "Development") on the Property. B. To assist the Borrower in the development of the Development, the City has agreed to make a loan to the Borrower in the amount One Million One Hundred Sixty Thousand Dollars ($1 , 160,000) (the "City Loan"). The City Loan is being made available in order to help achieve financial feasibility for the Development and to provide units in the Development which are affordable to Low Income Households. C. As a condition of the City Loan, the City has required the Borrower to maintain all one hundred sixteen (1 16) of the Development units as affordable to Low-Income Households, excluding any units for resident managers. D. The purpose of this Regulatory Agreement is to regulate and restrict the occupancy and rents of the Development. The covenants in this City Regulatory Agreement are intended to run with the land and be binding on the Borrower and its successors and assigns. In consideration of their mutual agreements, the Borrower and City agree as follows: E- 2 DEFINITIONS The following terms have the meanings and content set forth in this section wherever used in this Regulatory Agreement or attached exhibits. 1. "CITY" is the City of Carlsbad, a municipal corporation, and its officers, officials, directors, employees, agents and authorized representatives. 2. "CITY LOAN" is the City's loan of funds to the Borrower for the Project, in the amount of One Million One Hundred Sixty Thousand Dollars ($1,160,000). 3. "CITY LOAN DOCUMENTS" are collectively the Development Agreement, the City Loan Deed of Trust, the City Note, all of even date herewith, and this Regulatory Agreement as they may be amended, modified, or restated from time to time, along with all exhibits and attachments to these documents. 4. "AREA MEDIAN INCOME" means the median income for the San Diego Primary Metropolitan Statistical Area ("PMSA"), with adjustments for household size, as determined from time to time by HUD pursuant to the United States Housing Act of 1937, as amended. If HUD no longer publishes such income determinations, the City shall use the median income. for San Diego County as published by HCD. If HCD no longer publishes such income determinations, the City shall calculate median income in a manner consistent with the methods previously used by HUD. 5. "BORROWER" means Carlsbad Family Housing Partnership, a California Limited Partnership. 6. "DEVELOPMENT" means the development and operation of approximately one hundred sixteen (1 16) units of multifamily housing on the Property according to the terms of this City Regulatory Agreement. 7. "HCD" means the California Department of Housing and Community Development. 8. "HUD" means the United States Department of Housing and Urban Development. 9. "LOW-INCOME HOUSEHOLD" means a household whose annual gross income does not exceed the qualifying limits, adjusted for household size and other factors, for a low income household for the San Diego PMSA, as determined from time to time by HUD pursuant to the United States Housing Act of 1937, as amended. If HUD no longer publishes such income determinations, the City shall use the low income determination for San Diego County as published by HCD. If HCD no longer publishes such income determinations, the City shall calculate low income in a manner consistent with the methods previously used by HUD. 10. "LOW INCOME UNITS" shall mean the Units limited io occupancy by LOW Income Households pursuant to Section 15 below. Rancho Carrillo Affordable Housing Development Agreement 01/20/98 E-3 H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft 1 1, "PROPERTY" means the Borrower's leasehold interest in the real property described in the attached Exhibit A, which is incorporated into this City Regulatory Agreement by this reference. 12. "UNIT" means a housing unit in the Development. BORROWER'S OBLIGATIONS 13. COMPLIANCE WITH LOAN DOCUMENTS. The Borrower's actions with respect to the Property and the use of Loan funds shall at all times be in full conformity with all of the requirements of the City Loan Documents until the repayment of the City Loan and the Agency Second Loan. 14. TERM OF AGREEMENT. The term of this City Regulatory Agreement shall commence upon execution and shall remain in full force and effect for fifty-five (55) years. 15. OCCUPANCY OF PROJECT. The Borrower shall limit for the full term of this City Regulatory Agreement the rental of one hundred sixteen (1 16) Units to households whose incomes at initial occupancy do not exceed the income limits for Low Income Households, excluding any units for resident managers. Twenty percent (20%) of the Units shall be affordable to. households with incomes, at the time of initial occupancy, that do not exceed 50% of the Area Median Income, adjusted for actual household size; forty percent (40%) of the Units shall be affordable to households with incomes not exceeding 60% of the Area Median Income; and forty percent (40%) of the Units shall be affordable to households with incomes not exceeding 80% of the Area Median Income. 16. MAXIMUM RENTAL CHARGES. (a) The total charges for rent and utilities to Low Income Households occupying the Low Income Units shall not exceed the lesser of: (i) the applicable low income housing tax credit rent, or, if lower, the rent permitted under the applicable regulatory agreement of CHFA or TCAC or other public agency regulating affordable housing, or (ii) one-twelfth of thirty percent (30%) of the designated percentage of Area Median Income, adjusted for household size pursuant to subsection (c) below; provided, however, for Low Income Households occupying the Low Income Units whose gross income, upon annual income recertification, exceeds fifty percent (50%), sixty percent (60%), or eighty percent (80%) of Area Median Income, the Borrower may charge a rent equal to the lesser of: (x) the applicable low income housing tax credit rent, or, if lower, the rent permitted under the applicable regulatory agreement of CHFA or TCAC or other public agency regulating affordable housing, or (y) thirty percent (30%) of the gross income of the household, adjusted for household size pursuant to subsection (b) below. In the event the gross income of a Low Income Household, upon annual income recertification, exceeds the maximum income for a Low Income Household, the Borrower shall rent the next available Unit to a Low Income Household and shall not be required to terminate the tenancy of the over-income household and shall not be restricted in the rent charged to the over-income household so long as the over-income household otherwise remains a tenant in good standing in the Development. (b) In calculating the allowable rent for the Units, the Borrower shall use the occupancy per unit assumptions used by the California Tax Credit Allocation Committee ("TCAC") for SO long as the Project is subject to a TCAC regulatory agreement; and if the Project is no longer Rancho Carrillo Affordable Housing Development Agreement 01 /20/98 E-4 H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft .- subject to a TCAC regulatory agreement, the Borrower shall use the occupancy per unit assumption of one more occupant per unit than the number of bedrooms in the unit. In no case, however, shall the Borrower be required by this City Regulatory Agreement to use occupancy per unit assumptions which would cause the Borrower to be in violation of any other regulatory agreement recorded against the Property by any other federal or state government agency or any lender. 17. CONDOMINIUM CONVERSION. The Borrower shall not convert Units to condominium or cooperative ownership or sell condominium or cooperative conversion rights to the Property during the term of this City Regulatory Agreement. 18. NONDISCRIMINATION. The Borrower shall not discriminate or segregate in the use, enjoyment, occupancy, conveyance, lease, sublease, or rental of the Project on the basis of race, color, ancestry, national origin, religion, sex, sexual preference, age, marital status, family status, source of income, physical or mental disability, or any other arbitrary basis. GENERAL PROVISIONS 19. SUBORDINATION. The City agrees that the City Manager shall subordinate this City Regulatory Agreement to the lien or encumbrance of any private construction or permanent. lender providing financing for the Project upon the finding of the City Manager that: (i) an economically feasible loan is not reasonably available on comparable terms and conditions without subordination; and (ii) the mortgage to which the City Regulatory Agreement is being subordinated contains provisions meeting the requirements of Health and Safety Code Section 33334.14Ia) reasonably designed to protect the City's interest in the event of default under such mortgage. The City agrees that this City Regulatory Agreement shall be subordinated to any federal or state government agency regulating the Project which requires that this City Regulatory Agreement be subordinate to such government agency's documents or liens. The City will execute subordination agreements in a form reasonably acceptable to the lending entity or government agency to subordinate this City Regulatory Agreement as provided in this Section. 20. DEFAULT AND REMEDIES. In the event of any breach of any agreement or obligation under this City Regulatory Agreement by the Borrower, the City shall provide written notice to the Borrower of the breach. The Borrower shall have an opportunity to cure the breach within thirty (30) days from the Borrower's receipt of the written notice or, if the breach cannot be cured within thirty (30) days, the Borrower shall not be in breach so long as the Borrower is diligently undertaking to cure such breach. If the Borrower fails to perform a timely cure of the specified breach, subject to Section 21 , the City may proceed with any or all of the following remedies upon the Borrower's failure to cure or undertaking to cure: A. Bring an action in equitable relief seeking the specific performance by the Borrower of the terms and conditions of this City Regulatory Agreement, or enjoining, abating, or preventing any violation of the terms and conditions, or seeking declaratory relief; 6. Pursue any other remedy allowed at law or in equity. Rancho Carrillo Affordable Housing Development Agreement 01/20/98 E-5 H:\ ... \ContHornes\AhoCarrillo\AHDA.v02 Draft 2 1. LIMITED PARTNER CURE PERIODS. (a) Notwithstanding anything to the contrary contained in this City Regulatory Agreement or the City Loan Documents and in addition to any other cure provisions contained in this City Regulatory Agreement, the limited partner of the Borrower shall have the right but not the obligation to cure any defaults of the Borrower hereunder, and the City agrees to accept cures tendered by the limited partner on behalf of the Borrower within the cure periods described below: the limited partner of Borrower shall have the right to cure all defaults within sixty (60) days after receipt of notice thereof. However, if a default is not reasonably capable of being cured within sixty (60) days or if the limited partner notifies the City that it is in the process of removing the managing general partner of the Borrower (as such process may be stayed by injunction, bankruptcy or similar proceedings), the limited partner shall have such additional time as is reasonably necessary to cure such default or remove the managing general partner, provided the limited partner has commenced and is diligently proceeding to cure such default or remove the managing general partner, as applicable (taking into account the effect of injunction, bankruptcy or similar proceedings). (b) If, after the time provided in Sections 20 and 21, Borrower or the limited partner has not cured the default, the City may apply to any court, state or federal, for specific performance of this City Regulatory Agreement or an injunction against any violation of this City Regulatory Agreement, or any other remedies at law or in equity or any such other actions as shall be necessary or desirable so as to correct non-compliance with this City Regulatory, Agreement. 22. GOVERNING LAW. This City Regulatory Agreement shall be interpreted under and be governed by the laws of the State of California. 23. ATTORNEYS' FEES AND COSTS. In the event that any legal or administrative action is commenced to enforce, protect, or establish any right or remedy under this City Regulatory Agreement, the prevailing party in any such action shall be entitled to recover all reasonable attorneys' fees and costs incurred in such action. 24. TIME. Time is of the essence in this City Regulatory Agreement. 25. CONSENTS AND APPROVALS. Any consent or approval of the City required under this City Regulatory Agreement shall not be unreasonably withheld. Any approval must be in writing and executed by an authorized representative of the City. 26. NOTICES, DEMANDS AND COMMUNICATIONS. All notices, demands and communications between the Borrower and the City shall be sufficiently given and shall not be deemed given unless dispatched by certified mail, postage prepaid, return receipt requested, or delivered by express delivery service with a delivery receipt, to the principal offices of the Borrower and the City as follows: City: City of Carlsbad Housing and Redevelopment Department 2965 Roosevelt Street, Suite B Carlsbad, California 92008 Attention: Housing and Redevelopment Director Rancho Carrillo Affordable Housing Development Agreement 0 1 120198 E- 6 H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft c Borrower: Carlsbad Family Housing Partnershp, a California Limited Partnership c/o Barone Galasso and Associates, Inc. Attn: Michael B. Galasso 600 West Broadway, Suite 1070 San Diego,.California 92101 Following notice by Borrower to the City that Boston Capital (or its affiliate) ,.as been admitted as a limited partner of Borrower, with a copy to: Boston Capital Notice shall be deemed to have been effective on the date shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was returned as undeliverable. 27. BINDING UPON SUCCESSORS. All provisions of this City Regulatory Agreement shall be binding upon and inure to the benefit of the successors, transferees and assigns of the Borrower and the City, and shall run with the land for the full term of this City Regulatory. Agreement. 28. AMENDMENTS AND MODIFICATIONS. Any amendments or modifications to this City Regulatory Agreement must be in writing, and shall be effective only if executed by both the Borrower and the City. 29. SEVERABILITY. Every provision of this City Regulatory Agreement is intended to be severable. If any provision of this Agreement shall be held invalid, illegal, or unenforceable by a court of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired. The parties have executed this Regulatory Agreement as of the date first written above. BORROWER: Date: Rancho Carrillo Affordable Housing Development Agreement 01120190 CARLSBAD FAMILY HOUSING PARTNERSHIP, a California limited partnership By: Housing Opportunities, Inc., a California nonprofit public benefit corporation, Managing General Partner By: Title: E-7 H:\ ... \ConCHomes\RhoCartillo\AHDA.v02 Draft CITY: Date: By: Barone Galasso and Associates, Inc., a Delaware corporation, Co-General Partner By: Title: CITY OF CARLSBAD, a municipal corporation By: Its: APPROVED AS TO FORM: Ronald R. Ball City Counsel Rancho Carrillo Affordable Housing Development Agreement 01 120190 E-8 H:\. . .\ContHomes\RhoCarrillo\AHDA.vOZ Draft EXHIBIT F Master Developer Loan Note $1,297,967 , 2998 Carlsbad, California FOR VALUE RECEIVED, CARLSBAD FAMILY HOUSING PARTNERSHIP, a California Limited Partnership ("Borrower"), promises to pay to Continental Ranch, lnc., a Delaware corporation ("Master Developer"), or order, the principal sum of One Million Two Hundred Ninety-Seven Thousand Nine Hundred Sixty-Seven Dollars ($1,297,967), or so much thereof as is advanced to Borrower by the Master Developer pursuant to Section 6.6 of the Development Agreement (defined below), plus simple interest accruing at the rate of percent (-%) per annum. 1. Develoement Aareement. This Master Developer Loan Note is made pursuant to an Affordable Housing Development Agreement dated as of , 1998 (the "Development Agreement") by and among the Borrower, the City of Carlsbad, a municipal corporation, and Master Developer. 2. Term. The term of this Master Developer Loan Note (the "Term") shall commence on the date of this Master Developer Loan Note and shall end fifty-five (55) years from the date of recordation of the deed of trust securing the Permanent Loan (as defined in the Development Agreement) (the "Due Date"). 3. Amount and Time of Pavments. All amounts due under this Master Developer Loan Note shall be due and payable as set forth in Section 6.3 of the Development Agreement. 4. Preeavment. Borrower shall have the right to prepay all or a portion of the principal and interest due under this Master Developer Loan Note without any charge or penalty being made therefor. 5. Deed o f Trust. This Master Developer Loan Note is secured by a deed of trust of even date herewith (the "Master Developer Loan Deed of Trust"). 6. Acceleration. Upon the occurrence of a default under the Development Agreement or Master Developer Loan Deed of Trust, and expiration of all applicable notice and cure periods (an "Event of Default"), the Master Developer shall have the right to accelerate the Due Date of this Master Developer Loan Note and declare all of the unpaid principal and accrued interest immediately due and payable. Any failure by the Master Developer to pursue its legal and equitable remedies upon an Event of Default shall not constitute a waiver of the Master Developer's right to declare an Event of Default and exercise all of its rights under this Master Developer Loan Note, the Master Developer Loan Deed of Trust, and the Development Agreement. Nor shall acceptance by the Master Developer of any payment provided for herein constitute a waiver of the Master Developer's right to require prompt payment of any remaining principal and interest owed. Rancho Carrillo Affordable Housing Development Agreement 01 121x98 F- 2 H:\ ... \ContHomes\AhoCarrillo\AHDA.vOZ Draft 7. No Offset. Borrower hereby waives any rights of offset it now has or may hereafter have against the Master Developer, its successors and assigns. 8. Waiver: Attornevs' Fees. Borrower and any endorsers or guarantors of this Master Developer Loan Note, for themselves, their heirs, legal representatives, successors and assigns, respectively, severally waive diligence, presentment, protest, and demand, and notice of protest, dishonor and non-payment of this Master Developer Loan Note, and expressly waive any rights to be released by reason of any extension of time or change in terms of payment, or change, alteration or release of any security given for the payments hereof, and expressly waive the right to plead any and all statutes of limitations as a defense to any demand on this Master Developer Loan Note or agreement to pay the same, and jointly and severally agree to pay all costs of collection when incurred, including reasonable attorneys' fees. If an action is instituted on this Master Developer Loan Note, the undersigned promises to pay, in addition to the costs and disbursements allowed by law, such sum as a court may adjudge reasonable as attorneys' fees in such action. 9. Manner and Place of Pavment. All payments of principal and interest due under this Master Developer Loan Note, as well as any additional payments set forth in the Master Developer Loan Deed of Trust, shall be payable in lawful money of the United States of America at the office of Continental Ranch, Inc., Attn: Dave Lother, 12636 High Bluff Drive, Suite 300,. San Diego, California 921 30, or such other address as the Master Developer may designate in writing. BORROWER: Date: Rancho Carrillo Affordable Housing Development Agreement 01 120198 CARLSBAD FAMILY HOUSING PARTNERSHIP, a California limited partnership By: Housing Opportunities, Inc., a California nonprofit public benefit corporation, Managing General Partner By: Title: By: Barone Galasso and Associates, Inc., a Delaware corporation, Co-General Partner By: Title: F-3 H:\ ... \ContHomes\RhoCarrillo\AHDA.v02 Draft EXHIBIT G Master Developer Loan Deed of Trust Rancho Carrillo Affordable Housing Development Agreement 0 1/20/98 G- 1 H:\. . .\ContHomes\RhoCarriIlo\AHDA.vOZ Draft EXHIBIT G FORM OF MASTER DEVELOPER LOAN DEED OF TRUST RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Continental Ranch, Inc. 12636 High Bluff Drive, Suite 300 San Diego, CA 921 30 Attention: Dave Lother MASTER DEVELOPER LO AN DEED OF TRUST AND SECU RlTY AGREE MENT THIS MASTER DEVELOPER LOAN DEED OF TRUST AND SECURITY AGREEMENT ("Deed, of Trust") is made as of this day of , 1998, by and among Carlsbad Family Housing Partnership, a California Limited Partnership ("Trustor"), First American Title Insurance Company, a California corporation ("Trustee"), and Continental Ranch, Inc., a Delaware corporation ("Beneficiary"). FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's fee interest in the property located in the County of San Diego, State of California, that is described in the attached Exhibit A, incorporated herein by this reference (the "Property"). TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH Trustor's interest in all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including (without limiting the generality of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH Trustor's interest in any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of the Trustor now or hereafter affixed to or placed upon the Property; TOGETHER WITH Trustor's interest in all building materials and equipment now or hereafter delivered to said property and intended to be installed therein; Rancho Carrillo Affordable Housing Development Agreement 01 120198 G-2 H:\. ..\ContHomes\RhoCarrillo\AHDA.v02 Draft TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to or used in connection with the Property; TOGETHER WITH Trustor's estate, interest, right, title, other claim or demand, of every nature, in and to such property, including the Property, both in law and in equity, including, but not limited to, all deposits made with or other security given by Trustor to utility companies, the proceeds from any or all of such property, including the Property, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire, any and all awards made for the taking by eminent domain or purchase in lieu thereof of the whole or any part of such property, including without limitation, any awards resulting from a change of grade of streets and awards for severance damages to the extent Beneficiary has an interest in such awards for taking as provided in Paragraph 4.1 herein; and TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, and all renewals or replacements thereof or articles in substitution therefor, whether. or not the same are, or shall be attached to said building or buildings in any manner. All of the foregoing, together with the Property, is herein referred to as the "Security." To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever. FOR THE PURPOSE OF SECURING: (a) Payment of just indebtedness of Trustor to Beneficiary as set forth in the Note and the Development Agreement (both as defined in Article I below) until paid or cancelled. Said principal and other payments shall be due and payable as provided in the Note and the Loan Agreement. The Note, the Development Agreement, and the Regulatory Agreement (defined below), and all their terms are incorporated herein by reference, and this conveyance shall secure any and all extensions thereof, however evidenced; and (b) Payment of any sums advanced by Beneficiary to protect the Security pursuant to the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein; and (c) Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents (defined in Section 1.2 below), Rancho Carrillo Affordable Housing Development Agreement 01/20/98 G-3 H:\ ... \ContHomes\RhoCarrillo\AHDA.vOZ Draft AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: ARTICLE 1 DEFINITIONS In addition to the terms defined elsewhere in this Deed of Trust, the following terms shall have the following meanings in this Deed of Trust: Section 1.1 The term "Development Agreement" means that certain Affordable Housing Development Agreement by and among Trustor, Beneficiary, and the City of Carlsbad, a municipal corporation, dated as of , 1998, providing for the Beneficiary to loan to the Trustor One Million Two Hundred Ninety-Seven Thousand Nine Hundred Sixty-Seven Dollars ($1,297,967) for the development on the Property of improvements. Section 1.2 The term "Bank Deed of Trust" means the Construction Deed of Trust with Assignment of Leases and Rents, Security Agreement and Fixture Filing to , as beneficiary, from Trustor, as trustor, securing a loan from , to Trustor in the amount of Seven Million Seven Hundred Thousand Dollars ($7,700,000). Section 1.3 The term "City Loan Deed of Trust" means the City Loan Deed of Trust and Security Agreement to the City of Carlsbad, a municipal corporation, as beneficiary, from Trustor, as trustor, securing a loan from the City of Carlsbad to Trustor in the amount of One Million One Hundred Sixty Thousand Dollars ($1 , 160,000). Section 1.4 Development Agreement. The term "Loan Documents" means this Deed of Trust, the Note, and the Section 1.5 The term "Master Developer Purchase Money Loan Deed of Trust" means the deed of trust to Beneficiary, as beneficiary, from Trustor, as trustor, securing a purchase money loan from Beneficiary to Trustor in the amount of Three Million One Hundred Thirty-Two Thousand Dollars ($3,132,000). Section 1.6 The term "Note" means the Master Developer Loan Note in the principal amount of One Million Two Hundred Ninety-Seven Thousand Nine Hundred Sixty-Seven Dollars ($1,297,967) dated , 1998, executed by the Trustor in favor of the Beneficiary, the payment of which is secured by this Deed of Trust. (A copy of the Note is on file with the Beneficiary and terms and provisions of the Note are incorporated herein by reference.) Section 1.7 The term "Principal" means the aggregate of the amounts required to be paid under the Note. Rancho Carrillo Affordable Housing Development Agreement 01 /20/98 G-4 H:\.. .\ContHomes\RhoCarriIlo\AHDA.vOZ Draft The CdtyofCa.r..=bad RoudngaS Redeudopmesxt Department A-PORTTO THE HOUSING GOMMXSSXON XXEMNO. 2 ~~~~ DATE: FEBRUARY 12,1998 SUBJECT: CALAVERA HILLS VILLAGE L-i - RECOMMENDATION OF APPROVAL TO THE CITY COUNCIL TO PROVIDE $75,000 IN FINANCIAL ASSISTANCE FOR THE CONSTRUCTION OF FIVE, FOR SALE, AFFORDABLE FOUR BEDROOM SINGLE FAMILY DETACHED UNITS IN ORDER TO SATISFY THE REQUIREMENTS OF THE INCLUSIONARY HOUSING ORDINANCE THE CALAVERA HILLS MASTER PLAN. FOR THE DEVELOPMENT OF 35 RESIDENTIAL UNITS IN VILLAGE L-1 OF I. n. 1x1. RECOMMENDATION That the Housing Commission ADOPT Resolution No. 98-003 recommending APPROVAL to the City Council to provide $75,000 in financial assistance from the Housing Trust Fund to Heritage Builders, Inc., for construction of five, for sale, affordable four bedroom single family detached units fee in order to satisfy the requirements of the Inclusionary Housing Ordinance for the development of 35 residential units in Village G1 of the Calavera Hills Master Plan. PROJECT BACKGROUND On September 11, 1997, the Housing Commission recommended approval of the construction of the site development plan for five affordable units to the Planning Commission. At the September meeting, the applicant had not requested financial assistance for the project. Subsequent to that meeting, the applicant determined that financial assistance is necessary to develop the affordable housing product, as approved. PROTECT DESCRIPTION The project is located on the northwest comer of Harwich Drive and future Edgeware Way in the Calavera HilLs Master Plan. The affordable units will be distributed throughout the project and are to be developed concurrently with the market units. Each unit will contain 1,330 square feet of living space, 4 bedrooms and a two-car garage. The five affordable for-sale units in Village L-1 will be restricted and affordable to households with incomes not exceeding 80% of the area median. CALAVERA HILLS VILLAGE L-1 FEBRUARY 12,1998 PAGE 2 IV. FINANCIAL The developer has made a request for financial assistance to support the sale of the five units at affordable prices. The Affordable Housing Policy Team is recommending that financial assistance be provided in the amount of $15,000 per unit or a total of $75,000. The following factors were considered in arriving at this recommendation. A. Development Team It is important that the developer have the capacity to successfully implement the proposed project. Although the developer is not experienced with assisted for-sale development, the team is experienced and has been successful in developing conventional homeownership projects. B. Cost Reasonableness The developer has provided detailed proforma development cost information for review by staff and the Housing Commission (See Attachment 5). Since development costs are one of the key variables determining the need for subsidies, it is important that those costs be reasonable. At $207,000, including land but no profit, these average unit costs are consistent with typical development within the City. C. UndueGain It is important that any financial assistance have the effect of making the units more affordable and not creating undue gain for any party. In the proposed affordable project there is no developer return or profit factored into the project proforma and there are no other incentives tied to either the market or affordable projects which would create any gain for the developer. D. Subsidv Analvsis With projected costs and a known restricted purchase price based on the maximum household incomes, it is possible to determine the estimated level of subsidy required to develop and sell the affordable units. With this subsidy estimate, an amount of City assistance is recommended which effectively ”leverages” the City’s housing funds. Leveraging is defined as the ratio of City subsidy to subsidy provided from other sources. The following chart estimates the required subsidy for the affordable project and shows the recommended level of City assistance and developer subsidy necessary for the project to be feasible. CALAVERA HILLS VILLAGE L-1 FEBRUARY 12,1998 PAGE 3 COST LAND OTHER HOMEBUYER INCOME HOMEBUYER INCOME 80% AMI* 70% AMI" (MMIMUM ALL 0 WABLE) (MAXMUM ALLOWABLE) $66,000 $66,000 141,000 141,000 TOTAL $207,440 $207,440 * AMI = Area Median Income, San Diego County ** Based on housing cost of 30% of income for householdsizes of 7.5 (4 bedrooms) CITY LEVERAGE The Subsidy Analysis shows estimated subsidy needs for two levels of homebuyer income. Eighty percent (80%) of Area Median Income (AMI) is the maximum allowed income and is used to determine the maximum allowed purchase price. However, actual buyers will have incomes below 80% AMI, therefore, 70% AMI is used to illustrate the subsidy requirement based on the realistic actual average incomes of buyers. Based on 70% of AMI the recommended level of City assistance would provide $I of subsidy for each $4.70 from the developer or some other outside source (leverage of 4.7 1). Although this is a lower level of leveraging than rental projects such as Villa Loma and Laurel Tree Apartments, staff believes it is acceptable for a homeownership project where there are no "deep subsidy" funding programs available to assist in production. $3.3: $1 $4.7: $1 CALAVERA HILLS VILLAGE L-1 FEBRUARY 12,1998 E. F. G. V. VI Form of Assistance City as well as developer assistance would be provided in the form of funds which are first used for construction and then for deferred (no payment for a period of time) financing for the actual homebuyer. This subsidy financing is structured as loan which is repaid to the City upon resale of the unit. Any real appreciation is shared between the City and the homebuyer based on the contribution to the initial purchase. No “windfall” comes to the subsidized buyer. City assistance will be structured to provide for a reduction in the amount of assistance if the proceeds from the sale of the affordable units exceeds their actual cost, not including the land value. Securitv As indicated, the City takes a security interest in each property. Because the amount of City assistance is only a portion of the total subsidy, the City will have a sigruficant “cushion” of equity protecting its actual cash loan. Risks - The two major types of risk in this for-sale development are construction risk (units do not get built) and market risk (units do not sell). In addition, it is likely that any City finanaal assistance will be subordinated to conventional bank financing. If a problem did arise, the bank‘s interest would come ahead of the City’s. Although the City would be taking on some of the risk inherent with development, there are several factors that mitigate these risks. First, the City’s financial involvement would constitute a very small portion of the project, meaning that the other lenders and developer will be motivated to insure successful completion. Second, in terms of marketbk, the City’s assistance will be fixed and additional subsidies required to insure sale of all units will be the obligation of the developer. AFFORDABLE HOUSING AGREEMENT Prior to final map or issuance of building permits, the developer will be required to enter into an Affordable Housing Agreement with the City which binds the developer to the specifics of the affordable housing project including, but not limited to the affordable purchase price and household income Limits. The Housing Commission approved the drat Affordable Housing Agreement on September 11,1997. Execution of the agreement is pending. LOAN AGREEMENT A draft of the Loan Agreement is attached for review by the Housing Commission. Staff is requesting that the Housing Commission recommend approval of the agreement in substantially the form presented, subject to final approval by the City Attorney. CALAVERA HILLS VILLAGE L-1 ' FEBRUARY 12,1998 PAGE 5 VII. SUMMARY It is the role of the Housing Commission to make recommendations to the City Council based on several considerations with respect to affordable housing projects. These are: The proposal's effectiveness in serving the City's needs and priorities as expressed in the Housing Element of the General Plan and the HUD Consolidated Plan. The proposal's consistency with the City's affordable housing policies and ordinances as expressed in the Housing Element, hClUSiOMrY Housing Ordinance, Density Bonus Ordinance, etc. The proposal's development and operating feasibility, emphasizing the development team capacity, financing sources and the role of the City in providing financial assistance or incentives. Staff recognizes that affordable homeownership units of the size and type proposed are costly in comparison to other affordable housing alternatives. The financial information contained in the Proforma demonstrates the need for financial assistance to assist in the development of this project. The project will meet an affordable housing need and is consistent with City policies and ordinances on affordable housing. The AffordabIe Housing Policy Team (staff) is recommending that the Housing Commission approve a recommendation to the City ComciI to commit a total of $75,000 to the Calavera Hills Village L-1 for-sale affordable housing project. The funding will be provided from the City of Carlsbad's Housing Trust Fund and will be provided to the builder/developer, Heritage Builders, Inc. The team (staff) is also requesting that the Housing Commission review and recommend approval of the Loan Agreement in substantially the form submitted subject to final approval by the City Attorney. VIII. EXHIBITS 1. Housing Commission Resolution No. 98-003 2. Minutes of the September 11,1997 Housing Commission Meeting 3. Letter Requesting Financial Assistance 5. Proforma - 4. Draft Loan Agreement 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 HOUSING COMMISSION RESOLUTION NO. 98-003 THAT THE HOUSING RECOMMEND APPROVAL TO THE CITY COUNCIL OF $75,000 IN FINANCIAL ASSISTANCE FOR THE CONSTRUCTION OF FIVE, FOR SALE, AFFORDABLE FOUR BEDROOM SINGLE FAMILY DETACHED UNITS IN ORDER TO HELP SATISFY THE REQUIREMENTS OF THE INCLUSIONARY HOUSING ORDINANCE FOR THE DEVELOPMENT OF 35 HILLS MASTER PLAN. APPLICANT: HERITAGE BUILDERS, INC RESIDENTIAL UNITS IN VILLAGE L-1 OF THE CALAVERA CASE NO: CT 97-04, CP 97-02, SDP 97-03 WHEREAS, the developer of the Calavera Master Plan received approval to construct a 35 single family planned unit development as allowed by Carlsbad Tract Map CT 97-04; WHEREAS, the developer has proposed to construct five, for-sale, four bedroom detached single family homes affordable to lower income households as a means to satisfy their affordable housing obligations as permitted by Carlsbad Municipal Code Section 21.85 of the City’s Inclusionary Housing Ordinance; WHEREAS, on September 11, 1997, the Housing Commission recommended to the Planning Commission approval of the developer’s proposal to construct said units; WHEREAS, said Housing Commission did, on the 12th day of February, 1998, hold a public meeting to consider the developer’s request for financial assistance to construct said units; WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, of all persons desiring to be heard, said Commission considered all factors relating to the request for financial assistance; NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing Commission of the City of Carlsbad, California, as follows: 1. The above recitations are true and correct. 2. The project is consistent with the goals and objectives of the City of Carlsbad’s Housing Element and Comprehensive Housing Affordability Strategy, the Inclusionary Housing Ordinance, and the Carlsbad General Plan. 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 3. The project will provide a total of five, for-sale, four bedroom single family detached units affordable for purchase to households at 80% or below of the county median which meets a "medium priority" affordable housing need as outlined within the City of Carlsbad's approved 1995-2000 Consolidated Plan. The project, therefore, has the ability to effectively serve the City's housing needs and priorities as expressed in the Housing Element and the Consolidated Plan. 4. That based on the information provided within the Housing Commission Staff Report and testimony presented during the public meeting of the Housing Commission on February 12, 1998, the Housing Commission ADOPT Resolution No. 98-003, recommending APPROVAL to the City Council to provide $75,000 in financial assistance from the City of Carlsbad's Housing Trust Fund to heritage Builders, Inc., for the construction of five, for sale, affordable four bedroom single family detached units to satisfy the requirements of the Inclusionary Housing Ordinance for the development of 35 residential units in Village L-1 of the Calavera Hills Master Plan. 5. That the Housing Commission recommends that the City Manager or his designee be authorized to execute the Loan Agreement for the financial assistance in substantially the form presented in Exhibit 4 to the Housing Commission Staff Report, subject to review and approval by the City Attorney. PASSED, APPROVED, AND ADOPTED at a regular meeting of the Housing Commission of the City of Carlsbad, California, held on the 12th day of February, 1998, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: KATHLEEN WELLMAN, CHAIRPERSON CAIUSBAD HOUSING COMMISSION DEBORAH K. FOUNTAIN HOUSING & REDEVELOPMENT DIRECTOR HC RES0 NO. 98-003 PAGE 2 HOUSING COMMISS'-' MINUTES SEPTEMBER 11, 1997 PAGE 4 - Exhi.bit ; 2 --- 2. CALAVERA HlLLS VKLAGE L-1 - Request for recommendation ofapproval to the Planning Commission of the construction of five, for-sale, affordable four bedroom single family detached units and the payment of.25 of the City's in-lieu fee in order to satis@ the requirements of the Inclusionary housing ordinance for the development of 35 residential units in Village L-I of the Calavera Hills Master Plan. Craig Ruiz stated that this project was also previously before the Commission. The original project was to allow a higher density project, which included nine affordable townhomes. In response to the concerns raised by the surrounding property owners about the density issue, the project has been redesigned. Mr. Ruiz stated that the project currently being presented provides for 35 single-family homes, five of which will be for-sale affordable units. The five homes will be similar in style to the market-rate units as far as architecture and design. The project will consist of four bedroom units with 1,330 square feet of living space and two-car garages of 450 square feet. Mr. Ruiz explained the location of the project and showed how the affordable units are distributed throughout the overall project. Mr. Ruiz stated that this project is consistent with the City's Affordable Housing Policies and Ordinances, in addition to the Inclusionary Housins Ordinance. This project will be the second for-sale project in the City, and it is meeting an unmet need in the City. These large four-bedroom units are quite desirable as affordable units according to Mr. Ruiz. They will be affordable at a minimum of 80 percent of median income. Vice Chairperson Wellman asked if there were questions of Mr. Ruiz. Commissioner Calverley asked if there will be restrictions on the developer as to whom they sell to, Le., the family size occupying the affordable units. Mr. Ruiz responded that the City will not put any restrictions on the developer. Vice Chairperson Wellman asked if there are large families on waiting lists who would qualify for four-bedroom for- sale homes. Ms. Fountain responded that generally the City is in short supply of large units in the rental market. The City does not carry any waiting lists for the for-sale market, however. She added that &e rental assistance program is for people who are 50 percent or below the median, So they may not actually be able to qualify for a for-sale product. Vice Chairperson Wellman asked about extended families purchasing these units. Mr. Ruiz responded that extended families are okay as long as they qualify on their combined incomes. Vice Chairperson Wellman invited the applicant to speak. Mr. Mike Howes, Hofman Planning Associates, 2386 Faraday Avenue, Suite 120, Carlsbad, addressed the Commission and introduced the property owner, Don Clurman, and the site designer, Lex Williman. He said that he is not aware of any other four bedroom, affordable ownership units being proposed in this portion of Carlsbad (the northeast quadrant). He added that this is an excellent location for four bedroom, affordable units because they are in walking distance from an elementary school, a City park, a future commercial site, and a fiture junior high school site, with existing and future public transportation. Mr. Hows stated that at this time it has not been determined if any financial substantial subsidies will be required for this project. Vice Chairperson Wellman asked if there were any questions of the applicant. - HOUSING COMMIS, IV MINUTES SEPTEMBER 1 I, 1997 PAGE 6 put into the project SO the City can reinvest the money in another project on a first-time home-buyer product. Ms. Fountain said that there will be restrictions on the property so that if the home is sold, the new buyer will know what the requirements are. If the Property is sold, the City will be notified. Ms. Fountain added that 55 years is the tenn of affordability. ACTION: Motion by Commissioner Scarpelli, and duly seconded, to ADOPT Resolution No. 97-0 I I, recommending APPROVAL to the Planning Commission of the construction of five, for sale, affordable four bedroom sinzle family detached units and the payment of .25 of the City's In-Lieu fee in order to satisfy the requirements of the Inclusionary Housing Ordinance for the development of 35 residential units in Village L- I of the Calavera Hills Master Plan. Calverley, Latas, Rose, Scarpelli, Walker, Wellman VOTE: 6-0-0 AYES: NOES: None ABSTAIN: None 3. DEVELOPER PRESENTATION ON THE PROPOSED RANCHO CARRILLO AFFORDABLE HOUSING PROJECT Craig Ruiz informed the Commissioners that this item is an informational item only and there will be no request for action by the Commission; however, this project is going to come before the Commission at a later date. This item is to introduce the Commissioners to the development team. The developer of Rancho Carrillo, the architect for the affordable project, and the non-profit developer are all present and will make a brief presentation, he said. Mr. Ruiz gave the background ofthe project describing it as an approved Master Plan for over 1,800 units. This project was previously before the Commission with affordable units in Villages E and F. Currently the affordable project will be moving into Village B to be built in phases including multi-famiIy units with a mixture of both affordable units and potentially some market-rate units as well. Vice Chairperson Wellman invited the development team to speak. Mr. Chris Chambers, Continental Homes, 12636 High Bluff Drive, San Diego, addressed the Commission and said it has been over four years since he Was last before the Commission in connection with the approval of the Master Plan of Rancho Carrillo. Mr. Chambers'was also before the Commission for the approval of the first tentative maps in Rancho Carrillo. Mr. Chambers stated that this is the largest grading project that has been undertaken in Carlsbad since Aviara. He said they will be moving about 9 million cubic yards of earth all within the boundaries of Rancho Carrillo, being about 80 percent done with the grading and all the infrastructure work. When Rancho Carrillo first came before the Commission, it was comprised offour ownerships. Continental Homes owned the south and eastern comers. UDC, Scripps, and an individual by the name of Don Woodward, later taken over by Merrill Lynch, owned other parts ofthe project. When it came time to develop, Continental Homes purchased the other parcels of the project. Having a single ownership gave Continental Homes an opportunity to re-evaluate the planning efforts of Rancho Carrillo. Even before this time, the contributions of Rancho Carrillo to the City of Carlsbad continued to escalate. Today the project has almost 300 acres of open space out of the original acreage of 650. The land on-site approaches 40 percent of Open space; and there is another 20 acres off-site that has been acquired. Mr. Chambers said they have contributed Village G, which was at one time designated and allowed for 101 detached dwelling units. Today it is 39 dwelling units. There is a plant species (wild onion plant) which will have the largest population preserved in the County of San Diego, and there are extensive negotiations to preserve the eastern edge and the middle part of the project as wildlife corridors of all manner of animals; but primarily on the eastern edge to il HOUSING COMMlSSlC .dINUTES SEPTEMBER 1 1,1997 PAGE 5 Commissioner Scarpelli asked the developer how he is going to make this project work. Mr. Howes responded that it is not going to be easy--it’s going to be painful. He added that the site has been previously graded and the number of utilities are already in. The adjacent street, Hanvich, is in with full improvements, and Edgeware has been graded in. Vice Chairperson Wellman asked about the price of the market-rate and affordable units. Mr. Howes estimated the range to be between $220,000 to $225,000. He said he is aware of the large difference in cost between the market-rate units and the affordable units. He added that there is going to be quite a bit of subsidy for the affordable units with a $35,000 to $40,000 negative cash flow on the affordable units. Commissioner Scarpelli asked why the developer chose four bedroom over three bedroom units. Mr. Howes responded that the idea was compatibility with other homes in the project, which are all four bedroom homes. He added that there is a need for four bedroom homes. * Vice Chairperson Wellman asked if there will be much difference in the quality of the units and whether landscaping will be included. Mr. Howes responded that the units will be very similar in architecture and style. The affordable units will be a little bit smaller, but they will fit right in. Mr. Howes said that the front yards will be landscaped. Commissioner Rose asked about the amenities. Mr. Howes responded that there is a common rec facility, half basketball court, and a tot lot in the center of the project that will be accessible to all members--affordable and non affordable. In addition, there will be ocean views and be within walking distance to Calavera Park. Vice Chairperson Wellman opened the item for discussion among the Commission members. Commissioner Calverley thanked the applicant for the completion of the package, with its elevations and blue lines. Commissioner Walker applauded the developer for having these units integrated the way they are. Commissioners Latas and Scarpelli suggested the developer return to the Commission if they are in need of some type of modest subsidy. Ms. Fountain added that the prices ofthe other units are in the moderate income range for the size of units so this project is actually a good mix of units in both the low and moderate income category, which the City has a need for as well. The City does not require developers to do anything for the moderate income, but it is nice to see the mix come in with this type of project, she said. Vice Chairperson Wellman asked what happens to the affordability of the units when they are sold. Mr. Howes responded that it is put in the cC&Rs that the unit has to be sold to another Iow-income household. Ms. Fountain added that there are two options or ways the developer can market these homes, They can either choose to continue the affordability by making Sure that the next buyer qualifies and the unit is sold at an affordable price. Or, if the home is sold at a non-affordable price or to a non-qualified person, the city recaptures the subsidy the developer - Exhibit . 3 January 29,1995 Heritage Builders, Inc. 4809 Dulin Road Fallbrook, Ca 92028 (760) 723-2207 office (760) 723-6664 fax Debbie Fountain City of Carlsbad Housing & Redevelopment Department 2965 Roosevelt Street, Suite B Carlsbad, Ca 92008 SUBJECT: Calavera Hills Village L-1 Affordable Housing Subsidy Dear Ms. Fountain: Per our discussions with you and your staff, this letter fonnally requests a financial subsidy for the five affordable housing units within the Calavera Hills Village L-1 project. These for-sale units will be similar in style to the market rate units and will be developed concurrently with the market rate units. The affordable units within the project will each have four bedrooms with 1,330 square feet of living space and two-car garages. For the construction of each of these affordable housing units, we will be incurring a negative cash flow between $40,000 and $50,000 per affordable unit. In light of the economic difficulties posed by providing affordable units, we are requesting an affordable housing subsidy. During our meetings, a subsidy of $15,000 for each unit was discussed. We are requesting this amount due to the higher costs associated with providing affordable four bedroom ownership units for lower income families in the northeast quadrant of Carlsbad. We appreciate your support and consideration. President C.C. Craig Ruiz Exhibit 4 LOAN AGREEMENT BY AND BETWEEN THE CITY OF and CARLSBAD HERITAGE BUILDERS INC. I - - . - - . - - - . . TABLE OF CONTENTS Pase 1 .............. ARTICLE 1: DEFINITIONS AND EXHIBITS Section 1.1 Definitions 1 Exhibits 4 Section 1.2 .................. ................. ARTICLE 2: LOAN PROVISIONS ................... Section 2.1 Loan .................... Section 2.2 Interest .................. Section 2.3 Use of Loan Funds .............. Section 2.4 Security .................. Section 2.5 Disbursement of Loan Proceeds ........ Section 2.6 Intercreditor Agreement ........... Section 2.7 Subordination ................ Section 2.8 Term and Repayment Schedule ......... Section 2.9 Assumption ................. Section 2.10 Approval of Additional Financing ....... 4 4 4 4 4 5 6 6 6 7 8 ........... ARTICLE 3: CONSTRUCTION OF THE DEVELOPMENT 8 Section 3.1 Schedule of Performance ........... 8 Section 3.2 Construction Pursuant to Plans and Laws 8 Section 3.3 Equal Opportunity .............. 9 Completion 9 ... Section 3.4 Mechanics Liens. Stop Notices. and Notices of ................. ARTICLE 4: REQUIREMENTS DURING AND AFTER CONSTRUCTION ..... 10 Section 4.1 Information ................. 10 Section 4.2 Records ................... 10 Section 4.3 Inspections ................. 10 Section 4.4 Insurance .................. 15 ARTICLE 5: DEFAULT ....................... 16 Section 5.1 Events of Default .............. 16 Section 5.2 Remedies ................... 17 Section 5.3 Remedies Cumulative ............. 18 Section 5.4 Waiver of Terms and Conditions ........ 18 ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF DEVELOPER ..... 19 Representations and Warranties ............ 19 ARTICLE 7: GENERAL PROVISIONS ................. 20 Section 7.1 Relationship of Parties ........... 20 Section 7.2 No Claims .................. 21 Section 7.3 Amendments ................. 21 Section 7.4 Indemnification ............... 21 Section 7.5 Non-Liability of City Officials. Employees andAgents ................. 22 Section 7.6 No Third Party Beneficiaries ........ 22 Section 7.7 Discretion Retained By City ......... 22 -i- Section 7.8 Section 7.9 Section 7.10 Section 7.11 Section 7.12 Section 7.13 Section 7.14 Section 7.15 Section 7.16 Section 7.17 Section 7.18 Notices, Demands and Communications . Applicable Law ........... Parties Bound; Covenants Running with Land ................ Attorneys' Fees ........... Severability ............ Force Majeure ............ Approvals .............. Title of Parts and Sections ..... Entire Understanding of the Parties . Multiple Originals; Counterpart ... Time of the Essence ......... .... 22 .... 23 the .... 23 .... 23 .... 23 .... 23 .... 24 .... 24 .... 24 ..... 24 .... 24 EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY 1 ................ EXHIBIT C FORM OF THE DEVELOPER DEED OF TRUST 1 ............... EXHIBIT D . FORM OF ELIGIBLE BUYER NOTE ................... 1 EXHIBIT E FORM OF ELIGIBLE BUYER DEED OF TRUST 1 .............. LOAN AGREEMENT This Loan Agreement (the "Agreement") is entered into as of , 1997, by and between the city of Carlsbad, a municipal corporation (the , and HERITAGE BUILDERS INC. reference to the roiiowing Zacts: ,. ._ (the tlBorrowerll) , with A. The Developer is the Owner of certain real property in the city of Carlsbad, in the County of San Diego, California described in Exhibit A-1 attached hereto and incorporated herein (the tiProperty"). B. The Developer intends to construct 35 residential housing units on the Property, in a development to be known as S~BI Seaside Heights (the llDevelopment~~). The City has approved Carlsbad Tentative Tract Map Number CT ), Planned Unit Development Number --'. and Site Development Plan Number SDP - 1, for the proposed Development. C. In satisfaction of certain conditions of approval in connection with the City's approvals of the Development, the City and the Developer have executed an Affordable Housing Agreement Imposing Restrictions on Real Property dated as of (the "Affordable Housing Agreement"). -1 - .. -- sf D. Pursuant to the Affordable Housing Agreement, the Developer agreed to sell 5, of the housing units in the Development to lower income households (the "Affordable Units"). The Developer further agreed to carry back second mortgage financing on the Affordable Units in an amount equal to the difference between the market rate purchase price of the Affordable Unit and the affordable price of such unit, and to assign such second mortgage financing to the City. The Developer intends to construct the Affordable Units in a discrete townhome development on the portion of the Property described in Exhibit AS attached hereto and incorporated herein (the "Affordable Development Propertyft) . E. Pursuant to the Affordable Housing Agreement, the City agreed to provide financial assistance to the Developer in the form of a $75,000 construction loan (the "City Loan"), which represents a direct City subsidy amount of $15,000 per Affordable Unit. As more fully set forth herein, upon sale of each Affordable Unit to an eligible lower income household in compliance with the Affordable Housing Agreement, and execution of second mortgage loan documents by the homebuyer to the City in compliance with the Affordable Housing Agreement, the City will credit the Developer with repayment of $15,Oi~o of the City Loan. 1010\03\101710.01 1 F. The City intends to fund the City Loan with moneys from the City's Housing Trust Fund created pursuant to City Ordinance NO. NS-232. G. insert recital re CEQA compliance NOW, THEREFORE, the Parties agree as follows: ARTICLE 1: DEFINITIONS AND EXHIBITS Section 1.1 Definitions. meanings in this Agreement: (a) "Affordable Development" shall mean the Affordable Development Property, the Affordable Units, and all landscaping, roads, parking spaces, and common area appurtenant to such units. property described in Exhibit A-2 on which the Affordable Development will be constructed. The following capitalized terms shall have the following (b) "Affordable Development Property" shall mean the (c) "Affordable Housing Agreement" shall mean the Affordable Housing Agreement Imposing Restrictions on Real -&9% Property by and between the City and the Developer dated -. and recorded against the Property as 1nstrument.No. the Official Records of San Diego County. of ._ c- . -. (d) "Affordable Unit" shall mean a unit sold to an Eligible Purchaser in compliance with the Affordable Housing Agreement. (e) "Agreement" shall mean this Loan Agreement. ' .(f) "Bank" shall mean the maker of the Bank Loan. (9) "Bank Loan" shall mean the construction loan obtained by the Developer from a private institutional lender, to pay for costs of construction of the Affordable Units not paid from the City Loan. (h) "City" shall mean the City of carlsbad, a municipal corporation. (i) IlCity Loan" shall mean the loan for the amount of Four Hundred Fifty-Three Thousand Six Hundred Dollars ($453,600) by the City to the Developer pursuant to this Agreement. (j) nCity/Homebuyer Second Mortgage Loan1' shall mean the carryback financing provided by the Developer to Eligible purchasers and assigned by the Developer to the City. city/Homebuyer Second Mortgage Loan shall be evidenced by an Eligible Buyer Note and secured by an Eligible Buyer Deed of Trust. Each (k) "Default" shall have the meaning set forth in section 5.1 below. (1) l1Developer Deed of Trust" shall mean the deed of trust to be placed on the portion of the property where the Developer will construct the Affordable Units, in substantially the form shown in the attached Exhibit C, securing the Developer Note and naming the City as beneficiary. in substantially the form shown in the attached Exhibit: B, in the principal amount of . Seventy-five Thousand Dollars ($75,000) (m) "Developer Note" shall mean the promissory note, .. . evidencing the City Loan. (n) Improvements. nDevelopment" shall mean the.Property and the (0) "Direct City Subsidy Amount" shall mean the $10,800 increment of the City Loan attributable to each Affordable Unit. (p) "Eligible Buyer" shall mean a Lower Income Household purchasing an Affordable Unit. (q) "Eligible Buyer Deed of Trust" shall mean the deed of trust held by the City to secure payment of an Eligible Buyer Note executed and delivered to the City by the Eligible Buyer of an Affordable Unit, in the form attached hereto as Exhibit E. note, in the'form attached hereto as Exhibit D, executed and delivered.to the City by an Eligible Buyer of a Affordable Unit. (r) "Eligible Buyer Noten shall mean the promissory (SI "Hazardous Materialsii shall have the meaning set forth in Section 4.5 below. (t) "Hazardous Materials Claim" shall have the meaning set forth in Section 4.5 below. (u) "Hazardous Materials Lawii shall have the meaning set forth in Section 4.5 below. (VI "Improvements" shall mean the approximately . -. - thirty-five 435*9-. residential units to be constructed on the Property, as well as all landscaping, roads, and parking spaces appurtenant to such units. 1010\03\101710.01 2 (w) "Intercreditor Agreement" shall mean the Intercreditor Agreement to be entered into by and among the City, the Bank, and the Developer pursuant to Section 2.6 of this Agreement. (x) "Loan Documentsii shall mean the following documents: (i) the Developer Note; (ii) the Developer Deed of Trust; (iii) the Affordable Housing Agreement and (iv) this Agreement. (y) IILower Income Householdii shall mean a household with an annual income, adjusted for actual household size, that is no greater than eighty percent (80%) of Median Income. income for households in San Diego County, California, as adjusted for household size, as published periodically by the United States Department of Housing and Urban Development ("HUD"). In the event such income determinations are no longer published by HUD, or are not updated for a period of at least eighteen (18) months, the City shall provide the Developer with other income determinations which are reasonably similar with respect to method of calculation to those previously published by HUD . (z) "Median Income" shall mean the median gross yearly (aa) "Parties" shall mean the City and the Developer. (bb) "Primary Affordability Subsidy" shall have the meaning set forth in Section 2.4.2 of the Affordable Housing Agreement. (cc) IIProperty" shall mean the property on which the Developer shall construct the Improvements, as more particularly described in the attached Exhibit A. (ad) I1Schedule of Performance" shall mean the schedule of performance set forth in Section 2.2 of the Affordable Housing Agreement. (ee) irTermn shall mean the thirty-six (36) month term of the Loan, commencing on the date of recordation of the Deed of Trust and continuing for thirty-six (36) months thereafter. (ff) "Transfer" shall have the meaning set forth in Section 4.9 below. (gg) "Unit" shall mean a housing unit located within the Development. 1010\03\101710.01 3 Section 1.2 Exhibits The following exhibits are attached to this Agreement and incorporated into this Agreement by this reference: EXHIBIT A-1: Legal Description of the Property EXHIBIT A-2: Legal Description of the Affordable Development Property EXHIBIT B: EXHIBIT C: EXHIBIT D: EXHIBIT E: Form of the Developer Note Form of the Developer Deed of Trust Form of Eligible Buyer Note Form of Eligible Buyer Deed of Trust ARTICLE 2: LOAN PROVISIONS Section 2.1 Loan. The City shall loan to the Developer the Loan in the principal amoupt of SeventY-five Tho-usand Dollars- ($75,000)' this Agreement. The obligation of the Developer to repay the Loan shall be evidenced by the Developer Note in substantially the form attached to this Agreement as Exhibit B. section 2.2 Interest. . L.,.- -* for the purposes set forth in Section 2-13 of The Loan shall not bear interest; provided, however, if a Default is declared by the City, the Loan shall bear interest, commencing on the date of declaration of the Default, at the default rate equal to the lesser of ten percent (io%), compounded annually or the maximum rate permitted by law. Section 2.3 Use of Loan Funds. The Developer shall use the City Loan to pay for a portion of costs associated with construction of the Affordable Units. The Developer shall not use the City Loan funqs for any other purpose without the prior written consent of the City. Section 2.4 Security. Loan, as evidenced by the Developer Note, by signing and delivering to the City the Developer Deed of Trust in substantially the form attached to this Agreement as Exhibit C. The Developer shall secure its obligati'on to repay the City 1010\03\101710.01 4 Section 2.5 Disbursement of Loan Proceeds. (a) The City shall have no obligation to disburse any portion of the City Loan unless the following conditions have been satisfied and continue to be satisfied: (i) The Developer has signed and delivered to the City the Developer Note in substantially the form attached to this Agreement as Exhibit B and the Developer Deed of Trust in substantially the form attached to this Agreement as Exhibit C. (ii) The Developer Deed of Trust has been recorded against the Affordable Development Property in the Office of the Recorder of the County of San Diego. (iii) A title insurer reasonably acceptable to the City is unconditionally and irrevocably committed to issuing a CLTA Lender's Policy of insurance insuring the priority of the City Deed of Trust in the amount of the City Loan, subject only to such exceptions and exclusions as may be reasonably acceptable to the City and containing such endorsements as the City may reasonably require. securing the Bank Loan as a prior exception to title. The City agrees to accept the deed of trust (iv) The Developer has furnished the City with evidence of the insurance coverage required pursuant to Section 4.4 below. (v) The City has received a good standing certificate issued by the California Secretary of State's office indicating that the Developer exists in good standing at the time of the proposed disbursement, as well as a copy of a corporate resolution indicating that Developer has duly authorized entry into and performance under this Agreement. (vi) The Developer has certified in writing to the City that the City Loan, together with the Bank Loan and any other financing obtained by the Developer, is projected to be sufficient to pay all development costs of the Affordable Units. (vii) The Developer has received all land use, subdivision, and building permits necessary to construct the Affordable Units. (viii) The closing of the Bank Loan shall be completed and the City, the Bank, and the Developer shall have executed an Intercreditor Agreement as provided in Section 2.6 below. Prior to such closing, the City and the Developer shall cooperate in good faith with the Bank and shall make changes to the terms and conditions of this Agreement (including the determine are reasonable. require, and which the Developer 1010\03\101710.01 15 (b) Upon satisfaction of the conditions set forth above, and if required by the Intercreditor Agreement described in Section 2.6, the City shall deposit the entire proceeds of the City Loan with the Bank for disbursal by the Bank from time to time pursuant to the Intercreditor Agreement. Section 2.6 Intercreditor Aqreement As set forth in Section 2.5(a) (viii) above, the City, the Bank, and the Developer shall enter into an Intercreditor Agreement as a condition of closing the City Loan. Intercreditor Agreement shall set forth the agreement between the parties regarding the following issues: The (a) the deposit of the City Loan proceeds with the Bank for disbursement by the Bank, including the interest rate to be earned by the City on its funds prior to disbursement by the Bank. (b) the procedure for disbursement by the Bank of the City Loan proceeds, including the order of disbursement of City Loan proceeds and Bank Loan proceeds. (c) the provision to the City of notice of any default by Developer under the Bank Loan documents, and the nature and extent of the City's cure rights, including the right of the City to foreclose on the City Deed of Trust, succeed to Developer under the Bank Loan (or assign its right to do so to another developer), and complete the Affordable Units. (d) the treatment of any undisbursed portion of City Loan proceeds in the event of default by the Developer under the City Loan and/or the Bank Loan. Section 2.7 Subordination. The City shall execute such documents as may be necessary to subordinate the priority of the City Deed of Trust to the lien of the deed of trust securing the Bank Loan. The subordination documents shall provide the City with reasonably adequate notice and cure rights to enable the City to avoid foreclosure of a senior deed of trust. Section 2.8 Term and Repayment Schedule. The Loan shall be repaid as follows: (a) Upon sale of an Affordable Unit to an Eligible Buyer, the Developer shall carry back second mortgage financing to the Eligible Buyer in an amount equal to the Primary Affordability Subsidy for the Affordable Unit, as established pursuant to the Affordable Housing Agreement. 3010\03\101710.01 6 The Developer shall assign its interest in such second mortgage financing to the City, and shall require that the Eligible Buyer sign, at close of escrow on the purchase of the Affordable Unit, the Eligible Buyer Note and the Eligible Buyer Deed of Trust for the benefit of the City. Note and the Eligible Buyer Deed of Trust, and the recordation of the Eligible Buyer Deed of Trust against the Affordable Unit, the city shall credit the DevelODer with repayment of Fifteen Thousand Dollars ($15,000) . . - of the City Loan. The City and the Developer acmowledge that the principal amount of the Eligible Buyer Note to the City shall be equal to the Primary Affordability Subsidy, which includes the value to the Eligible Purchaser of the City's inclusionary housing restrictions pursuant to the Affordable Housing Agreement and will therefore be greater in principal amount than the Direct Citv Subsidy Amount of Fifteen Thousand Dollars ($15,000) .I but nevertheless agree that only the Direct City subsidy Amount of Fifteen Thousand Dollars ($15,000) shall be credited toward repayment of the City Loan. Upon the execution of the Eligible Buyer (b) Upon the sooner of the date of expiration of the Term, the date of an unauthorized Transfer of the Development, or Developer's Transfer of the last Affordable Unit still owned by the Developer, all principal remaining unpaid or uncredited shall be due and payable. (c) At the time of sale of an Affordable Unit to an Eligible Buyer, the City shall execute a partial reconveyance of the Developer Deed of Trust to release the Affordable Unit being sold from the lien of the Developer Deed of Trust. Upon the sale of all Affordable Units in compliance with the Affordable Housing Agreement, the City shall entirely reconvey the Developer Deed of Trust . (dl The Developer may pay the principal and any interest due the City underthe Developer Note prior to or in advance of the time for payment thereof as provided in the Developer Note, without penalty. However, the provisions of this Agreement and;qe Affordable Housing Agreement will be applicable to the Development even though Developer may have prepaid the Developer Note,-.including the requirement that a minimum of execite City Second Mortgage Loan documents. . (5) of the Units shall be sold to Eligible Buyers who Section 2.9 Assumption. Subject to Section 4.9 below, the Developer Note shall not be assumable by successors and assigns of Developer without the prior written consent of the City, which consent shall not be withheld unreasonably. 1010\03\101710.01 7 Section 2.10 ARRrova1 of Additional Financinq. The Developer shall not place any additional encumbrances on the Affordable Development Property without the prior written consent of the City, which consent shall not be withheld unreasonably. with the Bank Loan. The City consents to encumbrances in connection ARTICLE 3: CONSTRUCTION OF THE DEVELOPMENT Section 3.1 Schedule of Performance. compliance with the Schedule of Performance. The Developer shall develop the Affordable Development in Section 3.2 Construction Pursuant to Plans and Laws. (a) The Developer shall construct the Affordable Development in conformance with the construction drawings approved by the City in connection with approval of a building permit for the Development. (b) The Developer shall cause all work performed in connection with the Affordable Development to be performed in compliance with (i) all applicable laws, ordinances, rules and regulations of federal, state, county or municipal governments or agencies now in force or that may be enacted hereafter, and (ii) all directions, rules and regulations of any fire marshal, health officer, building inspector, or other officer of every governmental agency now having or hereafter acquiring jurisdiction. The work shall proceed only after procurement of each permit, license, or other authorization that may be required by any governmental agency having jurisdiction, and the Developer shall be responsible to the City for the procurement and maintenance thereof, as may be required of the Developer and all entities engaged in work on the Affordable Development. shall be performed by persons or entities licensed or otherwise authorized to perform the applicable construction work or service in the State of California. (c) All construction work and professional services (d) The Developer shall be solely responsible for all aspects of the Developer’s conduct in connection with the Affordable Development, including (but not limited to) the quality and suitability of the construction drawings, the supervision of construction work, and the qualifications, financial condition, and performance of all architects, engineers, contractors, subcontractors, suppliers, consultants, and property managers. Any review or inspection undertaken by the City with reference to the Affordable Development is solely 1010\03\101710.01 8 for the purpose of determining whether the Developer is properly discharging its obligations to the City, and should not be relied upon by the Developer or by any third parties as a warranty or representation by the City as to the quality of the design or construction of the Affordable Development. Section 3.3 Equal Opportunity. During the construction of the Affordable Development there shall be no discrimination on the basis of race, color, creed, religion, age, disability, sex, sexual orientation, marital status, national origin, or ancestry, in the hiring, firing, promoting, or-demoting of any person engaged in the construction work. Section 3.4 Mechanics Liens, Stop Notices, and Notices of Completion. (a) If any claim of lien is filed against the Property or the Affordable Development or a stop notice affecting the City Loan is served on the City or any other lender or other third party in connection with the Affordable Development, then the Developer shall, within twenty (20) days after such filing or service, either pay and fully discharge the lien or stop notice, effect the release of such lien or stop notice by delivering to the City a surety bond in sufficient form and amount, or provide the City with other assurance satisfactory to the City that the claim of lien or stop notice will be paid or discharged. (b) If the Developer fails to discharge any lien, encumbrance, charge, or claim in the manner required in Section 3.4(a), then in addition to any other right or remedy, the City may (but shall be under no obligation to) discharge such lien, encumbrance, charge, or claim at the Developer's expense. Alternately, the City may require the Developer to immediately deposit with the City the amount necessary to satisfy such lien or claim and any costs, pending resolution thereof. use such deposit to satisfy any claim or lien that is adversely determined against the Developer. The City may (c) The Developer shall file a valid notice of cessation or notice of completion upon cessation of construction on the Affordable Development for a continuous period of thirty (30) days or more, and take all other reasonable steps to forestall the assertion of claims or lien against the Affordable Development. The City may (but has no obligation to) record any notices of completion or cessation of labor, or any other notice that the City deems necessary or desirable to protect its interest in the Affordable Development. 1010\03\101710.01 9 ARTICLE 4: REQUIREMENTS DURING AND AFTER CONSTRUCTION Section 4.1 Information. The Developer shall promptly provide any informatior reasonably requested by the City in connection with the Affordable Development. Section 4.2 Records. The Developer shall maintain complete, accurate, and 'chrent records pertaining to the Affordable Development for a period of. five (5) years after the creation of such records, and shall permit any duly authorized representative of the City to inspect and copy records, including records pertaining to income and household size of purchasers of the Affordable Units. records shall include records regarding the occupancy and sales price of the Affordable Units, as well as records that accurately and fully show the date, amount, purpose, and payee of all expenditures drawn from Loan funds. Such records shall also include all invoices, receipts, and other documents related to expenditures from the Loan funds. Records shall be maintained accurately and shall be kept current. Section 4.3 InsDections. Such The Developer shall.permit and facilitate, and shall require its contractors to permit and facilitate, observation and inspection at the Affordable Development by the City and by public authorities during reasonable business hours for the purposes of determining compliance with this Agreement. Section 4.4 Insurance. Throughout the period of Developer's ownership of any portion of the Affordable Development, Developer shall maintain the following insurance policies: Employer's Liability coverage, with limits no't less than One Million Dollars ($1,000,000) each accident, if required by law or if the Developer has employees. (a) Worker's Compensation insurance, including (b) Comprehensive General Liability insurance with limits not less than Five Million Dollars ($5,000,000) each occurrence combined single limit for Bodily Injury and Property Damage, including coverages for Contractual Liability, Personal Injury, Broadform Property Damage, Products and Completed Operations. (c) limits not less than One Million Dollars ($i,ooo,ooO) each Comprehensive Automobile Liability insurance with 1010\03\101710.01 10 occurrence combined single limit for Bodily Injury and Property Damage, including coverages for owned, non-owned and hired vehicles, as applicable. However, if the Developer does not own or lease vehicles for purposes of this Agreement, then no automobile insurance shall be required. (d) Property insurance covering all real and personal (non-expendable) property leased or purchased in whole or in part with Loan proceeds, in form appropriate for the nature of such property, covering all risks of loss, including earthquake and flood (if the Property is located within a flood zone), for 100% of the replacement value, with deductible, if any, acceptable to the City, naming the City as a Loss Payee, as its interests may appear. (e) The Developer shall cause any general contractor or agent working on the Affordable Development under direct contract with the Developer to maintain insurance of the types and in at least the minimum amounts described in Sections 4.4(a), (b) and (c), and shall require that such insurance meet all of the general requirements of Sections 4.4 (f) , (9) , and (h) . Liability and Comprehensive Automobile Liability insurance to be maintained by such general contractor and agents pursuant to this subsection shall name as additional insureds the City, its officers, agents, employees, and members of the City Council. The Developer shall cause the conditions in this Section 4.4(e) to continue to be satisfied at all times after the disbursement of any City Loan funds and before sale of all Affordable Units in compliance with the Affordable Housing Agreement. occurrence form, and Developer shall maintain such coverage continuously until all Affordable Units are sold. (f) The required insurance shall be provided under an (9) Comprehensive General Liability, Comprehensive Automobile Liability and Property insurance policies shall be endorsed to name as additional insured the City and its officers, agents, and employees, as well members of the City Council. (h) All policies and bonds shall be endorsed to provide thirty (30) days prior written notice of cancellation, reduction in coverage, or intent not to renew to the address established for notices to the City. Section 4.5 Hazardous Materials. (a) The Developer shall keep and maintain the Development in compliance with, and shall not cause or permit the Development to be in violation of, any federal, state or local laws, ordinances or regulations relating to industrial hygiene or to the environmental conditions on, under or about the Development including, but not limited to, soil and ground water 1010\03\101710.01 11 conditions. The Developer shall not use, generate, manufacture, store or dispose of on, under, or about the Affordable Development or transport to or from the Affordable Development any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials, including without limitation, any substances defined as or included in the definition of "hazardous substances, "hazardous wastes, I1hazardous materials, federal or state laws or regulations (collectively referred to hereinafter as iiHazardous Materialsii) except such of the foregoing as may be customarily kept and used in and about multifamily residential property. or lltoxic substances" under any applicable (b) The Developer shall immediately advise the City in writing if at any time it receives written notice of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against the Developer or the Affordable Development pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials (ilHazardous Materials Lawll); (ii) all claims made or threatened by any third party against the Developer or the Affordable Development relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above are hereinafter referred to as liHazardous Materials Claims"); and (iii) the Developer's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Affordable Development that could cause the Affordable Development or any part thereof to be classified as I1border-zone property" under California Health and Safety Code Sections 25220 & seq. or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Affordable Development Property under any Hazardous Materials Law. (c) The City shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to have its reasonable attorneys' fees in connection therewith paid by the Developer. The Developer shall indemnify, defend (with counsel reasonably chosen by the City, at the City's option), and hold harmless the City and its officers, councilmembers, employees, and agents from and against, any loss, damage, cost, expense, or liability directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence of Hazardous Materials on, under, or about the Affordable Development, including (without limitation) : (i) all foreseeable consequential damages; (ii) the costs of any required or necessary repair, cleanup, or detoxification of the Affordable Development and the preparation and implementation of any 1010\03\101710.01 12 closure, remedial, or other required plans; and (iii) all reasonable costs and expenses incurred by the City in connection with clauses (i) and (ii), including (but not limited to) reasonable attorneys' fees. This paragraph shall survive termination of this Agreement. (d) Without the City's prior written consent, which shall not be unreasonably withheld, the Developer shall not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Affordable Development, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in the City's reasonable judgement, impair the value of the City's security hereunder. However, the City's prior consent shall not be necessary if the presence of Hazardous Materials on, under, or about the Affordable Development either poses an immediate threat to the health, safety or welfare of any individual, or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain the City's consent before taking such action, provided that in such event the Developer shall notify the City as soon as practicable of any action so taken. its consent, where consent is required hereunder, if either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) the Developer will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; or (iii) the Developer establishes to the reasonable satisfaction of the City that there is no reasonable alternative to such remedial action.which would result in less impairment of the City's security hereunder. The City shall not withhold (e) The Developer acknowledges and agrees that (i) this Section 4.5 is intended as the City's written request for information (and the Developer's response) concerning the environmental condition of the Affordable Development as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Agreement (together with any indemnity obligation applicable to a breach of or such representation and warranty) with respect to the environmental condition of the Affordable Development is intended by the Parties to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. Section 4.6 Fees and Taxes. During the period of ownership of the Affordable Development by the Developer, the Developer shall be solely responsible for payment of all fees, assessments, taxes, charges, and levies imposed by any public authority or utility company with respect to the Development or portion thereof owned by the Developer, and shall pay such charges prior to delinquency. However, the 1010\03\101710.01 13 . Developer shall not be required to pay and discharge any such charge so long as (a) the legality thereof is being contested diligently and in good faith and by appropriate proceedings, and (b) if requested by the City, the Developer deposits with the City any funds or other forms of assurance that the City in good faith from time to time determines appropriate to protect the City from the consequences of the contest being unsuccessful. Section 4.7 Nondiscrimination. The Developer covenants by and for itself and its successors and assigns.that there shall be no discrimination against or segregation of a person or of a group of persons on account of race, color, religion, creed, age, disability, sex, sexual orientation, marital status, ancestry or national origin in the sale, transfer, use, occupancy, or enjoyment of any Affordable Unit, nor shall the Developer or any person claiming under or through the Developer establish or permit any such practice or practices of discrimination or segregation. The foregoing covenant shall run wit,@ the land. Section 4.8 Notice of Litisation. During the period of ownership of the Affordable Development by the Developer, the Developer shall promptly notify the City in writing of any litigation affecting the Developer or the Development and of any claims or disputes that involve a material risk of litigation. Section 4.9 Transfers. (a) The qualifications and identity of the Developer are of particular concern to the City. qualifications and identity that the City has entered into this Agreement with the Developer. The City shall have no obligation to perform hereunder if any voluntary or involuntary successor in interest of the Developer shall acquire any rights or powers under this Agreement except as expressly set forth herein. The City may terminate this Agreement upon the occurrence of a Transfer prohibited by subsection (b). The City shall approve a proposed Transfer if the Developer is transferring the entire Property to the transferee and the City reasonably determines that the proposed transferee possesses the qualifications, development experience and financial capability necessary and adequate to fulfill the obligations undertaken in this Agreement and the Affordable Housing Agreement by the Developer. No Transfer shall be permitted prior to repayment of the City Loan in full or prior to sale of all Affordable Units in compliance with the Affordable Housing Agreement without the prior written consent of the City, which the City shall grant or withhold in accordance with the standard set forth in subsection It is because of those (b) 1010\03\101710.01 14 (d) above. Pursuant to Section 2.8 (b) above, the City Loan shall automatically accelerate and be due in full upon any Transfer for which prior written City approval has not been obtained. (c) For purposes of this Agreement, "Transfer" shall mean, except as excluded by the provisions of subsection (b), any sale, assignment, or transfer, whether voluntary or involuntary, of (i) any rights and/or duties under this Agreement, and/or (ii) any interest in the Development, including (but not limited to) a fee simple interest, a joint tenancy interest, a life estate, a partnership interest, a leasehold interest, a security interest, or an interest evidenced by a land contract by which possession of the Development is transferred and the Developer retains title. transfers that would otherwise be Transfers under subsection (a) : (d) The term "Transfer" shall exclude the following (i) the assignment of this Agreement (and the transfer of the Development) to a corporation controlled by the Developer, or to a partnership or joint venture in which the Developer, or an entity controlled by the Developer, is a general partner and is in control thereof; (ii) the admission of additional new general or limited partners, or the substitution or deletion of partners to any partnership or joint venture set forth in (i) above so long as the Developer, or an entity controlled by the Developer, continues in control; (iii) the granting of easements, licenses or permits to facilitate the development of the Development; (iv) the granting of any security interest in the Development or other financing arrangement for the purposes of securing the Bank Loan or other financing or the transfer of such security interests to another entity; *(VI the transfer or conveyance of all or any portion of the Development by foreclosure-of a mortgage or deed of trust or by transfer in-lieu-of foreclosure thereof, and a subsequent transfer or conveyance of all or any portion of the Development to a third party transferee. (vi) the sale or transfer of individual Units in the Development to homebuyers in compliance with the Affordable Housing Agreement. (e) In the absence of specific written agreement by the City, or except to a transferee otherwise authorized in this Agreement (whereupon the transferor-assignor shall be relieved Of its obligations hereunder) , no Transfer (whether authorized or 1010\03\101710.01 15 unauthorized) shall be deemed to relieve the Developer or any other party of any obligations under this Agreement. ARTICLE 5: DEFAULT Section 5.1 Events of Default. Each of the following shall constitute a iiDefaultn by Developer under this Agreement: (a) Failure to Make Payment. Failure to make prompt (b) Breach of Covenants. Failure by the Developer to payments of the principal on the Developer Note when due; duly perform, comply with, or observe any of the conditions, terms, or covenants of any of the Loan Documents (other than a monetary default as described in paragraph (a) above). If such a non-monetary event of default occurs under the terms of the Loan Documents, unless automatic acceleration is provided for hereunder, prior to exercising any remedies thereunder, the City shall give the Developer written notice of such default and the Developer shall have thirty (30) days (unless an alternative time period is specified hereunder, in which event such alternate cure period shall apply) to effect a cure prior to exercise of remedies by the City. (c) Insolvency. A court having jurisdiction shall have made or entered any decree or order (i) adjudging the Developer to be bankrupt or insolvent, (ii) approving as properly filed a petition seeking reorganization of the Developer or seeking any arrangement for the Developer under the bankruptcy law or any other applicable debtor's relief law or statute of the United States or any state or other jurisdiction, (iii) appointing a receiver, trustee, liquidator, or assignee of the Developer in bankruptcy or insolvency or for any of their properties, or (iv) directing the winding up or liquidation of the Developer, or the Developer shall have admitted in writing its inability to pay its debts as they fall due or shall have voluntarily submitted to or filed a petition seeking any decree or order of the nature described in clauses (i) to (iv), inclusive. The occurrence of any of the events of Default in this Section S.l(c) shall act to accelerate automatically, without the need for any notice or action by the City, the indebtedness evidenced by the Developer Note. (d) Assiqnment: Attachment. The Developer, by reason of a default under its obligations to creditors, has assigned its assets for the benefit of its creditors or suffered a . sequestration or attachment of or execution on any substantial part of its property; provided that Developer shall have sixty (60) days to cure any sequestration, attachment, or execution not 1010\03\101710.01 16 consented to by Developer. The occurrence of any of the events of Default in this Section S.l(d) shall act to accelerate automatically, without the need for any notice or action by the City, the indebtedness evidenced by the Developer Note. voluntarily suspended its business or, if Developer is a partnership, the partnership shall have been dissolved or terminated. (e) Suspension; Termination. The Developer shall have (f) Liens on the Development. There shall be filed any claim of lien (other than the deed(s) of trust and other security instruments in connection with the Bank Loan lien approved in writing by the City) against the Affordable Development or any part thereof, or any interest or right made appurtenant thereto, or the service of any notice to withhold proceeds of the City Loan, and such claim of lien or notices to withhold is maintained for a period of forty-five (45) days without discharge or satisfaction thereof or provision therefor satisfactory to the City. (9) Condemnation. The condemnation, seizure, or appropriation of all or, in the opinion of the City, a substantial part of the Affordable Development. (h) Defaults Under Other Loans. Any default declared by the lender under any loan document related to the Bank Loan or other loan secured by the Affordable Development Property, which default is not cured by the Developer following the expiration of applicable notice and cure periods under the Bank Loan Documents or other loan document, shall act to accelerate automatically, without the need for any notice or action by the City, the indebtedness evidenced by the Developer Note. (i) Breach of Representation. Any representation or warranty of Developer to the City was materially incorrect when made. Section 5.2 Remedies. The occurrence of any Default will either at the option of the City, or automatically where so specified, relieve the City of any obligation to make or continue the City Loan and shall give the City the right to proceed with any and all remedies set forth in this Agreement and the Loan Documents, including but not limited to the following: have the right to cause all indebtedness of the Developer to the City under this Agreement and the Developer Note to become immediately due and payable, with interest accruing on the principal amount from the date of acceleration to the date of (a) Acceleration of Developer Note. The City shall 1010\03\101710.01 17 repayment at an interest rate equal to the interest rate on the Bank Loan. The Developer waives all right to presentment, demand, protest or notice of protest or dishonor. The City may proceed to enforce payment of the indebtedness and to exercise any or all rights afforded to the City as a creditor and secured party under the law including the Uniform Commercial Code, including foreclosure under the City Deed of Trust. Developer shall be liable to pay the City on demand all expenses, costs and fees (including, without limitation, attorney's fees and expenses) paid or incurred by the City in connection with the collection of the City Loan and the preservation, maintenance, protection, sale, or other disposition of the security given for the Loan. The (b) Specific Performance. The City shall have the right to mandamus or other suit, action or proceeding at law or in equity to require the Developer to perform its obligations and covenants under the Loan Documents or to enjoin acts on things which may be unlawful or in violation of the provisions of the Loan Documents. (c) Risht to Cure at the DeveloPer's Expense. The City shall have the right to cure any monetary default by the Developer under a loan other than the City Loan. The Developer shall reimburse the City for any funds advanced by the City to cure a monetary default by Developer upon demand therefor, together with interest thereon at the rate of interest equal to the rate of interest on the Bank Loan from the date of expenditure until the date of reimbursement. Section 5.3 Remedies Cumulative. No right, power, or remedy given to the City by the terms of this Agreement or the Loan Documents is intended to be exclusive of any other right, power, or remedy; and each and every such right, power, or remedy shall be cumulative and in addition to every other right, power, or remedy given to the City by the terms of any such instrument, or by any statute or otherwise against the Developer and any other person. nor any delay on the part of the City to exercise any such rights and remedies shall operate as a waiver thereof, nor shall any single or partial exercise by the City of any such right or remedy preclude any other or further exercise of such right or remedy, or any other right or remedy. Neither the failure Section 5.4 Waiver of Terms and Conditions. The City's Housing and Redevelopment Director may at his or her discretion waive in writing any of the obligations of the Developer under this Agreement, without the Developer completing an amendment to this Agreement. breach by Developer hereunder shall be implied from any omission No waiver of any default or 1010\03\101710.01 18 by the City to take action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the waiver, and such waiver shall be operative only for the time and to the extent therein stated. Waivers of any covenant, term, or condition contained herein shall not be construed as a waiver of any subsequent breach of the same covenant, term, or condition. The consent or approval by the City to or of any act by the Developer requiring further consent or approval shall not be deemed to waive or render unnecessary the consent or approval to or of any subsequent similar act. power, or remedy shall in no event constitute a cure or a waiver of any default under this Agreement or the Loan Documents, nor shall it invalidate any act done pursuant: to notice of default, or prejudice the City in the exercise of any right, power, or remedy hereunder or under the Loan Documents, unless in the exercise of any such right, power, or remedy all obligations of the Developer to City are paid and discharged in full. The exercise of any right, ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF DEVELOPER 6.1 Representations and Warranties. Developer hereby represents and warrants to the City as follows: (a) Orsanization. Developer is duly organized, validly existing and in good standing under the laws of the State of California and has the power and authority to own its property and carry on its business as now being conducted. (b) Authoritv of Developer. Developer has full power and authority to execute and deliver this Agreement and to make and accept the borrowings contemplated hereunder, to execute and deliver the City Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, and to perform and observe the terms and provisions of all of the above. (c) Authority of Persons Executins Documents. This Agreement and the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement have been executed and delivered by persons who are duly authorized to execute and deliver the same for and on behalf of Developer, and all actions required under Developer’s organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement and the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, have been duly taken. 1010\03\101710.01 19 (d) Valid Bindins Asreements. This Agreement and the Loan Documents and all other documents or instruments which have been executed and delivered pursuant to or in connection with this Agreement constitute or, if not yet executed or delivered, will when so executed and delivered constitute, legal, valid and binding obligations of Developer enforceable against it in accordance with their respective terms. (e) No Breach of Law or Asreement. Neither the execution nor delivery of this Agreement and the Loan Documents or of any other documents or instruments executed and delivered, or to be executed or delivered, pursuant to this Agreement, nor the performance of any provision, condition, covenant or other term hereof or thereof, will conflict with or result in a breach of any statute, rule or regulation, or any judgment, decree or order of any court, board, commission or agency whatsoever binding on Developer, or any provision of the organizational documents of Developer, or Will conflict with or constitute a breach of or a default under any agreement to which Developer is a party, or will result in the creation or imposition of any lien upon any assets or property of Developer, other than liens established pursuant hereto. (f) Pendins Proceedinss. Developer is not in default under any law or regulation or under any order of any court, board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of Developer, threatened against or affecting Developer or the Development, at law or in equity, before or by any court, board, commission or agency whatsoever which might, if determined adversely to Developer, materially affect Developer’s ability to repay the City Loan or impair the security to be given to the City pursuant hereto. (9) Financial Statements. The financial statements of Developer and other financial data and information furnished by Developer to the City fairly present the information contained therein. As of the date of this Agreement, there has not been any adverse, material change in the financial condition of Developer from that shown by such financial statements and other data and information. (h) Sufficient Funds. Developer holds sufficient funds and/or binding commitments for sufficient funds to complete the construction of Affordable Development in accordance with the plans and specifications approved by the City. 1010\03\101710.01 20 ARTICLE 7: GENERAL PROVISIONS Section 7.1 Relationship of Parties. Nothing contained in this Agreement shall be interpreted or understood by any of the Parties, or by any third persons, as creating the relationship of employer and employee, principal and agent, limited or general partnership, or joint venture between the City and the Developer or its agents, employees or contractors, and the Developer shall at all times be deemed an independent contractor and shall be wholly responsible for the manner in which it or its agents, or both, perform the services required of it by the terms of this Agreement. and retains the right to exercise full control of employment, direction, compensation, and discharge of all persons assisting in the performance of services under the Agreement. In regards to the construction of the Improvements and sale of the Units, the Developer shall be solely responsible for all matters relating to payment of its employees, including compliance'with Social Security, withholding, and all other laws and regulations governing such matters, and shall include requirements in each contract that contractors shall be solely responsible for similar matters relating to their employees. solely responsible for its own acts and those of its agents and employees. The Developer has The Developer shall be Section 7.2 No Claims. Nothing contained in this Agreement shall create or justify any claim against the City by any person that the Developer may have employed or with whom the Developer may have contracted relative to the purchase of materials, supplies or equipment, or the furnishing or.the performance of any work or services with respect to the' construction or sale of the Affordable Units, and the Developer shall include similar requirements in any contracts entered into for the construction or sale of the Affordable Units. Section 7.3 Amendments. No alteration or variation of the terms of this Agreement shall be valid unless made in writing by the Parties. Section 7.4 Indemnification. Developer shall indemnify, defend, and hold harmless (without limit as to amount) City and its elected officials, officers, employees and agents in their official capacity (hereinafter collectively referred to as "Indemnitees"), and any of them, from and against all loss, all risk of loss and all damage (including expense and attorneys fees) sustained or incurred because of or by reason of any and all claims, demands, 1010\03\101710.01 21 suits, actions, judgments and executions for damages of any and every kind and by whomever and whenever made of obtained, allegedly caused by, arising out of or relating in any manner to Developer's actions or defaults pursuant to this Agreement, or construction of the Development and sale of any Units, and shall protect and defend Indemnitees, and any of them with respect thereto. The provisions of this Section 7.4 shall survive the expiration of the Term of the termination of this Agreement. Section 7.5 Non-Liability of Citv Officials, Employees and Aqents. No member, official, employee or agent of the City shall be personally liable to the Developer in the event of any default or breach by the City or for any amount which may become due to the Developer or its successor or on any obligation under the terms of this Agreement. Section 7.6 No Third Party Beneficiaries. There shall be no third party beneficiaries to this Agreement. Section 7.7 Discretion Retained BY City. The City's execution of this Agreement in no way limits the discretion of the City in the permit and approval process in connection with the Development. Section 7.8 Notices, Demands and Communications. Formal notices, demands, and communications between the Parties shall be sufficiently given if and shall not be deemed given unless dispatched by registered or certified mail, postage prepaid, return receipt' requested, or delivered by express delivery service, return receipt requested, or delivered personally, to the principal office of the Parties as follows: City: City of Carlsbad Housing and Community Development Department 2965 Roosevelt Street, Suite B Carlsbad, CA 92008-2389 Attention: Housing and Redevelopment Director 1010\03\101710.01 22 Developer: Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected Party may from time to time designate by mail as provided in this Section 7.8. Receipt shall be deemed to have occurred on the date shown on a Written receipt as the date of delivery or refusal of delivery (or attempted delivery if undeliverable). Section 7.9 Applicable Law. This Agreement shall be governed by California law. - Section 7.10 Parties Bound; Covenants Runninq with the Land. Except as otherwise limited herein, the provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their heirs, executors, administrators, legal representatives, SUCCeSSOrS, and assigns. This Agreement is intended to run with the land and shall bind the Developer and its successors and assigns in the Land and the Development for the entire Term, and the benefit hereof shall inure to the benefit of the City and its successors and assigns. Section 7.11 Attorneys' Fees. If any lawsuit is commenced to enforce any of the terms of this Agreement, the prevailing Party will have the right to recover its reasonable attorneys' fees and costs of suit from the other Party. Section 7.12 Severabilitv. If any term of this Agreement is held by a court of competent jurisdiction to be invalid', void or unenforceable, the remainder of the provisions shall continue in full force and effect unless the rights and obligations of the Parties have been materially altered or abridged by such invalidation, voiding or unenforceability. Section 7.13 Force Majeure. In addition to specific provisions of this Agreement, performance by either Party shall not be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lock-outs; riots; floods; earthquakes; fires; quarantine 1010\03\101710~01 ' 23 restrictions; freight embargoes; lack of transportation; third party lawsuit; or court order; or any other similar causes beyond the control or without the fault of the Party claiming an extension of time to perform (but not including any inability by Developer to secure financing). such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause. If, however, notice by the party claiming such extension is sent to the other party more than thirty (30) days after the commencement of the cause, the period shall commence to run only thirty (30) days prior to the giving of such notice. AII extension of time for any Section 7.14 Approvals. Whenever this Agreement calls for City approval, consent, or waiver, the written approval, consent, or waiver of the City's Housing and Redevelopment Director shall constitute the approval, consent, or waiver of the City, without further authorization required from the City Council. The City hereby authorizes the City's Housing and Redevelopment Director to deliver such approvals or consents as are required by this Agreement, or to waive requirements under this Agreement, on behalf of the City. Section 7.15 Title of Parts and Sections. Any titles of the sections or subsections 'of this Agreement are inserted for convenience of reference only and shall be disregarded in interpreting any part of the Agreement's provisions. Section 7.16 Entire Understandins of the Parties. This Agreement constitutes the entire understanding and agreement of the Parties with respect to the Loan. Section 7.17 Multiple Oriqinals; Counterpart. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. Section 7.18 Time of the Essence. Time is of the essence in this Agreement. 1010\03\101710.01 24 as IN WITNESS WHEREOF, the Parties have executed of the date first above written. this Agreement Developer: By : Its: city: City of Carlsbad, a municipal corporation Its: 1010\03\101710.01 25 STATE OF CALIFORNIA 1 COUNTY OF On , 199-, before me, the undersigned, a Notary Public, personally appeared . , personally known to me (or proved to me on the basis of satisfactorv evidence) to be the person (s) whose name (s) is/are subscribed to- the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s1 on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. STATE OF CALIFORNIA 1 COUNTY OF 1 1 ss On , 199 - , before me, the undersigned, a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, .and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. 1010\03\101710.01 26 EXHIBIT C FORM OF THE DEVELOPER DEED OF TRUST 1010\03\101710.01 c-1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: city of Carlsbad City Clerk's Office 1200 Carlsbad Village Drive Carlsbad, CA 92008 Attention: City Clerk No fee for recording pursuant to Government Code Section 27383 DEED OF TRUST AND SECURITY AGREEMENT THIS DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust") , 199-, by and among ("Trustee"), and the City of Carlsbad, a -. -. - -. . - .- ?Py of .- is made as of this HERITAGE BUILDERS-INC. (nTrustor"), ,a municipal corporation ("Beneficiary") . FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably. grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's fee interest in the property located in the City of Carlsbad, County of San Diego, State of California, that is described in the attached Exhibit A, incorporated herein by this reference (the "Property"). law'and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including (without limiting the generality of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH all interest, estates or other claims, both in TOGETHER WITH any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of the Trustor now or hereafter affixed to or placed upon the Property; TOGETHER WITH all building materials and equipment now or hereafter delivered to said property and intended to be installed therein ; 1010\03\1018S0.01 1 TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the property, and any and all sidewalks, alleys and strips and areas of land adjacent to or used in connection with the Property; TOGETHER WITH all estate, interest, right, title, other claim or demand, of every nature, in and to such property, including the Property, both in law and in equity, including, but not limited to, all deposits made with or other security given by Trustor to utility companies, the proceeds from any or all of such property, including the Property, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire, any and all awards made for the taking by eminent domain or by any proceeding or purchase in lieu thereof of the whole or any part of such property, including without limitation, any awards resulting from a change of grade of streets and awards for severance damages to the extent Beneficiary has an interest in such awards for taking as provided in Paragraph 4.1 herein; and TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to said building or buildings in any manner. Together with all of Trustor's interest in all building materials, fixtures, equipment, work in process and other personal property to be incorporated into the Property; all goods, materials, supplies, fixtures, equipment, machinery, furniture and furnishings, signs and other personal property now or hereafter appropriated for use on the Property, whether stored on the Property or elsewhere, and used or to be used in connection with the Property; all rents, issues and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles, chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance and condemnation awards and proceeds, trade names, trademarks and service marks arising from or related to the Property and any business conducted thereon by Trustor; all replacements, additions, accessions and proceeds; and all books, records and files relating to any of the foregoing. 1010\03\101850.01 2 ~ll of the foregoing, together with the Property, is herein referred to as the "Security." To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever. FOR THE PURPOSE OF SECURING: (a) Payment of just indebtedness of Trustor to Beneficiary as set forth in the Note (defined in Article 1 below) until paid or cancelled. Said principal and other payments shall be due and payable as provided in the Note. Said Note and all its terms are incorporated herein by reference, and this conveyance shall secure any and all extensions thereof, however evidenced; and (b) Payment of any sums advanced by Beneficiary to protect the Security pursuant to the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein; and (c) Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents (defined in Section 1.2 below) . AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: ARTICLE 1 DEFINITIONS In addition to the terms defined elsewhere in this Deed of Trust, the following terms shall have the following meanings in this Deed of Trust: Section 1.1 The term "Affordable Housing Agreement" means I - 21 - v. -,- that certain Affordable Housing Agreement Imposing Restrictions February 3, 1997. and recorded as Instrument No.1997-0045122 the Official Records of San Diego County. on Real. Property between Trustor and Beneficiary dated Section 1.2 The term "Loan Agreement" means that certain Loan Agreement between Trustor and Beneficiary, dated Trustor Four Hundred Fifty Three Thousand Six Hundred Dollars ($453,600) for the construction of improvements on the Property. , providing for the Beneficiary to loan to the Section 1.3 The term "Loan Documents" means this Deed of Trust, the Note, the Affordable Housing Agreement, and the Loan Agreement and any other debt, loan or security instruments between Trustor and the Beneficiary relating to the Property. ~~10\03\101850.01 3 Section 1.4 The term "Noteff means the promissory note in --L- the princinal amount of Seventy-five Thousand Dollars ($75,000) .., of even date herewith executed by the Trustor in favor of the Beneficiary, the payment of which is secured by this Deed of Trust. with the Beneficiary and terms and provisions of the Note is incorporated herein by reference.) (including interest) required to be paid under the Note. -- -. (A copy of the Note is on file Section 1.5 The term ffPrincipal" means all amounts ARTICLE 2 MAINTENANCE'AND MODIFICATION OF THE PROPERTY AND SECURITY Section 2.1 Maintenance and Modification of the Property by Trustor. The Trustor agrees that at all times prior to full payment of the sum owed under the Note, the Trustor will, at the Trustor's own expense, maintain, 'preserve and keep the Security or cause the Security to be maintained and preserved in good condition. The Trustor will from time to time make or cause to be made all repairs, replacements and renewals deemed proper and necessary by it. any of these matters or for the making of improvements or additions to the Security. The Beneficiary shall have no responsibility in Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all claims for labor done and for material and services furnished in connection with the Security; diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation of labor on the work or construction on the Security for a continuous period of thirty (30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Security of any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary as its agent (said agency being coupled with an interest) with the authority, but without any obligation, to file for record any notices of completion or cessation of labor or any other notice that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the Loan Documents; provided, however, that Beneficiary shall exercise its rights as agent of Trustor only in the event that Trustor shall fail to take, or shall fail to diligently continue to take, those actions as hereinbefore provided. Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or claims as Beneficiary shall specify upon laborers, materialmen, subcontractors or other persons who have furnished or claim to have furnished labor, services or materials 4 in connection with the Security. require Trustor to pay any claims for labor, materials or services which Trustor in good faith disputes and is diligently contesting provided that Trustor shall, within thirty (30) days after the filing of any claim of lien, record in the Office of the Recorder of San Diego County, a surety bond in an amount 1 and 1/2 times the amount of such claim item to protect against a claim of lien. Nothing herein contained shall Section 2.2 Granting of Easements. Trustor may not grant easements, ,licenses, rights-of-way or other rights or privileges in the nature of easements with respect to any property or rights included in the Security except those required or desirable for installation and maintenance of public utilities including, without limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law. As to these exceptions, Beneficiary will grant and/or direct the Trustee to grant such easements. ARTICLE 3 TAXES AND INSURANCE; ADVANCES Section 3.1 Taxes, Other Governmental Charges and Utility Charges. Trustor shall pay, or cause to be paid, at least fifteen (15) days prior to the date of delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company which are or may become a lien affecting the Security or any part thereof; provided, however, that Trustor shall not be required to pay and discharge any such tax, assessment, charge or levy so long as (a) the legality thereof shall be promptly and actively contested in good faith and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien therefor on any part of the Security; provided, however, if such taxes, assessments or charges may be paid in installments, Trustor may pay in such installments. Except as provided in clause (b) of the first sentence of this paragraph, the provisions of this Section 3.1 shall not be construed to require that Trustor maintain a reserve account, escrow account, impound account or other similar account for the payment of future taxes, assessments, charges and levies. In the event that Trustor shall fail to pay any of the foregoing items required by this Section to be paid by Trustor, Beneficiary may (but shall be under no obligation to) pay the same, after the Beneficiary has notified the Trustor of such ~~~0\03\101850.01 5 failure to pay and the Trustor fails to fully pay such items within seven (7) business days after receipt of such notice. Any amount so advanced therefor by Beneficiary, together with interest thereon from the date of such advance at the maximum rate permitted by law, shall become an additional obligation of Trustor to the Beneficiary and shall be secured hereby, and Trustor agrees to Pay all such amounts. Section 3.2 Provisions Respecting Insurance. Trustor agrees to provide insurance conforming in all respects to that required under the Loan Documents during the course of construction and following completion, and at all times until all amounts secured by this Deed of Trust have been paid and all other obligations secured hereunder fulfilled, and this Deed of Trust reconveyed. ~ll such insurance policies and coverages shall be maintained at Trustor's sole cost and expense. Certificates of insurance for all of the above insurance policies, showing the same to be in full force and effect, shall be delivered to the Beneficiary upon demand therefor at any time prior to the Beneficiary's receipt of the entire Principal and all amounts secured by this Deed of Trust. Section 3.3 Advances. In the event the Trustor shall fail to maintain the full insurance coverage required by this Deed of Trust or shall dail to keep the Security in accordance with the Loan Documents, the Beneficiary, after at least seven (7) days prior notice to Beneficiary, may (but shall be under no obligation to) take out the required policies of insurance and pay the premiums on the same or may make such repairs or replacements as are necessary and provide for payment thereof; and all amounts so advanced therefor by the Beneficiary shall become an additional obligation of the Trustor to the Beneficiary (together with interest as set forth below) and shall be secured hereby, which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, shall bear interest from the date of the advance at the lesser of ten percent (10%) per annum or the maximum rate permitted by law. 1010\03\101850.01 . 6 ARTICLE 4 DAMAGE, DESTRUCTION OR CONDEMNATION section 4.1 Awards and Damages. ~ll judgments, awards of damages, settlements and compensation made in connection with or in lieu of (1) taking of all or any part Of Or any interest in the Property by or under assertion of the Power of eminent domain, (2) any damage to or destruction of the Property.or in any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property ("Funds") are hereby assigned to and shall be paid to the Beneficiary by a check made payable to the Beneficiary. The Beneficiary is authorized and empowered (but not required) to collect and receive any funds and is authorized to apply them in whole or in part upon any indebtedness or obligation secured hereby, in such order and manner as the Beneficiary shall determine at its sole option. The Beneficiary shall be entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all ' expenses incurred by it in connection with any such settlement or adjustment. All 01: any part of the amounts so collected and recovered by the Beneficiary may be released to Trustor upon such conditions as the Beneficiary may impose for its disposition. Application.of all Or any part of the Funds collected and received by the Beneficiary or the release thereof shall not cure or waive any default under this Deed of Trust. The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior mortgage lender. ARTICLE 5 AGREEMENTS AFFECTING THE PROPERTY; FURTHER ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST Section 5.1 Other Agreements Affecting Property. The Trustor shall duly and punctually perform a1 covenants,. conditions and agreements binding upon it Loan Documents and any other agreement of any nature now or hereafter involving or affecting the Security thereof. .1 terms, under the whatsoever or any part Section 5.2 Agreement to Pay Attorneys' Fees and Expenses. In the event of any Event of Default (as defined below) hereunder, and if the Beneficiary should employ attorneys or incur other expenses for the collection of amounts due or the enforcement of performance or observance of an obligation or agreement on the part of the Trustor in this Deed of Trust, the 1010\03\101050.01 7 Trustor agrees that it Will, on demand therefor, pay to the Beneficiary the reasonable fees of such attorneys and such other reasonable expenses SO incurred by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the indebtedness secured by the lien of this Deed of Trust, and shall bear interest from the date such expenses are incurred at the lesser of ten percent (10%) per annum or the maximum rate permitted by law. Section 5.3 Payment of the Principal. The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth in the Note in the amounts and by the times set out therein. Section 5.4 Personal Property. To the maximum extent permitted by law, the personal property subject to this Deed of Trust shall be deemed to be fixtures and part of the real property and this Deed of Trust shall constitute a fixtures filing under the California Commercial Code. AS to any personal property not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement under the California Commercial Code. Section 5.5 Financing Statement. The Trustor shall execute and deliver to the Beneficiary such financing statements pursuant ,to the appropriate statutes, and any other documents or instruments as are required to convey to the Beneficiary a valid perfected security interest in the Security. The Trustor agrees to perform all acts which the Beneficiary.may reasonably request so as to enable the Beneficiary to maintain such valid perfected security interest in the Security in order to secure the payment of the Note in accordance with their terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdiction(s) as it shall deem appropriate from time to time in order to protect the security interest established pursuant to this instrument. Section 5.6 Operation of the Security. The Trustor shall operate the Security (and, in case of a transfer of a portion of the Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in full compliance with the Loan Documents. Section 5.7 Inspection of the Security. At any and all reasonable times upon seventy-two (72) hours' notice, the Beneficiary and its duly authorized agents, 1010\03\101850.01 a attorneys, experts, engineers, accountants and representatives, shall have the right, without payment of charges or fees, to inspect the Security. Section 5.8 Nondiscrimination. The Trustor herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, age, sex, sexual orientation, marital status, national origin or ancestry in the sale, transfer, use, occupancy, tenure or enjoyment of the Security, nor shall the Trustor itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of transferees or vendees in the Security. The foregoing covenants shall run with the land. ARTICLE 6 HAZARDOUS WASTE Trustor shall keep and maintain the Property in compliance with, and shall not cause or permit the Property to be in violation of any federal, state or local laws, ordinances or regulations relating to industrial hygiene or to the environmental conditions on, under or about the Property including, but not limited to, soil and ground water conditions. Trustor shall not use, generate, manufacture, store or dispose of on, under, or about the Property or transport to or from the Property any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials, including without limitation, any substances defined as or included in the definition of "hazardous substances," hazardous wastes," "hazardous materials," or "toxic substances" under any applicable federal or state laws or regulations (collectively referred to hereinafter as "Hazardous Materials") except such of the foregoing as may be customarily kept and used in and about multifamily residential property. at any time it receives written notice of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Trustor or the Property pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party against Trustor or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the Trustor shall immediately advise Beneficiary in writing if 1010\03\101850.01 9 matters set forth in clauses (i) and (ii) above hereinafter referred to a "Hazardous Materials Claims"); and (iii) Trustor's discovery of any Occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as "border-zone property" under the provision of California Health and Safety Code, Sections 25220 & w. or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. Beneficiary shall have the right to join and participate in, as a party if it SO elects,- any legal proceedings or actioris initiated in connection with any Hazardous Materials Claims and to have its reasonable attorneys' fees in connection therewith paid by Trustor. Trustor shall indemnify, defend (with counsel reasonably chosen by the Beneficiary, at the Beneficiary's option), and hold harmless Beneficiary and its councilmembers, employees, and agents from and against any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence of Hazardous Materials on, under, or about the Property including without limitation: (a) all foreseeable consequential damages; (b) the costs of any required or necessary repair, cleanup or detoxification of the Property and the preparation and implementation of any closure, remedial or other required plans; and (c) all reasonable costs and expenses incurred by Beneficiary in connection with clauses (a) and (b), including but not limited to reasonable attorneys' fees. This paragraph shall survive termination of this Deed of Trust. . Without Beneficiary's prior written consent, which shall not be unreasonably withheld, Trustor shall not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in Beneficiary's reasonable judgement, impair the value .of the Beneficiary's security hereunder; provided, however, that Beneficiary's prior consent shall not be necessary in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain Beneficiary's consent before taking such action, provided that in such event Trustor shall notify Beneficiary as soon as practicable of any action so taken. withhold its consent, where such consent is required hereunder, if either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) Trustor will or may be subjected Beneficiary agrees not to 1010\03\101850.01 10 to civil or criminal sanctions or penalties if it fails to take a required action; or (iii) Trustor establishes to the reasonable satisfaction of Beneficiary that there is no reasonable alternative to such remedial action which would result in less impairment of Beneficiary's security hereunder. The Trustor hereby acknowledges and agrees that (i) this Article is intended as the Beneficiary's written request for information (and the Trustor's response) concerning the environmental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other Loan Documents (together with any indemnity applicable to a breach of any such representation and warranty) with respect to the environmental condition of the property is intended by the Beneficiary and the Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. In the event that any portion of the Property is determined to be "environmentally impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3)) or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.5 (e) (I)) , then, without otherwise limiting or in any way affecting the Beneficiary's or the Trustee's rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its rights under California Code of civil Procedure Section 726.5(a) to (1) waive its lien on such environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and remedies of an unsecured creditor, including reduction of its claim against the Trustor to judgment, and (b) any other rights and remedies permitted by law. For purposes of determining the Beneficiary's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), the Trustor shall be deemed to have willfully permitted or acquiesced in a release or threatened release of hazardous materials; within the meaning of California Code of Civil Procedure Section 726.5(d) (l), if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and the Trustor knew or should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred by the Beneficiary in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.5(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the rate specified in the Note until paid, shall be added to the indebtedness secured by this Deed of TrU6.t and shall be due and payable to the Beneficiary upon its demand made at any time following the conclusion of such action. ~010\03\101850.01 11 ,- ARTICLE 7 EVENTS OF DEFAULT AND REMEDIES section 7.1 Events of Default. The following shall constitute Events of Default following the expiration of any applicable notice and cure periods: failure to make any PaPent to be paid by Trustor under the Loan Documents; (2) failure to observe or perform any of Trustor's other covenants, agreements or obligations under the Loan Documents, including, without limitation, the provisions concerning discrimination; or (3) failure to make any payment or perform any of TrUStOr'S other covenants, agreements, or obligations under any other debt instruments or regulatory agreement secured by the Property, which default shall not be cured within the times and in the manner provided therein. (1) Section 7.2 Acceleration of Maturity. If an Event of Default shall have occurred and be continuing, then at the option of the Beneficiary, the amount of any payment related to the Event of Default and the unpaid Principal of the Note shall immediately become due and payable, upon written notice by the Beneficiary to the Trustor (or automatically where so specified in the Loan Documents), and no omission on the part of the Beneficiary to exercise such option when entitled to do SO shall be construed as a waiver of such right. Section 7.3 The Beneficiary's Right to Enter and .Take Possession. If an Event of Default shall have occurred and be (a) continuing, the Beneficiary may: Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Security and take possession thereof (or any part thereof) and of any of the Security, in its own name or in the name of Trustee, and do any acts which it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. possession of the Security shall not cure or waive any Event of Default or Notice of Default (as defined below) hereunder or invalidate any act done in response to such Default or pursuant to such Notice of Default and, notwithstanding the continuance in possession of the Security, Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; The entering upon and taking 12 (b) mortgage , covenants (C) Commence an action to foreclose this Deed of Trust as a appoint a receiver, or specifically enforce any of the hereof; Deliver to Trustee a written declaration of default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of Default and Election to Sell"), which notice Trustee or Beneficiary shall cause to be duly filed for record in the Official Records of San Diego County; or (d) Exercise all other rights and remedies provided herein in the instruments by which the Trustor acquires title to any I Security, or in any other document or agreement now or hereafter evidencing, creating or securing all or any portion of the obligations secured hereby, or provided by law. Section 7.4 Foreclosure By Power of Sale. Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained, the Beneficiary shall give notice to the Trustee (the "Notice of Sale") and shall deposit with Trustee this Deed of Trust which is secured hereby (and the deposit of which shall be deemed to constitute evidence that the unpaid principal amount of the Note is immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require. . (a) upon receipt of such notice from the Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Default and Election to Sell as then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such Notice of Default and Election to Sell and after Notice of Sale having been given as required by law, sell the Security, at the time and place of sale fixed by it in said Notice of Sale, whether as a whole or in separate lots or parcels or items as Trustee shall deem expedient and in such order as it may determine unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale, and Trustor hereby covenants to warrant and defend the title of such purchaser or purchasers. The recitals in such deed or any matters of facts 1010\03\101850.01 13 (b) After deducting all reasonable costs, fees and expenses of Trustee, including Costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to payment of: (i) the unpaid Principal amount of the Note; (ii) all other amounts owed to Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the remainder, if any, to Trustor. (c) Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new Notice of Sale. Section 7.5 Receiver. If an Event of Default shall have occurred and be continuing, Beneficiary, as a matter of right and'without further notice to Trustor or anyone claiming under the Security, and without regard to the then value of the Security or the interest of Trustor therein, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of entry as provided herein, and shall continue as such and exercise all such powers until the date of confirmation of sale of the Security, unless such receivership is sooner terminated. Section 7.6 Remedies Cumulative. No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of Trust is intended to .be exclusive of any other right, power or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity. Section 7.7 No Waiver. (a) No delay or omission of the Beneficiary to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy, or shall be construed to be a waiver of any such Event of Default or acquiescence therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from time to time and as often as may be deemed expeditious by the Beneficiary. No consent or waiver, expressed or implied, by the Beneficiary to or any breach by the Trustor in the performance of the obligations hereunder shall be deemed or construed to be a 1010\03\101850.01 14 consent to Failure on failure to or waiver of obligations of the Trustor hereunder. the part of the Beneficiary to complain of any act or act or to declare an Event of Default. ,irresDective of how long such failure continues, shall not constitute a-waiver by the Beneficiary of its right hereunder or impair any rights, power or remedies Consequent on any Event of Default by the Trustor. (b) If the Beneficiary (i) grants forbearance or an extension of time for the payment of any sums secured hereby, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the granting of any easement or other right affecting the Security, or (iv) makes or consents to any agreement subordinating the lien hereof, any such act or omission shall not release, discharge, modify, change or affect the original liability under this Deed of Trust, or any other obligation of the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co-signer, endorser, surety or guarantor (unless expressly released); nor shall any such act or omission preclude the Beneficiary from exercising any right, power or privilege herein granted or intended to be granted in any Event of Default then made or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by the Beneficiary shall the lien of this Deed of Trust be altered thereby. Suits to Protect the Security. Section 7.8 The Beneficiary shall have power to (a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Security and the rights of the Beneficiary as may be unlawful or any violation of this Deed of Trust, (b) preserve or protect its interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment, rule or order would impair the Security thereunder or be prejudicial to the interest of the Beneficiary. Section 7.9 In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting the Trustor, its creditors or its property, the Beneficiary, to the extent permitted by law, shall be entitled to file such proof6 of claim and other documents as may be necessary or advisable in order to have the claims of the Trustee May File Proofs of Claim. 1010\03\101~50.01 15 Beneficiary allowed in such amount which may become due after such date. Section 7.10 Waiver. proceedings and payable and for any additional by the Trustor hereunder The Trustor waives presentment,.demand for payment, notice of dishonor, notice of protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in taking any action to collect any sums owing under the Note or in proceedings against the Security, in connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust. ARTICLE 8 MISCELLANEOUS Section 8.1 Amendments. This instrument cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by Beneficiary and Trustor. Section 8.2 Reconveyance by Trustee. Upon written request of Beneficiary stating that all sums secured hereby have been paid or forgiven, and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor Of Trustee's reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto. Section 8.3 Notices. If at any time after the execution of this Deed of Trust it shall become necessary or convenient for one of the parties hereto to serve any notice, demand or communication upon the other party, such notice, demand or communication shall be in writing and shall be served personally or by depositing the same in the registered United States mail, return receipt requested, postage prepaid and (1) if intended for Beneficiary shall be addressed to: City of Carlsbad Housing and Community Development Department 2965 Roosevelt Street, Suite B Carlsbad, CA 92008-2389 Attn: Housing and Redevelopment Director 16 and (2) if intended for Trustor shall be addressed to: Any notice, demand or communication shall be deemed given, received, made or communicated on the date personal delivery is effected or,.if mailed in the manner herein specified, on the delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either party may change its address at any time by giving written notice of such change to Beneficiary or Trustor as the case may be, in the manner provided herein, at least ten (10) days prior to the date such change is desired to be effective. Section 8.4 Successors and Joint Trustors. Where an obligation is created herein binding upon Trustor, the obligation shall also apply to and bind any transferee or successors in interest. Where the terms of the Deed of Trust have the effect of creating an obligation of the Trustor and a transferee, such obligation shall be deemed to be a joint and several obligation of the Trustor and such transferee. Where Trustor is more than one entity or person, all obligations of Trustor shall be deemed to be a joint and several obligation of- each and every entity and person comprising Trustor. Section 8.5 Captions. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust. Section 8.6 Every provision of this Deed of Trust is intended to be Invalidity of Certain Provisions. severable. to be illegal or invalid for any reason whatsoever by a court or other body of competent jurisdiction, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt, and all payments made on the debt, whether vdluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid or applied to the full payment of that portion of the debt which is not secured or partially secured by the lien of this Deed of Trust. In the event any term or provision hereof is declared 1010\03\101850.01 17 Section 8.7 Governing Law. This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California. Section 8.8 Gender and Number. In this Deed of Trust the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires. Section 8.9 Deed of Trust, Mortgage. Any reference in this Deed of Trust to a mortgage shall also refer to a deed of trust and any reference to a deed of trust shall also refer to a mortgage. Section 8.10 Actions. Trustor agrees to appear in and defend any action or Section 8.11 Substitution of Trustee. proceeding purporting to affect the Security. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Trust. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference.to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the Property is situated, shall be conclusive proof of proper appointment of the successor trustee. Section 8.12 StatUte of Limitations. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law. Section 8.13 Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. obligated to notify any party hereto of pending sale under this Deed of Trust or of any action of proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. Except as otherwise provided by law the Trustee is not 1010\03\101850.01 18 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written. TRUSTOR : -- By : Its: 19 STATE OF CALIFORNIA ) COUNTY OF On I before me, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s1 whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies1, and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. I WITNESS.my hand and official seal. 20 EXHIBIT A (Legal Description) The land is situated in the State of California, City of Carlsbad, County of San Diego, and is described as follows: A- 1 1010\03\101710.01 EXHIBIT D FORM OF ELIGIBLE BUYER NOTE D-1 NOTICE TO BORROWER: THIS NOTE IS NOT ASSUMABLE PROMISSORY NOTE Secured by Deed of Trust $ Carlsbad, California , 199- FOR VALUE RECEIVED, the undersigned (the promises to pay to the City of Carlsbad, a municipal corporation (the "City"), or order, at the Housing and Redevelopment Department, 2965 Roosevelt Street, Suite B, Carlsbad, California 92008, or such other place as the City may designate in writing, the principal sum of $ , plus Contingent Interest calculated pursuant to Section 3 below. 1. Pumose of Loan. Borrower is purchasing the Residence located at in the City of Carlsbad. This Note evidences a seller carryback loan made by the Seller of the Residence (the "Seller") to the Borrower, and assigned by the Seller to the City (the "City/Seller Loan"). The City/Seller Loan is in the amount determined by the City to be necessary for the Borrower to afford to purchase the Residence making a reasonable downpayment and using conventional first mortgage financing for the balance of the purchase price not financed by the CityEeller Loan. The Seller made the City/Seller Loan to the Borrower and assigned the City/Seller Loan to the City in fulfillment of the inclusionary housing obligations of the Seller pursuant to City Ordinance No. NS-232 and an Affordable Housing Agreement between the Seller and the City dated in this Note. ,1996. 2. Definitions. The terms set forth in this Section shall have the following meanings (a) "Appreciation Amount" shall mean the amount calculated by subtracting the total original purchase price of the Residence paid by the Borrower, which was Dollars ($ ), from one of the following amounts, as applicable: (i) in the event of a sale of the Residence, the amount received by the Borrower as the sale price of the Residence, as certified by the Borrower pursuant to Section 12 below; or (ii) in the event of a prepayment of this Note, a Transfer other than sale of the Residence, or in the event of a default, the Fair Market Value of the Residence; or (iii) in the event a creditor acquires title to the Residence through a deed in lieu of foreclosure, a trustee's deed upon sale, or otherwise, the amount paid for the Residence at a creditor's sale of the Residence. set out in Section 4. (b) "Contingent Interest" shall mean the percentage of the Appreciation Amount (c) "Fair Market Value" shall be determined by a real estate appraisal made by an independent residential appraiser designated by the City. If possible, the appraisal shall be -1- 1010\03\101714.03 based upon the sales prices of comparable properties sold in the market area during the preceding three-month period. The cost of the appraisal shall be shared equally by the City and the Borrower. Nothing in this subparagraph shall preclude the Borrower and the City from establishing the Fair Market Value of the Residence by mutual agreement in lieu of an appraisal. (d) "First Mortgage" shall mean the promissory note and deed of trust (e) "Residence" shall mean the housing unit and land encumbered by the deed of evidencing and securing the first mortgage loan for the Residence. trust executed in connection with this Note. (f) "Transfer" shall mean any sale, assignment or transfer, voluntary or involuntary, of any interest in the Residence, including, but not limited to, a fee simple interest, a joint tenancy interest, tenancy in common interest, a life estate, a leasehold interest, or an interest evidenced by a land contract by which possession of the Residence is transferred and the Borrower retains title. Any Transfer without satisfaction of the provisions of this Note is prohibited. A transfer: (i) to an existing spouse who is also an obligor under the Note; (ii) by a Borrower to a spouse where the spouse becomes the co-owner of the Residence; (iii) between spouses as part of a marriage dissolution proceeding; (iv) by the Borrower into an inter vivos trust in which the Borrower is the beneficiary; or (v) by deed of trust or imposition of a lien subordinate to the Deed of Trust, shall not be considered a Transfer for the purposes of this Note; provided, however, that the Borrower shall continue to occupy the Residence as his or her principal place of residence and the Borrower shall provide written notice of such transfer to the Agency pursuant to Section 13 below. 3. Security. This Note is secured by a second deed of trust dated the same date as this Note (the "Deed of Trust"). 4. Contingent Interest. The Borrower shall pay contingent interest equal to percent ( %) of the Appreciation Amount (the "Contingent Interest"). No interest other than Contingent Interest shall be due hereunder. The Contingent Interest shall be paid to the City at the time set forth in Section 7(c) below, unless forgiven by the City pursuant to Section 7(d) below. Borrower acknowledges, that the calculation of the percentage amount of the Contingent Interest includes a credit to Borrower for capital improvements Borrower may make to the Residence. 5. Term. The Term of this Note shall mean the period commencing on the date of this Note and expiring on the date fifteen (1 5) years thereafter. 6. Owner-Occuuancv Required: Representations Regarding Income. (a) The Borrower is required to occupy the Residence as his or her principal place of residence, and failure by the Borrower to comply with this requirement shall be a default under this Note. The Borrower shall be considered as occupying the Residence if the Borrower is living in the Residence for at least ten (10) months out of each calendar year. The Borrower shall provide an annual written certification to the City that the Borrower is occupying the Residence as his or her principal place of residence. The Borrower shall not lease the Home to another party. Any lease of the Residence shall be a default under this Note. (b) Borrower hereby certifies that all income information previously submitted to the - 1010\03\101714.03 2- Seller andor the City is true and correct. Misrepresentation by Borrower of income information provided to the Seller and/or the City shall be a default under this Note. 7. Reuavment. (a) Repayment of the principal amount of this Note shall be deferred for the first five years from the date of this Note. At the end of five (5) years, the Borrower shall begin making monthly repayments of principal in the amount of based on a ten (10) year principal repayment schedule and due and payable on the first day of Dollars ($ ) each calendar month commencing ,200-. (b) In the event that, during the five (5) year deferral period described above, the Borrower encumbers the Residence with a junior deed of trust securing a loan under which payments are not deferred until full repayment of this Note (a "Junior Deed of Trust"), the Borrower shall commence to make monthly payments to the City in an amount sufficient to amortize the unpaid principal balance of this Note over the remaining Term of this Note, provided, however, that during the Deferral Period such payments shall be limited to an amount which, when added to the payments on the First Mortgage and the note secured by the Junior Deed of Trust, will not exceed thirty three (33%) of the Borrower's original qualifying income for the First Mortgage. At the expiration of the Deferral Period, payments shall be in an amount sufficient to amortize the unpaid principal balance of this Note over the remaining Term of this Note and there shall be no limitation of such payment based on payments on any other loans. All monthly payments required to be made pursuant to this Section 7(b) shall commence on the first day of the month following the month in which a Junior Deed of Trust is recorded in the Official Records of the County of San Diego. (c) The total amount of the principal and any Contingent Interest owed under this Note shall immediately become due and payable (i) in the event of a default by the Borrower under this Note, the Deed of Trust, or the First Mortgage, (ii) on the date Transfer is made whether voluntarily, involuntarily, or by operation of law and whether by deed, contract of sale, gift, devise, bequest or otherwise, (iii) in the event Borrower ceases to occupy the Residence as his or her principal place of residence; or (iv) at the end of the Term of this Note as described above in Section 5. Failure to declare such amounts due shall not constitute a waiver on the part of the City to declare them due in the event of a subsequent Transfer. (ii) Borrower has repaid all principal pursuant to subsections (a) or (b) above, (iii) Borrower continues to owner-occupy the Residence, and (iv) Borrower is not in default hereunder or under the Deed of Trust, the City shall forgive repayment of all Contingent Interest due hereunder. (d) In the event, upon expiration of the Term, (i) no Transfer has occurred, 8. Preuavments. The Borrower may prepay all or part of the balance due under this Note including principal and Contingent Interest. In the event the entire amount of principal due under this Note is prepaid, all Contingent Interest, calculated as of the date of prepayment, shall also be due at the time of prepayment. 9. No Assurnution of Note. The Borrower acknowledges that this Note is given in connection with the purchase of property (the "Residence") as part of a program of the Agency to assist in the purchase of homes by lower income persons. Consequently, this Note is not assumable by transferees of the Residence, but is due in full upon Transfer. 1010\03\101714.03 -3 - 10. Maintenance: Taxes: Insurance. Borrower shall maintain the Residence in good repair and in a neat, clean and orderly condition. Borrower shall promptly pay all property taxes due on the Residence prior to any delinquency and shall comply with the insurance requirements set forth in the Deed of Trust. 1 1. Refinance of First Mortnaae Loan. The outstanding principal and interest on this Note shall not be due upon prepayment and refinance of the First Mortgage, and the Deed of Trust shall be subordinated to the refinanced loan, provided that (i) such refinancing is approved by the City, (ii) the amount refinanced does not exceed the outstanding principal balance of the First Mortgage at the time of refinance plus reasonable costs of refinance, and (iii) the term of the refinanced loan is not shorter than the term of the original First Mortgage. 12. Certification of Purchase Price on Transfer. Upon any sale of the Residence, the Borrower shall submit to the City at least fifteen (1 5) days prior to the close of escrow, a copy of the sales contract and a written declaration, under penalty of perjury, from the Borrower and the proposed purchaser in a form acceptable to the City stating the gross sales price of the Residence. The certification shall also provide that the proposed purchaser or any other party has not paid and will not pay to the Borrower, and the Borrower has not received and will not receive from the proposed purchaser or any other party, money or other consideration, including personal property, in addition to what is set forth in the sales contract. 13. Notice to Citv of Transfers. Borrower shall provide the City with written notice of any sale, assignment or transfer, voluntary or involuntary, of any interest in the Residence, including, but not limited to, encumbrance of the Residence with a Junior Deed of Trust or transfer of the Residence to a spouse or trust. 14. Default. (a) The Borrower shall be in default under this Note if he or she is in default under the First Mortgage following the expiration of First Mortgage cure periods, or if, after the notice and cure period provided by the City to the Borrower pursuant to the notice and cure provisions of the Deed of Trust, the Borrower (i) fails to pay any money when due under this Note; (ii) breaches any representation or covenant made in this Note in any material respect; or (iii) breaches any provision of the Deed of Trust. (b) Upon the Borrower's breach of any covenant or agreement of the Borrower in this Note or the Deed of Trust, including, but not limited to, the covenants to pay, when due, any sums secured by the Deed of Trust, the City, prior to acceleration, will send, in the manner set forth in Section 19, notice to the Borrower speciQing: (1) the breach; (2) if the breach is curable, the action required to cure such breach; (3) a date, not less than thirty (30) days from the date the notice is effective, by which such breach, if curable, is to be cured and (4) if the breach is curable, that failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by the Deed of Trust and foreclosure by the City. The notice will also inform the Borrower of the Borrower's right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of default or any other defense of the Borrower to acceleration and sale. 15. Acceleration. Upon the occurrence of a default under this Note, the Deed of Trust, or the First Mortgage, the City shall have the right to declare the full amount of the principal along with any Contingent Interest under this Note immediately due and payable. Any 1010\03\101714.03 -4- failure by the City to pursue its legal and equitable remedies upon default shall not constitute a waiver of the City's right to declare a default and exercise all of its rights under this Note and the Deed of Trust. Nor shall acceptance by the City of any payment provided for herein constitute a waiver of the City's right to require prompt payment of any remaining principal and interest owed. 16. No Offset. The Borrower hereby waives any rights of offset it now has or may later have against the City, its successors and assigns, and agrees to make the payments called for in this Note in accordance with the terms of this Note. 17. Waiver: Attornev Fees and Costs. The Borrower and any endorsers or guarantors of this Note, for themselves, their heirs, legal representatives, successors and assigns, respectively, severally waive diligence, presentment, protest, and demand, and notice of protest, dishonor and non-payment of this Note, and expressly waive any rights to be released by reason of any extension of time or change in terms of payment, or change, alteration or release of any security given for the payments hereof, and expressly waive the right to plead any and all statutes of limitations as a defense to any demand on this Note or agreement to pay the same, and jointly and severally agree to pay all costs of collection when incurred, including reasonable attorney fees. If an action is instituted on this Note, the Borrower promises to pay, in addition to the costs and disbursements allowed by law, such sum as a court may adjudge reasonable as attorneys' fees in such action. 18. No Waiver bv the City. No waiver of any breach, default or failure of condition under the terms of this Note shall be implied from any failure of the City to take action with respect to such breach, default or failure or from any previous waiver of any similar or unrelated breach, default or failure. 19. Notices. All notices required in this Note shall be sent by certified mail, return receipt requested, or express delivery service with a delivery receipt, or personally delivered with a delivery receipt obtained and shall be deemed to be effective as of the date shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was returned as undeliverable as follows: To the Borrower: At the address of the Residence. To the City: City of Carlsbad Housing and Redevelopment Department 2965 Roosevelt Street, Suite B Carlsbad, CA 92008-2389 Attention: Housing and Redevelopment Director The parties may subsequently change addresses by providing written notice of the change in address to the other parties in accordance with this Section 19. 20. Joint and Several Oblinations. This Note is the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and their successors 1010\03\101714.03 -5- and assigns. 21. Controlling Law. This Note shall be construed in accordance with and be governed by the laws of the State of California. Assignment bv City. The City may assign its right to receive the proceeds under this Note to any person and upon notice to the Borrower by the City all payments shall be made to the assignee. 22. 23. Invalid Provisions. If any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained in this Note. 24. Entire Agreement. This Note (along with the Deed of Trust) sets forth the entire understanding and agreement of the City and the Borrower and any amendment, alteration or interpretation of this Note must be in writing signed by both the City and the Borrower. BORROWER (Print Name) (Print Name) 1010\03\101714.03 -6- PROMISSORY NOTE CITY OF CARLSBAD ADMINISTRATIVE COVER SHEET (Remove Upon Completion) BLANK LINES: CHECKLIST Amount of City Loan, p. 1, upper left Date of Document, p. 1, upper right Borrower's Name, p. 1 , first paragraph Amount of City Loan, p. 1, first paragraph Street Address of Residence, p. 1, Section 1 Original Purchase Price of Residence, p. 1, Section 2(a) Contingent Interest Percent, p. 2, Section 4 Monthly Repayment Amount, p. 3, Section 7(a) Date Monthly Repayment Commences, p. 3, Section 7(a) Signatures, p. 8 -7- 1010\03\101714.03 1010\03\101720.01 EXHIBIT E FORM OF ELIGIBLE BUYER DEED OF TRUST E-1 Recording Requested and When Recorded Mail To: City of Carlsbad Housing and Redevelopment Department 2965 Roosevelt Street, Suite B Carlsbad, CA 92008-2839 Attn: Housing and Redevelopment Director NOTE TO BORROWER: THIS DEED OF TRUST CONTAJNS PROVISIONS PROHIBITING ASSUMPTIONS DEED OF TRUST AND SECURITY AGREEMENT THIS DEED OF TRUST AND SECURITY AGREEMENT ("Deed of Trust") made as of this day of , 19-9 among ("Borrower") as trustor, and ("Trustee"), and the City of Carlsbad, a municipal corporation (the "City"), as beneficiary. The Borrower, in consideration of the promises herein recited and the trust herein created, irrevocably grants, transfers, conveys and assigns to the Trustee, in trust, with power of sale, the property located in the City of Carlsbad, State of California, described in the attached Exhibit - "A" (the "Property"). TOGETHER with all the improvements now or hereafter erected on the property, and all easements, rights, appurtenances, and all fixtures now or hereafter attached to the property, all of which, including replacements and additions thereto, shall be deemed to be and remain a part of the property covered by this Deed of Trust; and TOGETHER with all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefore, whether or not the same are, or shall be attached to said building or buildings in any manner; and all of the foregoing, together with the Property, is herein referred to as the I'Security''; and assigns forever; executed by the Borrower to thecity dated To have and to hold the Security together with acquittances to the Trustee, its successors TO SECURE to the City the repayment of the sums evidenced by a promissory note , 19- in the amount of Dollars ($ (the "Note"); TO SECURE to the City the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Deed of Trust; and the performance of the 1 covenants and agreements of the Borrower herein contained; and TO SECURE the performance of any obligations of Borrower in any other agreements with respect to the financing of the Property or the Security the failure of which would adversely affect Beneficiary, whether or not Beneficiary is a party to such agreements. BORROWER AND CITY COVENANT AND AGREE AS FOLLOWS: 1. Borrower's Estate. That the Borrower is lawfully seized of the estate hereby conveyed and has the right to grant and convey the Security, that other than this Deed of Trust, the Security is encumbered only by that deed of trust executed by the Borrower in connection with a loan made to the Borrower by or its successors and assigns (the "First Lender"), dated , 19-, executed by the Borrower in favor of First Lender, and recorded in the County of San Diego on Recorder's Serial No. (the "First Lender Deed of Trust"), securing a promissory note executed by the Borrower in favor of the First Lender ("First Lender Note"), to assist in the purchase of the Property. The Borrower agrees to warrant and defend generally the title to the Security against all claims and demands, subject to any declarations, easements or restrictions listed in a schedule of exceptions to coverage in any title insurance policy insuring the City's interest in the Security. (As used in this Deed of Trust, the term "First Lender" shall include all successors and assigns of the First Lender.) , 19-, and assigned 2. Repayment of Loan. The Borrower will promptly repay, when due, the principal and interest required by the Note. The Note contains the following provisions concerning repayment of the loan under certain conditions: No Assumption of Note. The Borrower acknowledges that this Note is given in connection With the purchase of property (the "Residence") as part of a program of the Agency to assist in the purchase of homes by lower income persons. Consequently, this Note is not assumable by transferees of the Residence, but is due in full upon Transfer. 3. and agreements of the First Lender Note, First Lender Deed of Trust, and related First Lender loan documents. First Lender Loan. The Borrower will observe and perform all of the covenants 4. Owner-Occuuancv Rewired. The Borrower shall occupy the Property as his or her'principal place of residence. The Borrower shall be considered as occupying the Property if the Borrower is living in the unit for at least ten (10) months out of each calendar year. The Borrower shall provide an annual written certification to the City that the Borrower is occupying the Property as his or her principal place of residence. 5. Charges: Liens. The Borrower will pay all taxes, assessments and other charges, fines and impositions attributable to the Security which may attain a priority over this Deed of Trust, by the Borrower making any payment, when due, directly to the payee thereof. The Borrower will promptly furnish to the City all notices of amounts due under this paragraph, and in the event the Borrower makes payment directly, the Borrower will promptly discharge any lien which has priority over this Deed of Trust; provided, that the Borrower will not be required to discharge the lien of the First Lender Deed of Trust or any other lien described in this paragraph so long as the Borrower will agree in witing to the payment of the obligation secured by such lien in a manner acceptable to the City, or will, in good faith, contest such lien by, or defend enforcement of such lien in, legal proceedings which operate to prevent the enforcement of the lien or forfeiture of the Security or any part thereof. 2 1010\03\101715.01 6. Hazard Insurance. The Borrower will keep the Security insured by a standard fire and extended coverage insurance policy in at least an amount equal to the replacement cost of the Security, but in no event less than the amount necessary to prevent the Borrower from becoming a co-insurer under the terms of the policy. The insurance carrier providing this insurance shall be licensed to do business in the State of California and be chosen by the Borrower subject to approval by the City; provided, that such approval will not be withheld if the insurer is also approved by the First Lender, the Federal Home Loan Mortgage Corporation, Fannie Mae, Freddie Mac, the United States Department of Housing and Urban Development, the United States Department of Veterans Affairs, or successors thereto. All insurance policies and renewals thereof will be in a form acceptable to the City and will include a standard mortgagee clause with standard lender's endorsement in favor of the holder of the First Lender Note and the City as their interests may appear and in a form acceptable to the City. The City shall have the right to hold, or cause its designated agent to hold, the policies and renewals thereof, and the Borrower shall promptly furnish to the City, or its designated agent, the original insurance policies or certificates of insurance, all renewal notices and all receipts of paid premiums. In the event of loss, the Borrower will give prompt notice to the insurance carrier and the City or its designated agent. The City, or its designated agent, may make proof of loss if not made promptly by the Borrower. The City shall receive thirty days advance notice of cancellation of any insurance policies required under this section. Unless the City and the Borrower otherwise agree in writing, insurance proceeds, subject to the rights of the First Lender, will be applied to restoration or repair of the Security damaged, provided such restoration or repair is economically feasible and the Security of this Deed of Trust is not thereby impaired. If such restoration or repair is not economically feasible or if the security of this Deed of Trust would be impaired, the insurance proceeds will be used, subject to the rights of the First Lender, to repay the Note and all sums secured by this Deed of Trust, with the excess, if any, paid to the Borrower. If the Security is abandoned by the Borrower, or if the Borrower fails to respond to the City, or its designated agent, within thirty (30) days from the date notice is mailed by either of them to the Borrower that the insurance carrier offers to settle a claim for insurance benefits, the City, or its designated agent, is authorized, subject to the rights of the First Lender, to collect and apply the insurance proceeds at the City's option either to restoration or repair of the Security or to repay the Note and all sums secured by this Deed of Trust. If the Security is acquired by the City, all right, title and interest of the Borrower in and to any insurance policy and in and to the proceeds thereof resulting from damage to the Security prior to the sale or acquisition will pass to the City to the extent of the sums secured by this Deed of Trust immediately prior to such sale or acquisition subject to the rights of the First Lender. 7. Preservation and Maintenance of Securitv. The Borrower will keep the Security in good repair and will not commit waste or permit impairment or deterioration of the Security. 8. Protection of the Citv's Security. If the Borrower fails to perform the covenants and agreements contained in this Deed of Trust, the First Lender Note, the First Lender Deed of Trust, or if any action or proceeding is commenced which materially affects the City's interest in the Security, including, but not limited to, default under the First Lender Deed of Trust, the First Lender Note or any other deed of trust encumbering the Property, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then the City, at the City's option, upon notice to the Borrower, may make such appearances, disburse such sums and take such action as it determines necessary to protect the City's interest, including but not limited to, disbursement of reasonable attorney's fees and entry upon the Security to * 3 1010\03\101715.01 make repairs. Any amounts disbursed by the City pursuant to this paragraph, with interest thereon, will become an indebtedness of the Borrower secured by this Deed of Trust. Unless the Borrower and City agree in writing to other terms of payment, such amount will be payable upon notice from the City to the Borrower requesting payment thereof, and will bear interest from the date of disbursement at the lesser of ten percent (1 0%) or the highest rate permissible under applicable law. Nothing contained in this paragraph will require the City to incur any expense or take any action hereunder. 9. Inspection. The City may make or cause to be made reasonable entries upon and inspections of the Security; provided that the City will give the Borrower reasonable notice of inspection. 10. Forbearance bv the City Not a Waiver. Any forbearance by the City in exercising any right or remedy will not be a waiver of the exercise of any such right or remedy. The procurement of insurance or the payment of taxes or other liens or charges by the City will not be a waiver of the City's right to accelerate the maturity of the indebtedness secured by this Deed of Trust. 1 1. Remedies Cumulative. All remedies provided in this Deed of Trust are distinct and cumulative to any other right or remedy under this Deed of Trust or any other document, or afforded by law or equity, and may be exercised concurrently, independently or successively. 12. Successors and Assigns Bound. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the City and the Borrower subject to the provisions of this Deed of Trust. 13. be joint and several. 14. another manner, all notices required in this Deed of Trust shall be sent by certified mail, return receipt requested or express delivery service with a delivery receipt, or personally delivered with a delivery receipt obtained, and shall be deemed to be effective as of the date shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was returned as undeliverable as follows: Joint and Several Liabilitv. All covenants and agreements of the Borrower shall Notice. Except for any notice required under applicable law to be given in To the Owner: At the address of the Residence. To the City: City of Carlsbad Housing and Redevelopment Department 2965 Roosevelt Street, Suite B Carlsbad, CA 92008-2389 Attn: Housing and Redevelopment Director The parties may subsequently change addresses by providing written notice of the change in address to the other parties in accordance with this section. 15. Controlling Law. This Deed of Trust shall be construed in accordance with and 4 1010\03\101715.01 be governed by the laws of the State of California. 16. Invalid Provisions. If any one or more of the provisions contained in this Deed of Trust or the Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions, and this Deed of Trust and the Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained in this Deed of Trust or the Note. 17. Captions. The captions and headings in this Deed of Trust are for convenience only and are not to be used to interpret or define the provisions hereof. 18. Default; Remedies. Upon the Borrower's breach of any covenant or agreement of the Borrower in this Deed of Trust, including, but not limited to, the covenants to pay, when due, any sums secured by this Deed of Trust, the City, prior to acceleration, will send, in the manner set forth in Section 14 of this Deed of Trust, notice to the Borrower specifying: (1) the breach; (2) if the breach is curable, the action required to cure such breach; (3) a date, not less than thirty (30) days from the date the notice is effective as set forth in Section 14 of this Deed of Trust, by which such breach, if curable, is to be cured; and (4) if the breach is curable, that failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by this Deed of Trust and sale of the Security. Notice shall be effective as of the date shown on the delivery receipt as the date of delivery, the date delivery was refused or the date the notice was returned as undeliverable. The notice will also inform the Borrower of the Borrower's right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of default or any other defense of the Borrower to acceleration and sale. If the breach is not curable or is not cured on or before the date specified in the notice, the City, at the City's option, may: (a) declare all of the sums secured by this Deed of Trust to be immediately due and payable without further demand and may invoke the power of sale and any other remedies permitted by California law; (b) either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Security and take possession thereof (or any part thereof) and of any of the Security, in its own name or in the name of the Trustee, and do any acts which it deems necessary or desirable to preserve the value or marketability of the Security, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security shall not cure or waive any breach hereunder or invalidate any act done in response to such breach and, notwithstanding the continuance in possession of the Security, the City shall be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any uncured breach, including the right to exercise the power of sale; (c) commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (d) deliver to the Trustee a written declaration of default and demand for sale, pursuant to the provisions for notice of sale found at California Civil Code Sections 2924, et seq., as amended from time to time; or (e) exercise all other rights and remedies provided herein, in the instruments by which the Borrower acquires title to any Security, or in any other document or agreement now or hereafter evidencing, creating or securing all or any portion of the obligations secured hereby, or provided by law. the remedies provided in this paragraph, including, but not limited to, reasonable attorney's fees. Trust, the First Lender Note, or the First Lender Deed of Trust, the City shall have the right to declare the full amount of the principal along with any interest under the Note immediately due and payable. Any failure by the City to pursue its legal and equitable remedies upon default shall not constitute a waiver of the City's right to declare a default and exercise all of its rights under the Note and this Deed of Trust. Nor shall acceptance by the City of any payment provided for The City shall be entitled to collect all reasonable costs and expenses incurred in pursuing 19. Acceleration. Upon the occurrence of a default under the Note, this Deed of 5 lOl0\03\101715.0l in the Note constitute a waiver of the City's right to require prompt payment of any remaining principal and interest owed. sums secured by this Deed of Trust, the Borrower will have the right to have any proceedings begun by the City to enforce this Deed of Trust discontinued at any time prior to five (5) days before sale of the Security pursuant to the power of sale contained in this Deed of Trust or at any time prior to entry of a judgment enforcing this Deed of Trust if: (a) the Borrower pays City all sums, if any, which would be then due under this Deed of Trust and no acceleration under the Note has occurred; (b) the Borrower cures all breaches of any other covenants or agreements of the Borrower contained in this Deed of Trust; (c) the Borrower pays all reasonable expenses incurred by City and the Trustee in enforcing the covenants and agreements of the Borrower contained in this Deed of Trust, and in enforcing the City's and the Trustee's remedies, including, but not limited to, reasonable attorney's fees; and (d) the Borrower takes such action as City may reasonably require to assure that the lien of this Deed of Trust, City's interest in the Security and the Borrower's obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon such payment and cure by the Borrower, this Deed of Trust and the obligations secured hereby will remain in full force and effect as if no acceleration had occurred. 20. Borrower's Right to Reinstate. Notwithstanding the City's acceleration of the 2 1. Reconveyance. Upon payment or forgiveness of all sums secured by this Deed of Trust, the City Will request the Trustee to reconvey the Security and will surrender this Deed of Trust and the Note to the Trustee. The Trustee will reconvey the Security without warranty and without charge to the person or persons legally entitled thereto. Such person or persons will pay all costs of recordation, if any. 22. Substitute Trustee. The City, at the City's option, may fiom time to time remove the Trustee and appoint a successor trustee to any trustee appointed hereunder. The successor trustee will succeed to all the title, power and duties conferred upon the Trustee herein and by applicable law. 23. Subordination to First Mortaaee. Notwithstanding any other provision hereof, the provisions of this Deed of Trust shall be subordinate to the lien of the First Lender Deed of Trust and shall not impair the rights of the First Lender, or the First Lender's successor or assign, to exercise its remedies under the First Lender Deed of Trust in the event of default under the First Lender Deed of Trust by the Borrower. Such remedies under the First Lender Deed of Trust include the right of foreclosure or acceptance of a deed or assignment in lieu of foreclosure. After such foreclosure or acceptance of a deed or assignment in lieu of foreclosure, this Deed of Trust shall be forever terminated and shall have no further effect as to the Property or any transferee thereafter; provided, however, if the holder of such First Lender Deed of Trust acquired title to the Property pursuant to a deed or assignment in lieu of foreclosure, this Deed of Trust shall automatically terminate upon such acquisition of title, provided that (i) the City has been given written notice of default under such First Lender Deed of Trust and (ii) the City shall not have cured or commenced to cure the default within such 30-day period and given its firm commitment to complete the cure in the form and substance acceptable to the First Lender. Borrower agrees to record any necessary documents to effect such termination, if applicable. or any provision of this Deed of Trust or the Note, the prevailing party shall be entitled to its attorney's fees and the cost of such action or proceeding. 24. Attornev's Fees. If any action or proceeding is brought to enforce this Deed of Trust IN WITNESS WHEREOF, the Borrower has executed this Deed Of Trust as of the date first written above. 1010\03\101715.01 6 Borrower (Print Name) 1010\03\101715.01 Borrower (Print Name) 7 EXHIBIT A Property Description STATE OF CALIFORNIA ) COUNTY OF SAN DIEGO ) )ss On , 199,, before me, , personally appeared satisfactory evidence) to be the person(s) whose name(s) idare subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by hisherltheir signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. , personally known to me (or proved to me on the basis of WITNESS my hand and official seal. STATE OF CALIFORNIA ) COUNTY OF SAN DIEGO ) )ss On , 199-, before me, , personally appeared satisfactory evidence) to be the person(s) whose name@) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by hisherjtheir signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. , personally known to me (or proved to me on the basis of WITNESS my hand and official seal. DEED OF TRUST AND SECURITY AGREEMENT CITY OF CARLSBAD ADMINISTRATIVE CHECKLIST (Remove Upon Completion) BLANK LINES: CHECKLIST Date of Document, p. 1, first paragraph Borrower's Name, p. 1, first paragraph Trustee's Name, p. 1, first paragraph Date and Amount of Promissory Note, p. 2, second full paragraph First Lender's Name, p. 2, Section 1 Date of First Lender's Deed of Trust, p. 2, Section 1 Recording Information for First Lender's Deed of Trust, p. 2, Section 1 Signatures, p. 9 Include Exhibit A, Property Description Notary *r c f 1 I 1 F f 5 I 5 I f i I F f 3 c f f ! '! C < . C I 6 E U s b : I Y d I E : i L Y I C .- The City of Carhabad Housing & Redevelopment Department AREPORTTO THE HOUSXNG GOMMXBSION Stair: Leflanf Hines Management JXndyrt XTEM NO. 3 DATE: FEBRUARY 12,1998 SUBJECT: 1996-97 HOME PROGRAM - Request for approval of a recommendation for reallocation of $13,400 from the City of Carlsbad's 1996-97 HOME Investment Partnership Program. I. RECOMMENDATION ADOPT Housing Commission Resolution No. 98-004, recommending to the City Council the reallocation of $13,400 in City of Carlsbad 1996-97 HOME Investment Partnership Program funds originally approved for a security assistance deposit program to the City of Carlsbad's Single Family Residential Rehabilitation Program. 11. PROTECT BACKGROUND As a participant in the San Diego Urban County HOME Investment Partnership Consortium, the City will receive $194,082 in FY 1996-97 HOME funds to increase affordable housing opportunities. On June 19, 1996, the City Council of the City of Carlsbad, California selected the City's Single Family Residential Rehabilitation Program to receive $180,682 in 1996-97 HOME Consortium funds and the Community Resource Center's Security Deposit Assistance Program to receive $13,400. The HOME funds awarded to Community Resource Center was to provide one time security deposit assistance to lower income households currently in "near homeless" living situations, such as living in motels, shelters, or with friends, to move into permanent housing. Staff is requesting a recommendation from the Housing Commission to cancel $13,400 in 1996-97 HOME funds originally approved for a security assistance deposit program and reallocate these HOME funds for housing rehabilitation costs of eligible owner occupied single family homes. The reasons for this reallocation are described in further detail below. Attached for Housing Commission's information is the City's CDBG/HOME Investment Partnership Program Funding Plan Strategy (Exhibit 2). This strategy outlines the eligible housing activities for the HOME program. - 1996-97 HOME PROGRAM .ALLOCATION FEBRUARY 12,1998 PAGE 2 111. PROJECT DESCRIPTION The Community Resource Center was to provide one time security deposit assistance to lower income households currently in "near homeless" living situations, such as living in motels, shelters, or with friends, to move into permanent housing. Based upon the high costs associated with the administration of this program and the lack of available funding sources, Community Resource Center has determined that they are unable to administer the Security Deposit Assistance Program on behalf of the City of Carlsbad. Per the federal regulations governing the HOME Program, HOME funds cannot be used for the administration of a tenant based rental assistance program or the administration of a security deposit assistance program. The applicable federal regulations also require extensive management of such programs, similar in operation to the federal Section 8 Rental Assistance Program. Administering agencies must conduct initial and annual inspections of the units, as well as annual certifications of income. The Community Resource Center determined that the program was simply too burdensome for them to implement. Therefore, they will not be moving forward with this program. The funding provided for the actual assistance payments must, therefore, be reallocated to an alternate project. Staff is requesting a recommendation from the Housing Commission to cancel $13,400 in 1996- 97 HOME funds originally approved for a security assistance deposit program and reallocate these HOME funds for housing rehabilitation costs of eligible owner occupied single family homes. The City has already executed an agreement with the County of San Diego and the Housing Authority of the County of San Diego for administration and implementation of a HOME funded single family residential rehabilitation program. This agreement will require an amendment to include the additional $13,400 for the rehabilitation of eligible owner occupied single fanuly homes. The Single Family Residential Rehabilitation Program will be operated in the same manner as previous years. No further action from the Housing Commission will be required for single family residential rehabilitation projects. IV. ASSESSMENT The City of Carlsbad is requesting the reallocation of $13,400 in 1996-97 HOME funds originally approved for a security assistance deposit program to housing rehabilitation costs of eligible owner occupied single family homes. The City's Single Family Residential Rehabilitation Program will therefore receive the full $194,082 available in FY 1996-97 HOME funds. The following factors were considered in arriving at this recommendation. A. Development Team Carlsbad's Residential Rehabilitation Program, administered by the County of San Diego, has been in operation since 1993. The County has been operating residential rehabilitation programs since 1978. County staff has significant experience in all phases of residential rehabilitation, including construction and inspections. . - 1996-97 HOME PROGRAN ,ALLOCATION FEBRUARY 12,1998 PAGE 3 B. Project Quality and Financial Staff believes that the City of Carlsbad’s funding request to continue providing grants and/or loans for the rehabilitation of single family homes is a priority based upon the lack of other comparable rehabilitation programs, lack of other available funding sources for Carlsbad’s Rehabilitation Program and the benefits of the program. Carlsbad’s Single Family Residential Rehabilitation Program provides below market interest rate loans for those able to qualify, zero interest deferred loans, and grants for up to $2,000 to low income home owners to rehabilitate and maintain their home. Unlike other commercial lending programs with higher interest rates, Carlsbad‘s Residential Rehabilitation Program does not place an economic burden on a low income family’s financial resources. The rehabilitation of owner occupied single family homes has been funded in the past entirely through the City’s Community Development Block Grant/ HOME Program. To date, the City has rehabilitated ten single family homes and three mobile homes, with approximately $224,585 in CDBG and HOME funds. Rehabilitation of housing increases property values and positively impacts the surrounding neighborhood. C. Housing Needs and Goals Rehabilitation will preserve the integrity of single family homes in the community and provide a stable, safe and salutary living environment for lower income residents. Additionally, the rehabilitation of housing will prevent the potential degradation of neighborhoods. The rehabilitation of housing supports several Housing Element Goals and Objectives, including Objective 1.5 (Rehabilitation) and Objective 1.9 (Rehabilitation-Home Owners). V. SUMMARY It is the role of the Housing Commission to make recommendations to the City Council based upon several considerations with respect to expanding affordable housing opportunities. These are: 0 The proposal’s effectiveness in serving the housing needs and priorities as expressed in the Housing Element of the General Plan and the HUD Consolidated Plan. 0 The proposals’ development and operating feasibility, emphasizing the applicant’s capacity, the financial feasibility and the appropriate role of the City in providing financial assistance. - 1996-97 HOME PROGRAM 4LLOCATION FEBRUARY 12,1998 PAGE 4 The City of Carlsbad’s Single Family Residential Rehabilitation Program represents a desirable component to the City’s efforts of creating and maintaining affordable housing. To this point the City has made considerable progress in creating both affordable rental and homeownership opportunities. The City‘s Single Family Residential Rehabilitation Program represents the City’s only program to provide assistance to existing homeowners and to support the objective of preserving the existing housing stock within the community. The Single Family Residential Rehabilitation Program will preserve the integrity of housing within the community and provide a safe and sanitary living environment for its occupants. Additionally, the residential rehabilitation is consistent with the City’s affordable housing policies and priorities and staff believes that the Single Family Residential Rehabilitation Program is deserving of City financial assistance. Staff is recommending that the City of Carlsbad’s Residential Rehabilitation Program receive the full $194,082 available in 1996-97 HOME funds. The Housing Commission is being requested to approve a recommendation of amending project funding allocations for the City’s 1996-97 HOME Program. XIV. EXHIBITS 1. Housing Commission Resolution No. 98-004 2. 1996-97 CDBG/ HOME Consolidated Funding Plan Strategy 3. HOME Funding Project Proposal and Evaluation 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 HOUSING COMMISSION RESOLUTION NO. 98-004 A RESOLUTION OF THE HOUSING COMMISSION OF THE CITY OF CARLSBAD, CALIFORNIA, RECOMMENDING AN AMENDMENT TO INVESTMENT PARTNERSHIP PROGRAM. SPECIFIC PROJECTS FOR FUNDING UNDER THE 1996-97 HOME WHEREAS, the City Council of the City of Carlsbad, California, selected projects and funding allocations for the City's 1996-97 Community Development Block Grant/ HOME Program during a public meeting on June 19,1996; WHEREAS, the Housing Commission of the City of Carlsbad, California accepted public comments on the reallocation of $13,400 in 1996-97 HOME funds originally approved for a security assistance deposit program to be administered by the Community Resource Center. WHEREAS, the Housing Commission has recommended an amendment to the projects to be included in the Consolidated Funding Plan for the 1996-97 HOME Investment Partnership Program HOME funding; and, WHEREAS, the Housing Commission has taken all testimony into account. NOW, THEREFORE BE IT HEREBY RESOLVED as follows: 1. 2. 3. ... ... ... ... That the above recitations are true and correct. That $13,400 in 1996-97 HOME funds originally approved for a security assistance deposit program to be administered by the Community Resource Center is hereby recommended for cancellation and these HOME funds to be reallocated for housing rehabilitation costs of eligible owner occupied single family homes. The City of Carlsbad's Single Family Residential Rehabilitation Program will therefore receive the full $194,082 available in FY 1996-97 HOME funds. That the City of Carlsbad's Consolidated Funding Plan for the 1996-97 HOME Investment Partnership Program is hereby recommended for amendment to include the reallocation of $13,400 in City of Carlsbad 1996-97 HOME Investment Partnership Program funds. 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 4. That the Housing and Redevelopment Director is hereby recommended to submit the required documents to the U.S. Department of Housing and Urban Development. PASSED, APPROVED AND ADOPTED at a regular meeting of the Housing Commission of the City of Carlsbad, California held on the 12th day of February, 1998, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: KATHLEEN WELLMAN, Chairperson DEBORAH K. FOUNTAIN Housing and Redevelopment Director HC RES0 NO. 98-004 2 EXHIBIT 2 CITY OF CARLSBAD 1996-97 COMMUNITY DEVELOPMCENT BLOCK GRANT HOM3E INVESTM[ENT PARTNERSHIP FUNDING PLAN STRATEGY A CITY OF CARLSBAD 1996-97 COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM STATEMENT OF COMMUNITY DEVELOPMENT 0aJECTIVE-S' The City of Carlsbad Community Development Block Grant (CDBG) funds will be allocated to organizations, agencies, City Departments, or persons to implement programs or develop/improve public facilities which meet the following community development objectives: 1. AFFORDABLE HOUSING: e Provide direct benefit to lower income persons through the provision or retention of affordable housing units in Carlsbad; e Provide shelter or services to homeless or near homeless persons/families which result in an improved situation through employment, permanent housing, treatment of mental, or substance abuse problems, etc.; and, e Provide direct assistance to lower income households to prevent or eliminate residential Building or Municipal Code violations and/or improve the quality of housing units in Carlsbad through residential (rental and/or owner occupied) rehabilitation programs. 2. SOCIAL SERVICES (GENERAL): e Provide assistance to non-profit public service providers who meet the basic needs of lower income Carlsbad residents. Basic needs are defined as those which provide food, shelter, clothing and, in some cases, health care; e Provide assistance to non-profit public service providers who offer counseling and self-improvement programs/activities for lower income Carlsbad residents; and, e Provide assistance to non-profit public service providers who offer recreational and/or cultural programs/activities for lower income Carlsbad residents. 3. SOCIAL SERVICES (CHILDREN & ADULTS): e Provide assistance to organizations which administer programs that directly benefit lower income children living in Carlsbad. The programs must provide one or more of the following activities: day care, after-school care, cultural enrichment, recreation, health care/immunization or sei€-improvement. The City may also give priority to single-parent assistance programs such as counseling services; and e Provide assistance to organizations which administer programs that directly benefit low income adults living in Carlsbad. The programs must provide one or more of the following activities for adults: employment services, job training, and educational programs. Programs designed for elderly adults only must provide one or more of the following activities: meals, homemaking or personal assistance services, financial assistance services, counseling, transportation, or shared housing or other housing related services. -. I I CITY OF CARLSBAD COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM SUMMARY OF FUNDS AVAILABLE 1996-97 Source of Funds Amount ($1 New Entitlement Grant 647,000.00 Reallocation of Previous Funds 50,62 1.5 8 TOTAL 697,621.58 CompletecVCanceled Project Funds to be Reallocated - Year Status Balance ($1 Boys & Girls Club (Renovation) 92-93 Completed 220.78 Boys & Girls Club (Renovation) 93-94 Forfeited 50,000.00 Join Hands Save a Life 94-95 Completed 400.80 Activity TOTAL 50,621.58 Funds Available bv Activity Amount ($1 Public Service 97,050.00 Public Facilities & Improvements, etc. 236,976.32 Program Administration 117,973.68 Section 108 Loan Payment 195,000.00 Reallocation due to completed or canceled 50,621.58 project and unprogrammed funds. TOTAL AVAILABLE FUNDS 697,621.58 1 May not be used for Program Administration or Public Service Activities SAN DIEGO URBAN COUNTY HOME INVESTMENT PARTNERSHIP PROGRAM STRATEGY 1996-97 The City of Carlsbad, as a member of the San Diego Urban County HOME Consortium, will allocate its HOME Investment Partnership funds to implement the following activities directly, through local housing authorities, or for-profit or non-profit organizations: e e 0 1. 2. 3. 4. 5. 6. Housing Acquisition/Rehabilitation 0 Rental Assistance Housing Rehabilitation a Security Deposits Housing Construction 0 Administration/Planning HousinP AcauisitionRehabilitation HOME funds may be used for acquisition of existing housing units with or without rehabilitation for lower-income persons and special needs groups. Housing Rehabilitation HOME funds may be used for housing rehabilitation costs incurred separately or in connection with the acquisition of existing housing for lower-income persons and special needs groups. Housing Construction HOME funds may be used for all eligible costs of housing construction for lower-income persons and special needs groups, when housing units are not available through acquisition or rehabilitation. Rental Assistance HOME funds may be used for rental assistance for eligible lower-income persons and special needs groups, and for related residential security deposit assistance programs. AdministrationlPlanning A portion of HOME funding may be used for eligible HOME administration and planning costs, including direct administrative and overhead costs, public information, fair housing, and program development costs. NOFA Process The City’s portion of HOME funds will be awarded to eligible housing activities implemented by the City or by for profit or non-profit organizations. All housing proposals submitted as part of the CDBGIHOME Request for Proposals which were not recommended for CDBG funding and proposals which are determined to be ineligible activities under the CDBG Program will be considered for funding under the HOME Program. City staff shall evaluate each proposal and present all eligible HOME funded housing activities to the Housing Commission. Based upon the evaluation, staff will recommend a housing activity(ies) to be considered by the Housing Commission for a HOME funding recommendation to the City Council. The Urban County HOME funding program will be implemented through twice yearly Notices of Funding Availability (NOFA’S). For 1996-97, the County Fall NOFA will be available from November 17 to 30, 1995 and the Spring NOFA will be available from April 19 to May 31, 1996. 7. Leverage In so far as possible, HOME funds will be leveraged with other public and private funding sources to enhance program productivity. 8. Area of Activitv HOME funds may be used for housing activities implemented within the City of Carlsbad. I - AN DIEGO COUNTY CONSORTi 2 1996-97 HOME PARTNERSHIP PROGRAM PRELIMINARY STRATEGY ALLOCATIONS Participating Jurisdictions Amount ($1 Carlsbad 176,720.25 Encinitas 162,5 82.63 Santee 14 1,376.20 Vista 226,201.92 Urban County 1,859,658.00 Program Administration 285,171.00 TOTAL 2,85 1,7 10.00 EXHIBIT 3 HOME FUNDING PROJECT PROPOSALS -_ - CITY OF CARLSBAD COMMUNITY DEVELOPMENT BLOCK GRANT/HOkIE PROGRAM FUNDING PROPOSAL APPLICATION 1996-97 The following information must be completed by each person/agency/organization interested in being considered for CDBG funding. All information requested must be provided or the application will be considered incomplete and will not be further evaluated for funding consideration. Please type or print clearly. Attach additional sheets or information as necessary. * ADMINISTRATING AGENCY Name of Agency: Address : Citv of Carlsbad. HousinrZ & Redevelopment Department 2965 Roosevelt Street. Suite B Carlsbad CA 92008 Federal Tax I.D. Number: PROPOSED PROGRAM/PROJECT Title of Program/Project: Single Familv Residential Rehabilitation Program Location of ProgrardProject: Citv wide activity Administrative Office - See above Contact Person: Leilani Hines Telephone No.: 1619) 434-2818 Requested Funding Amount: $ 154.000 Description of ProgrdProject (Describe the work to be performed, including the activities to be undertaken or the services to be provided, the goals and objectives of the program/project, etc.): Rehabilitation of single familv owner occupied homes through out the Citv of Carlsbad. Funds will be used for loanskrant to aualifvinn low income households and for the County of San Diego’s costs to administer the urogram. The Citv is requesting additional CDBG funds so that this residential rehabilitation urogram can continue without delav. Funding request will allow for the rehabilitation of approximately 10 single familv homes. Currently. there are auuroximatelv 18 single familv home owners and 7 mobilehome owners on the Citv’s interest list. I. ORGANIZATIONAL ABILITY/CAPACITY A. This agency is: 0 Non-profit For-profit E4 Local public agency State public agency 0 Other (Please specify.) B. What is the purpose/mission of the agency? The Housing and Redevelopment Department is dedicated to: 1) Enriching and revitalizing the redeveloument area for the benefit and enjoyment of the entire communitv; 2) ProvidinP affordable housing city wide for all economic segments of the pouulation: and 3) Providing a CDBG program that meets the social service. housing and communitv develoment needs of low income residents. CITY OF CARLSBAD COMMUNITY DEVELOPMENT BLOCK GRANTIHOME PROGRAM FUNDING PROPOSAL APPLICATION 1996-97 The following information must be completed by each person/agency/organization interested in being considered for CDBG funding. All information requested must be provided or the application will be considered incomplete and will not be further evaluated for funding consideration. Please type or print clearly. Attach additional sheets or information as necessary. ADMINISTRATING AGENCY Name of Agency: Address: City of Carlsbad, Housinq & Redevelopment Department 2965 Roosevelt Street, Suite B Carlsbad CA 92008 Federal Tax I.D. Number: PROPOSED PROGRAM/PROJECT Title of ProgrdProject: Single Family Residential Rehabilitation Program Location of Program/Project: City wide activity Administrative Office - See above Contact Person: Leilani Hines Telephone No. : J6 19) 434-28 18 Requested Funding Amount: $ 154,000 Description of ProgramlProject (Describe the work to be performed, including the activities to be undertaken or the services to be provided, the goals and objectives of the program/project, etc.): Rehabilitation of single familv owner occupied homes through out the Citv of Carlsbad. Funds will be used for loandgrant to aualifving low income households and for the County of San Diego’s costs to administer the program. The Citv is requesting additional CDBG funds so that this residential rehabilitation program can continue without delay. Fundinp reauest will allow for the rehabilitation of approximately 10 single familv homes. Currentlv. there are approximately 18 side family home owners and 7 mobilehome owners on the Citv’s interest list. I. ORGANIZATIONAL ABILITY/CAPACITY A. This agency is: 0 Non-profit 0 For-profit 0 Local public agency 0 State public agency 0 Other (Please specify.) B. What is the purpose/mission of the agency? The Housing and Redevelopment Department is dedicated to: 1) Enrichinn and revitalizing the redevelopment area for the benefit and enioyment of the entire communitv; 2) Providing affordable housing city wide for all economic segments of the potmlation: and 3) Providing a CDBG program that meets the social service. housing and communitv develoDment needs of low income residents. - City of Carlsbad 1995-96 CDBG/HOkIE Funding Application Page 2 C. How long has this agency been in operation? Please include the date of incorporation? Citv of Carlsbad incorporated in 1952. D. How long has this agency been providing the proposed program/project? Carlsbad’s residential rehabilitation program administered bv the Countv has been in operation since 1993. The Countv has been ouerating residential rehabilitation programs for the unincorporated San Dieqo County area and on behalf of other iurisdictions since 1978. Prior to the Citv of Carlsbad becoming a CDBG Entitlement community. the Countv of San Diego did offer a residential rehabilitation program to Carlsbad residents under the Urban Countv urogram. E. Please describe the agency’s existing staff positions. (May substitute an organizational chart.) Please see attached. F. Please describe the agency’s existing staff positions directly responsible for the proposed program/project and their qualifications and experience in implementing such a progradproject. (Resumes may also be submitted.) Please see attached. G. Please indicate your agency’s level of experience with the CDBG program and/or other State or Federal Funding Sources. CDBG program: 0 No past experience. 0 0 IB Some experience, 1 to 2 years of using CDBG funds. Moderate experience, 3 to 5 years of using CDBG funds. Considerable experience, more than 5 years of using CDBG funds. Other State/Federal Funding Sources: 0 No past experience. 0 0 El Some experience, 1 to 2 years of using other State/Federal funding sources. Moderate experience, 3 to 5 years of using other State/Federal funding sources. Considerable experience, more than 5 years of using other State/Federal funding sources. H. If you have received federal funds, including CDBG funds, in previous years, have program violation findings ever been made against your agency/organization? R No Yes If yes, please explain nature of finding(s) and how finding(s) has been addressed by your organization. Not Applicable (WP:\APPLICATION) Revised: 1/22/96 _- I City of Carlsbad 1995-96 CDBG/HOMh Funding Application Page 3 11. FINANCIAL CAPACITY/STABILITY A. Please attach the proposed budget for the program/project, itemizing revenues and expenses, to this application. Indicate how the requested CDBG funds would relate to the overall proposed budget. B. Please submit a copy of the organization’s financial statements for the last three years and a copy of the most recent IPA Audit Report. C. Did you receive any of the following sources of funding from the City of Carlsbad last year (July 1995 to June 1996) for the proposed program/project? Sources of Funding - No - Yes CDBG Community Activities (General Fund monies) w Ed 0 1. If yes, please indicate status of previously awarded funds (fully expended, funds remaining, program/project discontinued). CDBG funds: Community Activities: Not auulicable D. Did you receive any federal funds, including CDBG funding from other cities, last year (July 1995-June 1996)? 43: No 0 Yes (Please list funds below.) Amount Received $ $ $ $ Program Source E. Will additional CDBG funds be required in future years for the project? 0 No Ca Yes 111. BENEFITS & BENEFICIARIES A. How accessible or convenient is the proposed program/project to Carlsbad residents? (Please be specific.) Program offers funds to rehabilitate lower income owner-occuoied single farnilv homes and mobile homes located in Carlsbad only. (WP:\APPLICATION) Revised: 1/25/96 - City of Carlsbad 1995-96 CDBG/HOME Funding Application Page 4 B. What is the approximate percentage of your clients that have annual family incomes in each of the following ranges: (Percentages should add to 100%; Please see the 1994-95 Income Limits for the CDBG Program) % of clients are at 30 percent or below of the area median income % of clients are between 31 and 50 percent of the area median income % of clients are between 51 and 80 percent of the area median income % of clients are above 80 percent of the area median income 40 60 C. Please describe how low and moderate income persons will benefit from the proposed progradproject. Include the need or problem to be addressed in relation to local and national objectives, CHAS or other community development priorities, as well as the population to be served or the area to be benefitted. The rehabilitation of residential units occupied by lower-income households will assist in the preservation and maintenance of the Citv’s affordable housing stock. Additionally, the rehabilitation of these homes will further Drotect the health and safety of the occupant by correcting deficiencies in the home. D. Please indicate the number of households or individuals you serve each year and the percentage that are Carlsbad residents. - 5 Households or Persons of which 100 % are Carlsbad residents E. Does your agency focus its activities on populations with special needs? 0 No R Yes (Please specify) Please specify which special needs populations. (Homeless individuals/families, Persons with disabilities, Persons with substance abuse problems, Veterans, Farm workers & day laborers, Elderly, Children, etc.) Offers rehabilitation grant of $1.000 for the elderly or disabled for accessibility/adaotability improvements. IV. IMPLEMENTATION OF ACTIVITY A. Please attach a schedule for implementation of the proposed progradproject to this application. The agency must ensure the expenditure of all CDBG funds awarded within the program year. (WP:\APPLICATION) Revised: 1/25/96 - City of Carlsbad 1995-96 CDBG/HOME Funding Application Page 5 I, the undersigned, do hereby attest that the above information is true and correct to the best of my knowledge. Management Analyst December 20, 1995 Title Date Date Received: December 20, 1995 Date Reviewed: December 20, 1995 Staff Person Completing Review: Leilani Hines National Objective: Low/mod Income Benefit Local Objective: Eligibility Determination: Affordable HousinP - Rehabilitation 24 CFR Part 570.202 (a)(l) 24 CFR Part 570.208 (aN3) (WP:\APPLICATION) Revised: 1/25/96 CITY OF CARLSBAD COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM RESIDENTIAL REHABILITATION PROGRAM 1996-97 EXPENSES: No. of Units Cost Der Unit Total Cost Single Family Homes 6 $20,000.00 $120,000.00 Mobile Homes Administration @ 22 % $33,846.15 TOTAL 6 $20,000.00 $153,846.15 Revenues: HOME Funds $154,000 Edward A. Baker Director (Acting) Alfred0 Ybarra Housing Program ADhiIINISTRATIVE CAPABILITY HOUSING AUTHORITY OF THE COUNTY OF SAN DIEGO HOUSING REHABILITATION Martha Meurer Principal Rehabilitation Specialist 111 (Supervisor) Bob Steckman Housing Rehabilitation Specialist 111 (Inspector) Margaret Wooley Housing Rehabilitation Specialist I1 Sharon Ford Housing Rehabilitation Specialist I1 David Smith Housing Rehabilitation Specialist I1 Two years as Acting Director of the County of San Diego’s Housing and Community Development Department, which includes the Urban County’s CDBG Program, the Housing Authority and the Industrial Development Authority. Currently, the Director’s responsibilities include 91 employees and an annual budget of $82 million. Ten years with the County of San Diego’s HCD Department; Thirteen years of experience in various housing programs including mobilehome assistance programs, density bonus programs, rehabilitation, and bond financing. Fourteen years with the County of San Diego’s HCD Department; Experience in all phases of duties associated with the rehabilitation programs; Experience in the supervision of and responsibility for subordinates in the division. Six years with the County of San Diego’s HCD Department in the Rehabilitation Division; Twenty three years of experience in construction, inspections, and teaching construction applications. Fifteen years with the County of San Diego’s HCD Department; Eight years of experience with Housing Rehabilitation Division; Experience in real estate and construction industry. Nine years of experience with the County of San Diego’s Housing Rehabilitation Division; Experience in construction and inspections of residential properties for health and safety code violations, and general remodeling and repair. Five years of experience with the County of San Diego’s HCD Department; Six years of experience in housing, office, and industrial construction and renovation; Eleven years experience in civil engineering and earth work. Sherri Hopkins Housing Aide Six years of experience with the County of San Diego’s HCD Department with three years of experience in residential rehabilitation; Experience as an Account Clerk 111 at the County of Orange HCD. - CObIh7il'S DEVELOPMENT BLOCK GRA ' I'ROGRAM PROGRAM/PROJECT EVALUATION INSTRUCTIONS Each eligible proposal/application for CDBG funds shall be reviewed and evaluated, for ranking purposes based upon the attached criteria. The CDBG Funding Advisory Committee, as well as Housing 'and Redevelopment Department staff, will evaluate each eligible proposal for funds and assign a score based on a maximuni 100 point scale. To assist you in reviewing and evaluating each proposal based upon the established criteria, measurement examples, where appropriate, have been provided. These are to be used as a guide only and is not intended to cover every circumstance which may occur. Please use your best judgement in evaluating the proposals with the criteria that has been provided. You will find a copy of each evaluation form placed directly behind the application. To facilitate the evaluation of eligible proposals based upon the attached criteria, applicants will be given the opportunity to participate in a 10 minute interview with the CDBG Funding Advisory Committee and staff during a public meeting. The public will be given the opportunity to comment on the eligible proposals being considered for funding. The interview will provide the Advisory Committee with an opportunity to obtain additional information regarding the organization and the proposed activity that may not have been provided in or was unclear within the application. It will be suggested that applicants provide any documents which may assist the Advisory Committee and staff in evaluating the proposal Prior to this interview. Staff will average the evaluation scores given by each Advisory Committee member and staff. The average score received will then be used to rank order each of the proposals within each of the following three classifications for public service and public facility activities: 1) Housing; 2) General Social services; and 3) Social Services for Children & Adults. This information will then be presented to the Advisory Committee for further review and evaluation to determine the level of funding to be recommended for each selected proposal. - CITY OF CARLSBAD - COMMui.JITY DEVELOPMENT BLOCK GRANT PROGRAM PROGRAMPROJECT EVALUATION Name of Organization & Project: Project Location: 39fii'; ROOSFVFI T ST. ~ STF R CqBl SBW Service ProvidedIBenefit to Carlsbad Residents: CITY OF CARLSBAD/SF RESIDENTIAL REHAB CITYWIDF PROGRAM ~ Type of Activity: Local Objective: National Objective: Amount of Funding Request: $ 154,000 I. ORGANIZATIONAL ABILITY/CAPACITY (Maw. of 15 points): A. General Experience of Organization - How much general experience does the organization have in providing services to IOW and moderate income persons? (i.e., length oftime the ornanization has been in operation) Measurement Examples: No Experience - New organization - - Some Experience - 1 to 3 years of experience Moderate Experience - 4 to 9 years of experience Considerable Experience = 10 years or more of experience - 0 No 1 Some 3 SCORE 2 0 Considerable Moderate Experience Experience Experience Experience COMMENTS : B: Experience in Implementation of Program/Project - How much experience does the organization have in providing the specific program/project proposed for funding? (i.e., Iengrh of time the actual pro,qram/llroject has been operated by the organization) Measurement Examples: Some Experience 0 to 3 years of experience Moderate Experience - 4 to 9 years of experience considerable Experience = 10 years or more of experience - No Experience - New program/project - - - 0 No 1 Some 2 SCORE 2 Moderate Experience Experience Experience Experience COMMENTS: -. CDBG Program Evaluation Form Page 2 C. D. E. Staffing for Program/Prc+ct - How qualified is the identified staff in performing the various functions required to implement the proposed program/project? tie., years ofsta ff experience, education and training) 0 Not 1 Fairly 2 4 SCORE 0 More than Qualified Qualified Qualified Qualified , COMMENTS: Experience with Federal or State Funding Sources - How much experience does the organization have in administering CDBG and/or other State or Federal funds? (i.e., Iengr/i of time the organizatiorJassigned staff has been administering such fund) Measurement Examples: No Experience = First time applying for FederauState Fun& Some Ekperience E 1 to 2 years of experience Considerable Experience = 5 years or more of experience - Moderate Experience - 3 to 5 years of experience 0 No 1 Some 3 SCORE 2 0 Moderate Considerable Experience Experience Experience Experience COMMENTS: Performance record - What overall level of ability has the organization demonstrated for providing services to the public, as well as adhering to local, State and/or Federal regulations which may have applied to the various funding sources for their previous programs/projects? (i. e., number of clients benefitting from program/project, any violations of the regulations, ability to clear violation findings) 3 2 Strong SCORE 0 1 0 No Some Adequate Ability Ability Ability Ability COMMENTS: & CDBG Program Evaluation Form Page 3 11. FINANCIAL CAPACITY & STABILITY (Ma, of20 ooints): A. Leverage of Funds - What level of leveraging of CDBG funds with other funding sources has been proposed for the proposed program/project or demonstrated in the current operating budget for the program/project? Measurement fiamples: ' I No Leveraging Some Leveraging Moderate Leveraging - - Proposed progranJproject will be funded entirely with CDBG funds from CDBG funds. from CDBGfunds. 0 to 30% of the revenues used for the ProposedprogranJproject will be from CDBG fin&. - - 65 to 95% of the revenues used for the proposed program/project will be 31 to 65% of the revenues used for the proposed progranJproject will be - Considerable Leveraging = 0120 456 789 10 3 No or Little Some Moderate Considerable SCORE Leveraging Leveraging Leveraging Leveraging B. Financial Stability - Do the fmancial statements of the organization indicate a relatively stable financial position? (Le., diversified funding revenues and support, revenue exceeding expenses, fund balance) Measurement Examples: No Capacity One source of funding (CDBG) and few, if any, assets. Revenue does not cover expenses. Fund balance is negative. Some Capacity = A few sources of funding and assets. Revenues equal expenses. No fund balance. expenses. Some fund balance to carry over. A wide variety offunding sources and substantial assets. Revenues notably exceed expenses with significant fund balance. - - - Moderate Capacity - Several sources offunding and assets. Revenues equal or slightly exceed Considerable Capacity 5- 0123 456 7@9 10 B No or Little Some Moderate Considerable SCORE Stability Stability Stability Stability - CDBG Program Evaluation Form Page 4 111. BENEFITS & BENEFICIARIES (Ma. of 60 points): A. Access to Program/Service - Is the proposed program/project easily accessible or convenient to Carlsbad residents? Measurement fiamples: Not or Not Very Accessible = Service office located more than a mile outside of Carlsbad and office is not located directly along any public transportation routes. directly along any public transportation routes. from service location and/or office is located directly along public transportation routes. client's residence. - Fairly Accessible Accessible - Service office located within a mile of Curlsbad and office is not located Service once located outside of Carlsbad but provides transportation to and Service office located within Carlsbad or provides services directly to - - - - Very Accessible 024 57 9 10 12 14 15 123 Not or Not Fairly Very SCORE Very Accessible Accessible Accessible Accessible B. Benefit to Lower Income Persons - To what extent does the proposed program/project benefit low income persons? Measurement Eramples: Some Benefit Less than 30% of clients are of low income (50% of MFI). 30 to 40% of clients are of low income (50% of MFI). - No or Little Benefit - Moderate Benefit Considerable Benejt = - - 41 to 80% of clients are of low income (50% of MFI). More than 81 !% of clients are of low income (50% of MFI). - - 024 5 @ 9 10 12 14 15 7 No or Little Some Moderate Considerable SCORE Benefit Benefit Benefit Benefit C. Benefit to Carlsbad Residents - To what extent does the proposed program/project benefit low income Carlsbad residents? Measurement Examples: No or Little Benefit Serves 1 to 15 Carlsbad residents annually. Facility located outside of Carlsbad. Some Benefit 5 Serves 16 to 50 Carlsbad residents annually. Facility located just outside of Carlsbad. Moderate Benefit Serves 51 to 99 Carlsbad residents annually. Facility located in Carlsbad but serves less than 50 residents. Carlsbad and serves more than 51 residents. = - - - considerable Benefit Serves more than 100 Carlsbad residents annually an@or faciliv located in 024 579 a1214 15 ALL No or Little Some Moderate Considerable SCORE Benefit Benefit Benefit Benefit CDBG Program Evaluation Form Page 5 D. Needs of Low Income Residents - TO what extent does the proposed program/project meet the needs of low-income residents? (Le., relation to Consolidated Plan priorities, special needs population served) Measurement Examples: No! Adequate - Fairly Adequate = - Adequate s= More than Adequate I 0' 2 4 57 Not Fairly Adequate Adequate Meets no prioritized need of the Consolidated Plan. Serves no special needs populations. Meets a low priority need of the Consolidated Plan. Serves no special needs populations. Meets a medium priority need of the Consolidated Plan. Serves special needs populations. Meets a high priority need of the Consolidated Plan. 9 10 12 14 15 r3 More than SCORE Adequate Adequate IV. IMPLEMENTATION OF PROJECT/PROGRAM (Mu. of 5 Doints): A. Implementation/Expenditure of Funds - To what degree has the organization demonstrated a readiness to implement the proposed program/project and expend the CDBG funds within the one year period? (i.e., program/project is in planning stage only, identification ancC/or commitment of other finding sources for completion of progrom/project, program/project already in operation or started) Measurement Examples: No or Little Some Moderate High 0 No or Little Degree of Readiness - - Program/project in development stage only. No specific site selected. No construction or construction related plans completed. purchase offer. Architectural, engineering plans and other plans being drafed to open bid process. Site selected and offer accepted or option to buy. Property to be in escrow by July 1st. = Program operating for less than one year. specijic site selected and ready to submit Program operating for at least one year. Construction drawings completed and ready Program operating at least two years. Construction work ready to begin by July 1st. = - - 5 SCORE 1 2 3 4 0 Some Moderate High Degree Degree of Degree of of Readiness Readiness Readiness COMMENTS : TOTAL POINTS RECEIVED (Maximum of I00 Points Possible): 75 SCORE