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HomeMy WebLinkAbout2020-02-20; Windsor Pointe Affordable Housing Project; |Barberio, Gary| Murphy, Jeff|To the members of the: ,PT'/ COUNCIL Date ~CA Y.. cc .x_ CM -f'v-COO .x._ DCM (3) ...:i::... Council Memorandum Feb.20,2020 To: From: Via: Re: Honorable Mayor Hall and Members of the City Council Gary Barberio, Deputy City Manager Jeff Murphy, Community Development Director David de Cordova, Principal Planner Elaine Lu key, Chief Operations Officer ~ Windsor Pointe Affordable Housing Project {city of . Carlsbad Memo ID# 2020017 This memorandum includes a brief project history of the Windsor Pointe Affordable Housing Project, previously known as the Oak and Harding Veterans Housing project and provides responses to several recent questions that .have been raised by community members. Staff is currently working on a corresponding Frequently Asked Questions sheet that is targeted for public release by the end of this week. Background A bulleted chronology of the project history is provided in Attachment A, but an executive overview is shown below. • 2016/2017 -Affirmed Housing processed applications for the construction of a 100 percent affordable housing project on two noncontiguous sites: 24 units at 965 Oak Avenue and 26 units at 3606 Harding Street. The proposed units in both project sites were intended for very low and extremely low-income veterans and their families, but the project was not conditioned to require veterans only. • Feb. 14, 2017 -the City Council approved a commitment of $4.25 million from the Housing Trust Fund to Affirmed Housing as a residual receipts loan to assist with project . financing to construct 50 affordable apartment homes for homeless military veterans and · lower income military veterans and their families. The estimated total cost of the project at the time was $21.4 million, with Affirmed to seek additional funding from other sources. • Affirmed Housing was twice denied financing from HCD's Veterans Housing and Homelessness Prevention Program for their proposed housing project. Community Services Branch Housing Services Division 1200 Carlsbad Village Drive I Carlsbad, CA ZIP 92008 I 760-434-2935 t · Honorable Mayor Hall and Members of the City Council Feb.20,2020 Page 2 • Aug. 16, 2019 -Affirmed Housing received conditional commitment from County Health and Human Services Agency {HHSA) of $10.14 million from the No Place Like Home (NPLH) program. This funding required that 24 of the project's units be set aside for residents experiencing severe mental illness (SMI). Additionally, _County of San Diego Behavioral Services will provide mental health services to the NPLH residents. • Jan. 28, 2020 -Carlsbad City Council approved an additional $4.043M request, for a combined total commitment of $8,293,392. Financial assistance is to be in the form of a combination of land purchase/lease back and residual receipts loan, for the construction of 50 affordable apartment units for homeless military veterans and lower income military veterans and their families, including homeless veterans, as well as people experiencing homelessness with SMI. Funding sources include the affordable housing trust funds and Community Development Block Grant money. Discussion Question: Will this facility house only veterans, or will some residents be non-veterans? Windsor Pointe is supportive housing that gives preference to veterans to the extent consistent with applicable law. Affirmed Housing was unable to secure enough funding to develop an affordable housing project exclusively for veterans. As such, they were forced to secure funding opportunities from other agencies, including the county. The County's No Place Like Home funding, which covers half of the apartments and roughly one- third of total project costs, targets supportive housing for persons with severe mental illness. These funds cannot be restricted only to veterans. Residents of these apartments may or may not be veterans, depending on the ability to fill these apartments with veterans who meet the county's requirements, including being on the county's list of persons with severe mental illness (SMI) who need housing (Coordinated Entry System). Question: Didn't the City Council approvals restrict funding for veterans housing only? Staff presented the initial $4.25 million funding request in 2017, describing the project as supportive affordable housing for veterans. The staff report title, and a PowerPoint slide used the term "restricted for homeless veterans and lower income veteran families." City Council . Resolution 2017-030, paragraph 4, states that, "the City Council hereby approves financial cash assistance in the amount of $4,250,000 from Carlsbad's Housing Trust Fund to Affirmed Housing Corporation for the construction offifty (SO) affordable apartment homes on two noncontiguous sites within the Northwest Quadrant of the City of Carlsbad, and within the historic Barrio Carlsbad neighborhood, for homeless military veterans and lower income military veterans and their families." Subsequent to the City Council's approval, Affirmed Housing sought, but was unsuccessful in obtaining, additional veterans housing financing. On Aug. 16, 2019, Affirmed Housing received conditional commitment from County Health and Human Services Agency (HHSA) of $10.14 Honorable Mayor Hall and Members of the City Council Feb.20,2020 Page 3 million from the No Place Like Home (NPLH) program. This funding would set aside 24 of the project's units for residents experiencing SMI. On Jan. 28, 2020, the City Council approved Affirmed Housing's request for additional funding. City Council Resolution 2020-032, paragraph 5, states that, "the City Council hereby approves the additional financial assistance in the amount of $4,043,392 from the city's affordable housing funds to Affirmed Housing (dba Carlsbad Veteran Housing, LP.) for the construction of fifty (SO) affordable apartment units on two noncontiguous sites located at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue in the city's northwest quadrant, for homeless military veterans and lower income military veterans and their families, including homeless veterans, as well as people experiencing homelessness with SMI. This additional assistance shall be combined with the $4,250,000 previously approved on Feb. 14, 2017, for a total financial assistance amount of $8,293,392. The assistance shall be provided as a combination of property acquisition by the City of Carlsbad and lease-back of the Windsor Pointe Apartments sites to Affirmed Housing, and a residual receipts loan. The source of funds shall be the city's affordable housing trust funds." To the extent consistent with applicable law, Affirmed Housing will give preference to veterans and Carlsbad resident and workers for all the apartment units. The attached Jan. 28, 2020 staff report and resolution describe in detail Affirmed Housing's request, staff analysis, and the City Council's action approving the financial assistance. Question: Can the City Council prohibit persons with mental health issues from residing at Windsor Pointe? Federal and state fair housing laws protect all people from discrimination in housing due to their mental or physical disabilities, religion, race, color of their skin, source of income, familial status, and many other characteristics. Public policy that results in discrimination against any of these protected classes of people is prohibited under these laws. For example, the law says it shall be unlawful "to make, print, publish, or cause to be made, printed or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling [housing accommodation] that indicates any preference, limitation, or discrimination based on ... handicap [disability]." (42 U.S.C. § 3604) (Cal.Gov. Code §12955 et. seq.) Because a mental health diagnosis is a private matter and a protected disability, denial of housing on the basis of disability would by a violation of fair housing laws. Question: Why is this project going in a residential neighborhood? Did the City of Carlsbad select the site? The site was selected and purchased by Affirmed Housing based on land availability and zoning. The City of Carlsbad did not select the site. Under California state law and the City of Carlsbad zoning ordinance, supportive housing that assists groups like veterans and disabled persons is a residential use, and not a business or commercial use. Such housing must be treated the same way as any housing under the city's land-use and zoning rules. Moreover, state and federal fair housing laws prohibit discrimination based on disability. Honorable Mayor Hall and Members of the City Council Feb.20,2020 Page 4 Question: Who is eligible to live in this housing? Windsor Pointe is designed as supportive housing for some of the most vulnerable members of our community, namely very low and extremely low-income homeless veterans and veteran families, and people with severe mental illness who are experiencing homelessness. Rents will be restricted to households at 25% to 50% of the San Diego County Area Median Income, which are in the extremely low to very low-income categories. Individuals who have been diagnosed by a licensed mental health professional as having a serious mental illness will be eligible for the 24 units at Windsor Point. Question: What is supportive housing? Supportive housing couples affordable rental housing with intensive supportive case management and on-site services (e.g., physical and mental health support, addiction treatment, job training, budgeting and financing support) to support homeless residents with housing stability. Each resident has a case manager (a dedicated staff member who helps each resident identify goals and track progress) who assesses their needs, works with them on an action plan to meet their goals and supports their housing stability. Supportive housing is designed to meet the needs of highly vulnerable populations by removing barriers and pre-conditions that would otherwise prevent an individual from being considered for housing in the first place (e.g., low income, poor credit history, or substance abuse). Question: How is supportive housing different from transitional housing or homeless shelters? Unlike transitional housing or shelters, supportive housing is a long-term housing solution to reducing homelessness. Supportive housing has consistent residents, whereas shelters and transitional housing often have high turnovers and offer fewer services than those offered to residents living in supportive housing. Residents sign leases and have all the same rights and responsibilities as any renter. They pay up to 30 percent of their monthly household income in rent (which usually comes from employment or government benefits). There is no time limit for how long someone can live in supportive housing, however the initial lease a resident signs is for one year. Question: What kinds of mental illness are we talking about? Mental illness categories include schizophrenia, bipolar disorder, severe depression, and post traumatic stress disorder. People with such conditions often do very well when treated, and many are living among us and functioning quite normally without anyone realizing that they are being treated for mental illness. Nationwide, nearly 1 in 5 adults live with a mental illness.1 California has the largest number of homeless veterans in the United States at 24 percent of the total population in our nation. Fifty 1 National Institute of Mental Health (NIMH) https://www.nimh.nih.gov/health/statistics/mental-illness.shtml Honorable Mayor Hall and Members of the City Council Feb.20,2020 Page 5 percent of California's veterans live with serious mental illness and 70 percent have a substance use disorder.2 Question: What tenant screening criteria will Affirmed Housing apply to potential residents of Windsor Pointe? • No registered sex offenders. • No one with a conviction of manufacturing or producing methamphetamines. • Residents will be screened for any convictions of violent criminal history or drug-related . crimes within the previous three years. • Only US citizens or legal residents • At Windsor Point, there will also be a veteran preference and City of Carlsbad preference for Carlsbad residents or workers, to the extent consistent with fair housing laws. Question: What is the process for being approved to live at supportive housing apartments? Referrals are made through the County's Coordinated Entry System, then the on-site service provider for the project contacts the individual to ensure he/she meets the eligibility requirements (e.g., homeless, veteran, etc). The individual meets with the property management team and completes the property management application which requires extensive back up documentation and paperwork. Question: What level of onsite security will Affirmed Housing provide? The safety of the Carlsbad community and Windsor Pointe residents is a top priority for the city and Affirmed Housing. Affirmed Housing will provide a private security guard on-site generally after business hours during the weekdays, with increased hours on Saturdays and Sundays. The properties will also have security camera systems installed with off-site monitoring. During the weekdays, Affirmed Housing will have highly trained on-site staff including trained health professionals and a property manager who work together to prevent loitering around the building, ensure the safety of residents, and respond to community concerns. A property manager at each property will live on-site. Next Steps Staff will post a Frequently Asked Questions document on the city's website to answer the various questions and comments the city has been receiving on this project. The City Council directed the City Manager to schedule a discussion item at a future City Council workshop to listen to community concerns about the project and provide information to address those concerns. The workshop will take place on Mar. 17, 2020. 2 No Place Like Home Program, Legislative Findings, Welfare and Institutions Code Section 5849.l(b)(4). http://leginfo.legislature.ca.gov/faces/bil1NavClient.xhtml?bill_id=201520160AB1618 Honorable Mayor Hall and Members of the City Council Feb.20,2020 Page 6 Once Affirmed Housing has confirmed it has received all other necessary financing, staff will negotiate the terms of land acquisition and the financial assistance package with Affirmed Housing as directed by the City Council's Jan. 28, 2020 approval. Attachments: A. Project History B. Jan. 28, 2020 City Council Staff Report (Exhibit 4 removed due.to size, and is available for review in the City Clerk's Office or in HPRM) C. Additional Materials D. Presentation from the Jan. 28, 2020 City Council Meeting cc: Scott Chadwick, City Manager Celia Brewer, City Attorney Kristina Ray, Communication & Engagement Director Mike Peterson, Assistant Community Development Director ATTACHMENT A Project History • 2016 -Affirmed Housing submitted applications for the construction of a 100 percent affordable housing project on two noncontiguous sites: 24 units at 965 Oak Avenue and 26 units at 3606 Harding Street. The project application consisted of a mix of studio, one, two, and three-bedroom units intended for very low and extremely low-income veterans and their families. • Jul. 14, 2016 -Housing Commission recommended approval of applicant's $4.25 million funding request from the Housing Trust Fund. • Jan. 18, 2017 -Planning Commission approved site development permits for the two sites. • Feb. 14, 2017 -the City Council approved a commitment of $4.25 million from the Housing Trust Fund to Affirmed Housing as a residual receipts loan to assist with project financing to construct 50 affordable apartment homes for homeless military veterans and lower income military veterans and their families. The estimated total cost of the project at the time was $21.4 million, with Affirmed to seek add\tional funding from other sources. • 2017 to 2018 -sought additional funding from the federal and state low-income housing tax credit program, Veterans Housing and Homelessness Prevention program, and the San Diego County Innovative Housing Trust Fund. The funding applications were unsuccessful. • Jan. 2019 -City Planner extended development permits until Jan. 18, 2021. • Aug. 16, 2019 -Affirmed Housing received conditional commitment from County Health and Human Services Agency (HHSA) of $10.14 million from the No Place Like Home (NPLH) program. This funding would set aside 24 ofthe project's units for residents experiencing severe mental illness (SMI). $4.875 million of the funding creates a capitalized operating subsidy reserve. Additionally, County of San Diego Behavioral · Services will provide mental health services to the NPLH residents. • Nov. 2019 -Affirmed Housing applied for 4% tax credit financing. • Dec. 2019 -Affirmed Housing requested additional $4.043 million gap financing from the city. • Jan. 17, 2020 -Carlsbad Housing Commission recommended approval of the additional financing request, including a recommendation to give tenant preference for Carlsbad residents. • Jan. 28, 2020 -Carlsbad City Council approved an additional $4.043 million request, for a combined total commitment of $8,293,392. Financial assistance is to be in the form of a combination of land purchase/lease back and residual receipts loan, for the construction of 50 affordable apartment units for homeless military veterans and lower income military veterans and their families, including homeless veterans, as well as people experiencing homelessness with SMI. Funding sources include the affordable housing trust funds and Community Development Block Grant money. Community Services Branch Housing Services Division 1200 Carlsbad Village Drive I Carlsbad, CA ZIP 92008 I 760-434-2935 t ATTACHMENT B CA Review C/<H CITY COUNCIL Staff Report Meeting Date: To: From: Staff Contact: Subject: Jan.28,2020 Mayor and City Council Scott Chadwick, City Manager David de Cordova, Principal Planner david.decordova@carlsbadca.gov, 760-434-2935 Authorization to negotiate with Affirmed Housing Carlsbad (dba Veteran Housing, LP.) to acquire property at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue, and approving $4,043,392 in additional financial assistance to construct fifty affordable apartment units restricted for homeless and lower income veteran families, as well as people experiencing homelessness with Severe Mental Illness (SMI). Recommended Action Adopt a resolution to: 1) authorize the real estate manager to negotiate with Affirmed Housing (Carlsbad Veteran Housing, LP.) to acquire property it owns at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue and to execute all documents necessary to provide $4,043,392 in additional financial assistance to Affirmed Housing for construction of fifty (SO) affordable apartment units for homeless and lower income veterans and their families, and for homeless people with SMI, on two noncontiguous sites in the northwest quadrant · of the City of Carlsbad; and 2) appropriate and authorize expenditure of $50,000 from the Housing Trust Fund for costs related to the property acquisition and execution of documents, including market appraisal services, relocation consultant services, outside legal counsel expenses and other related transaction costs. Executive Summary Affirmed Housing has submitted a request to the City of Carlsbad for additional financial assistance of $4,043,392 for the construction of 50 apartments for very low and extremely low-income homeless veterans and veteran families, and people experiencing homelessness with SMI. The City Council previously approved $4,250,000 in financial assistance to the project (Resolution No. 2017-030; Feb. 14, 2017) in the form of a 55-year residual receipts loan with simple interest of 3% annually. Combined with this additional request, the city's financial assistance would total $8,293,392, or $165;868 per unit. The developer has secured $10,140,000 of No Place Like Home (NPLH) funds through the County of San Diego in the form of a zero interest loan. The developer has also requested funding through the California Low Income Housing Tax Credit Program to finance the proposed development, which has an estimated total cost of $33,147,916. Jan.28,2020 Item #18 Page 1 of 61 Discussion On Jan. 18, 2017, the Planning Commission unanimously approved a SO-unit affordable apartment development, now known as Windsor Pointe, that will consist of development on two noncontiguous properties (3606-3618 and 3630 Harding Street and 965-967 Oak Avenue) within the Barrio Carlsbad neighborhood in the city's northwest quadrant. The Harding Street development will consist of 26 studio, one, two, and three-bedroom rental units. These rental units will be available to veteran households at very low and extremely low incomes. Twelve of the units will provide permanent supportive housing for people experiencing homelessness with SMI. The Oak Street development will consist of 24 studio, one and two-bedroom rental units. These rental units will be available to veteran households at very low and extremely low incomes as well. As with the Harding Street development, .12 of the units will provide permanent supportive housing for people experiencing homelessness with SMI. All of the residents at Windsor Pointe will have access to dedicated on-site services, including services intended to improve housing retention, health, education and employment/career opportunities. Further, residents in the NPLH units will receive intensive mental health services through the County of San Diego. Dedicated case managers will work with the residents on an individual case plan, offer assistance in applying for benefits, and provide linkages to other community services. Affirmed Housing has partnered with the County of San Diego to be the service provider. Affirmed Housing will develop, own, and operate Windsor Pointe. Affirmed Housing is experienced and has recognized expertise in developing high quality affordable apartment communities throughout the state and within San Diego County, including the Cassia Heights Apartments in Carlsbad (Exhibit 4). Affirmeq Housing also owns and operates affordable housing developments in other areas of San Diego and Los Angeles counties, as well as the San Francisco Bay Area. Affirmed Housing has a history of building top quality housing developments and operating/managing them in an outstanding manner. The developer has also developed, owns and manages other affordable homes for special needs populations, such as homeless and lower income veterans. l In considering any financial assistance request for an affordable housing development, staff and the Housing Commission reviewed several factors. The analysis of the developer request is discussed below. Affirmed Housing provided for the city's review a development proforma (Exhibit 3), which coincides with Affirmed Housing's Nov. 2019 federal four percent and state low income housing tax credit application {4% tax credits). Should the 4% tax credits application be unsuccessful, Affirmed Housing has stated their intent to apply for the 9% tax credits when offered in March 2020. While the amount of tax credits requested under the 9% program may vary from the current application, the· amount of assistance requested of the city would be the same. As of Jan. 9, 2019, the California Tax Credit Allocation ·committee {CTCAC) staff have made a . preliminary recommendation to place the Windsor Pointe project on a waiting list for funding, pending the completion of application scoring by the California Debt Limit Allocation Committee (CDLAC). Once the CDLAC results are reported to CTCAC, final funding Jan.28,2020 Item #18 Page 2 of 61 recommendations will be made. Therefore, the 4% tax credits proforma forms the basis of the following analysis. Cost Reasonableness Since development costs are one of the key variables determining the need for subsidies, it is important that those costs be reasonable. At approximately $33.1 million in total development costs (including land), the average per unit development cost of approximately $663,000 is, in fact, high as compared to other city-assisted developments. There are a number of reasons for this. First, is land cost. Because there is no master developer to underwrite the project to satisfy an inclusionary housing requirement, the properties were purchased at market value, representing approximately 13% of total project costs. However, the cost is reasonable considering the continuing high cost of land in Carlsbad, especially in the northwest quadrant of . the city. Second, construction costs are increasing. For example, the Terner Center reports that, between 2011 and 2016, construction costs in the Los Angeles area rose 13.6%, compared to 11.8% nationwide.1 Regulations, market dynamics and construction efficiency are cited as the three major influencers of construction costs. The residential construction labor force contracted sharply during the Great Recession and is still recovering. Construction materials costs increased 4.8% overall in the past year. In addition, the Windsor Pointe project will pay prevailing wages for construction labor. Third, development design affects the project's cost. This development is intended to be constructed specifically to provide affordable housing for very low and extremely low-income households as well as a special needs population -veteran families and chronic homeless.with SMI which require specialized case management to successfully maintain housing. The project will include a concrete podium to accommodate ground floor parking, with wood framing construction on the second and third floors. The project will also provide ample community space, accessible and adaptable ADA standards, and higher energy efficiency (GreenPoint certified) than a typical apartment building. Fourth, some of the existing rental units on the project sites are occupied. Relocation assistance · is required by state and federal regulations due to the use of public funds. As a project funder, the city will ensure that relocation assistance is carried out in conformance with applicable regulations and the City of Carlsbad Relocation Plan. Relocation assistance expenses of up to $331,000 are included in the project proforma. The per unit cost of this project, although high, is within the range of similar projects recently constructed by Affirmed Housing. For example, special needs apartments under construction or completed since 2017 have ranged between approximately $525,000 and $673,000 per unit (Exhibit 4). A recent report from the City of Los Angeles city auditor estimated the median per unit cost for permanent supportive housing in that city at more than $530,000.2 1 Terner Center for Housing Innovation. https://ternercenter.berkefey.edu/construction-costs 2 As reported by CalMatters, 12/31/19. https://calmatters.org/explainers/californias-homelessness-crisis- explained/ Jan.28,2020 Item #18 Page 3 of 61 The projected costs are reasonable for the very low and extremely low-income households and the special needs housing; the lower income affordability and the service-enriched development exceed the typical benefit of affordable housing developments in Carlsbad, but also increases the per unit cost warranting additional subsidy from the city. In Carlsbad's Housing Element, "special needs housing" includes seniors, persons with disabilities, large households, single-parent families, homeless, farmworkers, students and military personnel; it is not simply considered housing for the disabled. These populations have special needs for affordable housing for a variety of reasons. Since the development will have no master developer to provide the land at no cost and/or for additional equity, additional funds are being requested from the city to provide the remainder of the full-financing. The current request for $4,043,392, when combined with the previous $4,250,000 commitment, would provide a total city financial contribution of $8,293,392. This would be the largest contribution of local affordable housing funds to a single project to date.3 On a per unit basis, the $165,868 subsidy would be near the upper end of the range for city- assisted affordable housi'ng projects. The city subsidy would represent about 25% of the total funding required for the development, which is at the high end of the range compared to other city-assisted projects. However, for reasons discussed below, the relatively large financial request is reasonable in light of the relatively large public benefit that will result from the project. Undue Gain It is important that any financial assistance from the city have the effect of making the units more affordable and not creating undue gain for any party. If funded under the 4% tax credits program, Affirmed Housing would be eligible to earn a developer fee of $2,500,000. However, to reduce the financing gap, Affirmed Housing has committed to contribute $500,000 of the developer fee back to the project. The net fee would be 6% of total project costs (including land), which is consistent with the city's policies and is reasonable considering the complexity of the development/construction, financing and the long-term ownership and management of special needs housing. A capitalized reserve fund of $5,679,000 as an operating subsidy is included in the development proforma. This capitalized reserve, $4,875,000 of which will be funded by the NPLH program, is necessary for operations which could not be otherwise supported given the deeply targeted extremely low-income units within the development . . Given the complex nature of this type of project, as well as the contribution of a portion of the earned developer fee back to the project4, the city's financial assistance would not create an undue financial gain. Public Benefit Another consideration in evaluating the merit of the financial assistance request is the level of public benefit that will accrue. This can be examined in a number of ways: 1) the leveraging 3 The largest financial contribution made by the city to date took place in 2013, a $7.4 million residual receipts loan to acquire 44 existing duplex units in the Barrio and redevelop the property into a larger multi-family project. 4 This assumes the developer receives 4% tax credit funding. The fee that could be earned would be less under the 9% tax credit program, and so would overall project costs. The city's total financial commitment would not change. Jan.28,2020 Item #18 Page 4 of 61 effect on other sources of public and private equity; 2) the housing need being served; and 3) synergies with other city policies and priorities. 1.} In addition to this funding request of $4,043,392, Affirmed Housing proposes to finance the · project from a variety of sources, including proposed state and federal tax credit equity ($14,214,524) together with awarded County of San Diego NPLH funds {$10,140,000) and the previous city loan commitment {$4,250,000). Thus, every dollar of city assistance wilrleverage three dollars in capital from outside sources. In addition, the County of San Diego has committed to providing case management and mental health services to the NPLH residents at the Windsor Pointe project. It is important to note that Affirmed Housing has attempted to secure funding from other sources prior to making this supplemental request of the city. As stated in their Dec. 20, 2019 request letter (Exhibit 3), Affirmed Housing made two unsuccessful attempts (February 2017 and July 2018) to secure competitive Veterans Housing and Homelessness Prevention (VHHP) Program funds from the California Department of Housing and Community Development (HCD) and one unsuccessful attempt to secure funding from the County of San Diego Innovative Housing Trust Fund (March 2018). 2.) The project will provide housing and supportive services to some of the most vulnerable members of our community, namely, very low and extremely low-income homeless veterans and veteran families, and people experiencing homelessness with severe mental illness. Rents will be restricted to households at 25% to 50% of the San Diego County Area Median Income, which are in the extremely low to very low-income categories. These rent levels are necessary to serve the intended lower income special needs populations. According to the 2018 City of Carlsbad Annual Housing Element Progress Report, only 42 of the 912 units needed to satisfy Carlsbad's share of regional very low (and extremely low) income housing needs have been built since 2013. Furthermore, Carlsbad will need to.plan to accommodate at least 1,311 very low-income housing units for the upcoming 2021-29 Housing Element cycle. According to the 2019 regional Point-in-Time homeless count, there are 161 homeless individuals living in Carlsbad, 102 of whom are unsheltered. In 2018-19, twenty-seven percent of the 1,142 homeless men, women and children that were served in north San Diego county shelters suffer from mental health problems. 3.) The proposed project meets a critical housing need as identified in the city's Housing Element. In addition to helping meet the regional housing share discussed above, Housing Element Programs 3.13 and 3.14 describe actions the city will take to provide housing and supportive services to homeless and special needs populations. Similarly, the city's Consolidated Plan establishes high priority uses of housing funds, including increasing the supply of affordable housing units and providing supportive services for the homeless, lower- income residents and persons with special needs. In October 2017, the City Council approved the Homeless Response Plan {HRP), which is intended to: 1) prevent, reduce and manage homelessness in Carlsbad; 2) support and build capacity within the city and community to address homelessness; 3) encourage collaboration within the city, community partnerships and residents; and 4) retain, protect, and increase the Jan.28,2020 Item #18 Page 5 of 61 supply of housing. The HRP is being implemented under the leadership of the city's Police Department in coordination with Housing Services and other city departments. Progress of the HRP is monitored by the Housing Commission and City Council. An ad hoc subcommittee of the Carlsbad City Council has been working with elected officials from other north county cities, the County of San Diego, regional service providers, transit agencies, local community colleges and university, and state legislative representatives to develop an action plan to address homelessness in the north county region. The group has established a goal to reduce unsheltered homelessness 50% by January 2022 PY, among other things, increasing both short-term and long-term housing options for people experiencing homelessness. Based on the above, the city's financial assistance to this project will provide substantial public benefit by leveraging additional capital resources, provide needed extremely low and very-low income housing, and address the special needs of homeless veterans and their families, and homeless persons with severe mental illness. Form of Assistance Staff and the Housing Commission recommend that $4,043,392 in financial assistance from the city's affordable housing funds be provided to the Windsor Pointe project, which is in addition to the February 2017 commitment of $4,250,000 in the form of a residual receipts loan. However, rather than providing the entire subsidy in the form of a loan, staff recommends that the City Council authorize staff to enter into negotiations with Affirmed Housing (dba Carlsbad Veteran Housing, LP.) to purchase the property at an agreed-upon price up to its market value and lease back the land for a nominal amount, such as $1 per year. The balance of the financial assistance would be in the form of a residual receipts loan secured by a note and deed of trust. The loan will begin accruing interest after the completion of construction of the improvements. The outstanding principal and accrued interest on the city loan will be amortized over 55 years and repaid from surplus cash (the amount of money left over, if any, after expenses are covered by income and operating reserves) in equal annual install merits of principal and interest. In the event that there is not adequate surplus to repay the city loan, the outstanding balance shall accrue with simple interest at 3% per annum. The loan becomes due in full (with interest) at the end of the 55-year term. Jan.28,2020 Item #18 Page 6 of 61 Summary of uses and sources of funds The developer's detailed proforma is included in Exhibit 3. Below is a summary of the proforma: SUMMARY PROFORMA USES OF FUNDS TOTAL PER UNIT Land Payment/Costs $4,245,791 $84,916 Direct Construction 15,046,752 300,935 Capitalized Reserves 5,679,000 113,580 Architecture/Engineering 950,000 19,000 Impact Fees and Permits 962,000 19,240 Other indirect/Soft Costs {including $2.5 6,264,373 125,287 million developer fee) TOTAL USES $33,147,916 $662,958 PERMANENT SOURCES OF FUNDS TOTAL PER UNIT Tax Credit Equity (State) $5,132,628 $102,652 Tax Credit Equity (Federal) 9,081,896 181,638 NPLH Capital 5,265,000 105,300 NPLH Capital Operating Subsidy Reserve 4,875,000 97,500 Committed City Contribution 4,250,000 85,000 Additional City Contribution 4,043,392 80,868 Contribution of Developer Fee Earned 500,000 10,000 TOTAL SOURCES $33,147,916 $662,958 Security The developer will be required to provide completion bonds to the city to ensure that construction is completed. Risk 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 cove r expenses). Adding to this risk, any city financial assistance will be subordinated to conventional and other financing as may be necessary to ensure project financing success. Several factors mitigate t he identified risks: First, the development team has a strong track record with similar affordable housing projects both inside and outside the City of Carlsbad. The presence of other major financial commitments, such as the County of San Diego commitment of NPLH funding, mental health and supportive services, and tax credit investment, is also key as this means that other stakeholders depend on the success of the project both short and long term. Finally, the position of city and other subordinated financing is a feature that helps attract the necessary private, state and federal financing. Jan.28,2020 Item #18 Page 7 of 61 To further mitigate risk to the city's financial contribution, staff is seeking authority from the City Council to negotiate purchase of the land for the project and lease back the land to Affirmed Housing (dba Carlsbad Veteran Housing, LP.). Additionally, the balance of the assistance will take the form of a residual receipts loan, secured by a leasehold deed of trust, and other appropriate security interests in the project improvements. Additionally, staff recommends that the city's financial commitment {both the previous commitment and any new commitment) be maintained for only as long as the County of San Diego's NPLH commitment; that is, 24 months from August 16, 2019, or three tax credit funding rounds, whichever occurs earlier. This way, the committed funds could be released and made available to other projects in the city in the event the Windsor Pointe project is ultimately unsuccessful in securing all other funding. General Plan Conformance Acquisition of the property is in conformance with the Carlsbad General Plan in that the proceeds from the acquisition will provide financial assistance to Affirmed Housing to construct Windsor Pointe Apartments, a SO-unit residential project on two non-contiguous sites. The property is designated for residential use by the General Plan Land Use map, and the city's purchase of the property will not change its intended residential use. Furthermore, the intended use of the property is consistent with the General Plan Land Use and Community Design Element with respect to land use compatibility, residential density, and infill development policies; and the Housing Element with respectto goals to increase the supply of affordable housing. Housing Commission Review The financial assistance request was reviewed by the Housing Commission on Jan. 17, 2020. Based on its review, the Housing Commission recommends approval of Affirmed Housing's request for financial assistance based on the findings contained in the Housing Commission · Resolution {Exhibit 2). Fiscal Analysis Staff is recommending that the City Council approve $4,043,392 iii additional financial assistance to Affirmed Housing for the Windsor Pointe housing developments on Oak Avenue and Harding Street within the City of Carlsbad. This amount is in addition to the $4,250,000 in assistance approved by the City Council in February 2017. The land purchase and supplemental loan financing proceeds will come from the city's affordable housing funds (Affordable Housing Trust Fund and Successor Agency Housing Trust Fund), which may only be used for funding affordable housing programs and developments for lower income households. The city's affordable housing funds have an available balance of $21. 7 million prior to making any financial contributions to the Windsor Pointe housing developments. CDBG funds, to the extent they are available during the project's development timeline, may be used to assist with the land purchase, thereby reducing the impact on the city's affordable housing funds. Jan.28,2020 Item #18 Page 8 of 61 Next Steps The real estate manager will enter into negotiations to purchase the land and lease back to Affirmed Housing (dba Carlsbad Veteran Housing, LP.), and prepare and execute all appropriate documents, including, but not limited to: a Financial Assistance Agreement; Purchase/Sale Agreement; Grant Deeds; Ground Lease Agreements; Regulatory Agreement; Promissory Note; and Deed of Trust, necessary to provide for the financial assistance. The approving resolution authorizes the real estate manager to negotiate the land purchase and ground lease, retain professional services, and execute all necessary documents after review by the city attorney. Environmental Evaluation (CEQA) The city planner determined that the development belongs to a class of projects that the State Secretary for Resources has found do not have a significant impact on the environment and is, therefore, exempt from the requirement for the preparation of environmental documents pursuant to Section 15194 (Affordable Housing) of the State CEQA Guidelines. If the city provides CDBG funding towards the land purchase, environmental review pursuant to the National Environmental Policy Act (NEPA) will be completed in accordance with federal regulations. Public Notification This item was noticed in accordance with the Ralph M. Brown Act and was available for public viewing and review at least 72 hours prior to the scheduled meeting date. Exhibits 1. City Council resolution 2. Housing Commission resolution 3. Financial Assistance Request, including development proforma, from Affirmed Housing 4. Affirmed Housing company profile and representative projects Jan.28,2020 Item #18 Page 9 of 61 Exhibit 1 RESOLUTION NO. 2020-032 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING THE REAL ESTATE MANAGER TO NEGOTIATE WITH AFFIRMED HOUSING (DBA CARLSBAD VETERAN HOUSING, LP.) TO ACQUIRE PROPERTY AT 3606-3618 AND 3630 HARDING STREET AND 965- 967 OAK AVENUE, AND APPROVING $4,043,392 IN ADDITIONAL FINANCIAL ASSISTANCE TO CONSTRUCT FIFTY (50) AFFORDABLE APARTMENT UNITS RESTRICTED FOR HOMELESS AND LOWER INCOME VETERAN FAMILIES, AS WELL AS PEOPLE EXPERIENCING HOMELESSNESS WITH SEVERE MENTAL ILLNESS WHEREAS, Affirmed Housing has proposed to construct 50 apartment homes to be affordable to for very low and extremely low-income homeless veterans and veteran families, and people experiencing homelessness with severe mental illness (SMI), on two noncontiguous sites located at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue in the city's northwest quadrant, and has requested financial assistance from the City of Carlsbad to assist in the financing of said affordable housing project; and WHEREAS, the first request for financial assistance was submitted to the City of Carlsbad's Housing Commission for review and consideration at their public meeting on July 14, 2016, on which date said Commission recommended that the City Council approve the requested financial assistance in the amount of $4,250,000; and WHEREAS, the Planning Commission approved said affordable housing development, now known as Windsor Pointe Apartments, on Jan. 18, 2017; and WHEREAS, at a public meeting on Feb. 14, 2017, the City Council reviewed the financial assistance request and after considering staff and Housing Commission recommendations, and all testimony of all persons desiring to be heard, approved the financial cash assistance in the amount of $4,250,000 from Carlsbad's Housing Trust Fund (City Council Resolution No. 2017-030); and WHEREAS, subsequent to the project and city financial assistance approvals, Affirmed Housing has diligently pursued financing from other sources, which have been partly successful to date, including the commitment of funding from the County of San Diego; and Jan.28,2020 Item #18 Page 10 of 61 WHEREAS, despite the additional funding secured and anticipated, due to high construction costs and the complexities of creating financially feasible supportive housing, there remains a funding gap for the Windsor Pointe Apartments; and WHEREAS, on Dec. 20, 2019, Affirmed Housing made a second request to the City of Carlsbad for additional financial assistance in the amount of $4,043,392 to close the funding gap; and WHEREAS, the Housing Commission held a special meeting on Jan. 17, 2020 to consider the financial assistance request, staff evaluation and recommendation, and the testimony of all persons desiring to be heard on the matter, and upon which the Housing Commission recommended approval of the additional financial request in the amount of $4,043,392. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the request for financial assistance from Affirmed Housing is consistent with the goals and objectives of the City of Carlsbad's Housing Element, Consolidated Plan, and other priority policy initiatives such as the Homeless Response Plan. 3. That the city's acquisition of property located at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue is in conformance with the Carlsbad General Plan in that the proceeds from the acquisition will provide financial assistance to Affirmed Housing to construct Windsor Pointe Apartments, a SO-unit residential project on two non- contiguous sites. The property is designated for residential use by the General Plan Land Use map, and the city's purchase of the property will not change its intended residential use. Furthermore, the intended use of the property is consistent .with General Plan goals and programs, including: a. Land Use and Community Design Element Goal 10-G.3, "Promote infill development that makes efficient use of limited land supply, while ensuring compatibility and integration with existing uses. Ensure that infill properties develop with uses and development intensities supportive a cohesive development pattern." Jan. 28, 2020 Item #18 Page 11 of 61 b. Housing Element Goal 10-G.3, "Sufficient new affordable housing opportunities in all quadrants of the city to meet the needs of current lower and moderate income households and those with special needs, and a fair share proportion offuture lower and moderate income households." c. Housing Element Program 3.4 City-initiated Development, "The city, through the Housing and Neighborhood Services division, will continue to work with private developers (both for-profit and non-profit) to create housing opportunities for low, very low, and extremely low-income households." 4. That the request for financial assistance will assist the affordable housing developer in constructing a total of 50, studio, one, two and three-bedroom affordable apartment units for homeless veterans and lower income veteran families, as well as people experiencing SM!, on two noncontiguous sites located at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue in the city's northwest quadrant. The apartment units will be affordable to households ranging from 25% to 50% of area median income for San Diego County. The project, therefore, can effectively serve the city's housing needs and priorities as expressed in the General Plan Housing Element and the Consolidated Plan, and to meet the housing and service needs of the special needs population of homeless military veterans and lower income military veterans and their families, as well as people experiencing homelessness with SMI. 5. That the City Council hereby approves the additional financial assistance in the amount of $4,043,392 from the city's affordable housing funds to Affirmed Housing (dba Carlsbad Veteran Housing, L,P.) for the construction of fifty (50) affordable apartment units on two noncontiguous sites located at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue in the city's northwest quadrant, for homeless military veterans and lower income military veterans and their families, including homeless veterans, as well as people experiencing homelessness with SMI. This additional assistance shall be combined with the $4,250,000 previously approved on Feb. 14, 2017, for a total financial assistance amount of $8,293,392. The assistance shall be provided as a combination of property acquisition by the City of Carlsbad and lease-back of the Windsor Pointe Jan. 28, 2020 Item #18 Page 12 of 61 Apartr,;ents sites to Affirmed Housing, and a residual receipts loan. The source of funds shall be the city's affordable housing trust funds. 6. That Community Development Block Grant (CDBG) funds, to the extent they are available within the project development timeline, may be used towards the property acquisition, with a corresponding reduction to affordable housing trust funds assistance. 7. That the deputy city manager, administrative services shall appropriate funds necessary to purchase the land at an agreed-upon price up to its fair market value, and shall appropriate $50,000 from the Housing Trust Fund for costs related to the property acquisition and execution of documents, including niarket appraisal services, relocation consultant services, outside legal counsel and other related transaction costs. 8. That the City Council authorizes the real estate manager to negotiate with Affirmed Housing (dba Carlsbad Veteran Housing, LP.) to acquire property at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue at an amount not to exceed the appraised fair market value, and to lease back said property to Affirmed Housing (dba Carlsbad Veteran Housing, LP.) at $1 per year. 9. That the City Council authorizes the city manager or designee to execute all documents related to provision of the city assistance in the form of a residual receipts loan, including but not limited to a Financial Assistance Loan Agreement, Note, Deed of Trust, and Regulatory Agreement, subject to review and approval by the City Attorney. 10. That this financial commitment is conditional and contingent upon Affirmed Housing receiving all necessary third-party funding commitments, including tax credits and successful negotiation of all required property transfers, loan documents and legal instruments to effectuate the transaction and implement development. The city's commitment of funds, including the previous commitment approved on Jan. 17, 2017, shall be maintained until Aug. 16, 2021, or three tax credit funding rounds, whichever occurs earlier, but may be withdrawn at any time if satisfactory progress is not demonstrated. 11. That a preference shall be given to Carlsbad residents for tenancy at Windsor Pointe Apartments, where permitted by federal and state law. Jan. 28, 2020 Item #18 Page 13 of 61 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 28th day of January 2020, by the following vote, to wit: AVES: Hall, Blackburn, Bhat-Patel, Schumacher. NAYS: None. ABSENT: None. Jan. 28,2020 MATT HALL, Mayor f«~ 1 /-Jetlir 61Jrnez 1 BARBARA ENGLESON, tity Clerk /)ffll!_/.,j c1q (SEAL) . C/ttK Item #18 Page 14 of 61 RESOLUTION NO. 2020-001 A RESOLUTION OF THE HOUSING COMMISSION OF THE CITY OF CARLSBAD, CALIFORNIA, RECOMMENDING THAT THE CITY COUNCIL APPROVE $4,043,392 IN ADDITIONAL FINANCIAL ASSISTANCE TO AFFIRMED HOUSING (DBA CARLSBAD VETERAN HOUSING, LP.) TO CONSTRUCT FIFTY (50} AFFORDABLE APARTMENT UNITS RESTRICTED FOR HOMELESS AND LOWER INCOME VETERAN FAMILIES, AS WELL AS PEOPLE EXPERIENCING HOMELESSNESS WITH SEVERE MENTAL ILLNESS, ON PROPERTY AT 3606- 3618 AND 3630 HARDING STREET AND 965-967 OAK AVENUE EXHIBIT 2 WHEREAS, Affirmed Housing has proposed to construct SO apartment homes to be affordable for very low and extremely low-income homeless veterans and veteran families, and people experiencing homelessness with severe mental illness (SMI}, on two noncontiguous sites located at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue in the city's northwest quadrant, and has requested financial assistance from the City of Carlsbad to assist in the financing of said affordable housing project; and WHEREAS, the first request for financial assistance was submitted to the City of Carlsbad's Housing Commission for review and consideration at their public meeting on July 14, 2016, on which date said Commission recommended that the City Council1 approve the requested financial assistall<:ie'"'" ----- in the amount of $4,250,000; and WHEREAS, the Planning Commission approved said affordable housing development, now k~own as Windsor Pointe Apartments, on Jan . 18, 2017; and WHEREAS, at a public meeting on Feb. 14, 2017, the City Council reviewed the financial assistance request and after considering staff and Housing Commission recommendations, and all testimony of all persons desiring to be heard, approved the financial cash assistance in the amount of $4,250,000 from Carlsbad's Housing Trust Fund (City Col!ncil Resolution No. 2017-030); and WHEREAS, subsequent to the project and city financial assistance approvals, Affirmed Housing has diligently pursued financing from other sources, which have been partly successful to date, including the commitment of funding from the County of San Diego; and WHEREAS, despite the additional funding secured and anticipated, due to high construction costs and the complexities of creating financially feasible supportive housing, there remains a funding gap for the Windsor Pointe Apartments; and Jan.28,2020 Item #18 Page 15 of 61 WHEREAS, in a letter dated Dec. 20, 2019, Affirmed Housing made a second request to the City of Carlsbad for additional financial assistance in the amount of $4,043,392 to close the funding gap; and WHEREAS, the Housing Commission held a special meeting on Jan. 17, 2020 to considerthe financial assistance request, staff evaluation and recommendation, and the testimony of all persons desiring to be heard on the matter. NOW, THEREFORE, BE IT RESOLVED by the Housing Commission of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the request for financial assistance from Affirmed Housing is consistent with the goals and objectives and programs of the City of Carlsbad's Housing Element, Consolidated Plan, and other priority policy initiatives such as the Homeless Response Plan. 3. That the request for financial assistance will assist the affordable housing developer in constructing a total of 50, studio, one, two and three-bedroom affordable apartment units for homeless veterans and lower income veteran families, as well as people experiencing SMI; on two noncontiguous sites located at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue in the city's northwest quadrant. The apartment units will be affordable to households ranging from 25% to 50% of area median income for San Diego County. The project, therefore, can effectively serve the city's housing needs and priorities as expressed in the General Plan Housing Element and the Consolidated Plan, and to meet the housing and service needs of the special needs population of homeless military veterans and lower income military veterans and their families, as well as people experiencing homelessness with SMI. 4. That, based on information provided in the Housing Commission staff report and considering testimony of all persons desiring to be heard at the Jan. 17, 2020 public meeting, the Housing Commission hereby recommends that the City Council approve $4,043,392 in additional financial assistance to Affirmed Housing (dba Carlsbad Veteran Housing, L.P.) from the city's affordable housing funds for the construction of fifty (SO) Jan.28,2020 Item #18 Page 16 of 61 Apartments sites to Affirmed Housing, and a residual receipts loan. The source of funds shall be the city's affordable housing trust funds. 6. That Community Development Block Grant (CDBG} funds, to the extent they are available within the project development timeline, may be used towards the property ac::quisition, with a corresponding reduction to affordable housing trust funds assistance. 7. That the deputy city manager, administrative services shall appropriate funds necessary to purchase the land at an agreed-upon price up to its fair market value, and shall appropriate $50,000 from the Housing Trust Fund for costs related to the property acquisition and execution of documents, including market appraisal services, relocation consultant services, outside legal counsel and other related transaction costs. 8. That the City Council authorizes the real estate manager to negotiate with Affirmed Housing (dba Carlsbad Veteran Housing, L.P.) to acquire property at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue at an amount not to exceed the appraised fair market value, and to lease back said property to Affirmed Housing · (dba Carlsbad Veteran Housing, LP.) at $1 per year. 9. That the City Council authorizes the city manager or designee to execute all documents related . to provision of the city assistance in the form of a residual receipts loan, including but not limited to a Financial Assistance Loan Agreement, Note, Deed of Trust, and Regulatory Agreement, subject to review and approval by the City Attorney. 10. That this financial commitment is conditional and contingent upon Affirmed Housing receiving all necessary third-party funding commitments, including tax credits and successful negotiation of all required property transfers, loan documents and legal instruments to effectuate the transaction and implement development. The city's commitment of funds, including the previous commitment approved on Jan. 17, 2017, shall be maintained until Aug. 16, 2021, or three tax credit funding rounds, whichever occurs earlier, but may be withdrawn at any time if satisfactory progress is not demonstrated. 11. That a preference shall be given to Carlsbad residents for tenancy at Windsor Pointe Apartments. Jan. 28, 2020 Item #18 Page 17 of 61 PASSED, APPROVED AND ADOPTED at a Special Meeting of the Housing Commission of the City of Carlsbad on the 17th day of January 2020, by the following vote, to wit: AYES: NAYS: NGUYEN-CLEARY, COLE, CORTES-TORRES, MANZANO NONE ABS!:NT: EVANS ; .'1r/-r~,&----J.--c~,,G,<~ <' ~NGYUErJ-:CLEARY, Chairperson CARLSBAD HOUSING COMMISSION ATTEST: ,dJ~~~ DAVID DE CORDOVA Principal Planner Jan.28,2020 Item #18 Page 18 of 61 December 20, 2019 City of Carlsbad Dave de Cordova, Principal Planner 1200 Carlsbad Village Drive Carlsbad, CA 92008 Re: Windsor Pointe Dear Mr. de Cordova: AFFIRMED HOUSING EXHIBIT3 Affirmed Housing Group respectfully requests additional grant funds from the City of Carlsbad in order to bridge the remaining financing gap for the Windsor Pointe project in Carlsbad Village. The project will serve homeless veterans, with half of the project units set aside for residents experiencing severe mental illness. Veterans are overrepresented in homeless population due to many risk factors, including: military pay grade, active duty status, length and number of deployments, incidences of Traumatic Brain Injury, Substance Use and other mental illness, and incidences of PTSD. The risk of homelessness continues for many years after service--up to a decade or longer The Windsor Pointe project will not only provide shelter for an extremely vulnerable population, but also will include intehsive mental health services through the County of San Diego's No Place Like Home {NPLH) program. NPLH capital funds and a capitalized operating subsidy reserve (COSR) have already been secured through the County. The City of Carlsbad has committed $4,250,000 in capital to the Windsor Pointe project. These funds, in addition to the NPLH funds and equity from the sale of 4% federal and state tax credits, will finance approximatel.y 86% of the total development cost. Affirmed is requesting an additional commitment from the City of $4,043,392 to cover the remaining gap and move the project forward. This additional contribution will take the City's share of the project's TDC to approximately 25%, which Affirmed understands is in line with previous commitments to advance affordable housing. The proposed permanent sources for Windsor Pointe are: Name of Lender/Source Term Interest Residual Annual Debt Amount of Rate Receipts/ Service Funds (months) Deferred Pymt. 1) Add'I Citv of Carlsbad Commitment 660 3% Residual 2) Citv of Carlsbad Commitment 660 3% Residual 3) No Place like Home (NPLH) ~20 0% Residual 14) NPLH COSR S) Contributed Developer Fee TBD rrso rr00 Total Permanent Financing: Total Tax Credit Eauitv: !Total Sources of Project Funds: 13520 Evening Creek Dr. N., Ste, 160, San Diego, CA 92128 www.affirrnedhousing.com Jan.28,2020 85.8.679.2828 $4,043,392 $4~250,000 $5,265,000 $4,875,000 $500,000 $18,933,392 $14,210,774 $33,144,166 Item #18 Page 19 of 61 AFFIRMED HOUSING The project is currently being considered for an award of 4% federal Low-Income Housing Tax Credits (LIHTC) and California State Low-Income Housing Tax Credits (CLIHTC). If successful, credits will be awarded in mid-January 2020. The project would then close on its construction loan in July 2020, and construction would begin shortly thereafter. Construction would likely be complete in the 3rd or 4th quarter of 2021. This funding strategy will bring units on-line for homeless veterans most expeditiously. However, if the Windsor Pointe project does not receive an award of 4% plus state tax credits in January 2020, Affirmed will apply in CTCAC's first round 9% tax credits in March 2020. Because of the competitiveness of the 9% credit application, a project must rely on its tiebreaker score to determine whether it will receive an award or not. The additional $4 million in funds from the City will increase the project's tiebreaker from 45% (unlikely to receive an award) to 66% (very competitive). So either direction the project ends up taking (4% plus state or 9%), the City's additional funding is crucial to its success. * Please note: Developer will not contribute fee in the 9% scenario because CTCAC will limit paid fee to approximately $1. 7 million There are two major considerations as to why the project has not been able to move forward since receipt of the City's original funding commitment: inability to compete for additional financing (despite the owner's best efforts) and high costs. To the first point, in 2018, Affirmed inquired about the availability of vouchers through the City. Unfortunately, there are relatively few vouchers available, and few that are available each year are tenant-based. Affirmed understands this is due to the lack of supply of affordable housing in Carlsbad, so tenants can use the vouchers to offset rents in market rate housing. Thus, the Windsor Pointe project has been unable to secure project based rental subsidy. In addition to the voucher request, Affirmed unsuccessfully applied for VHHP through HCD (in February 2017 and July 2018) and IHTF through the County of San Diego (in March 2018). The reality is that affordable housing lacking project-based vouchers is simply not going to compete well for these financing sources. The NPLH program works because the County will provide services free of charge in addition to the COSR that will offset any operating deficit resulting from low rent collection. However, even with this source in place, additional capital is necessary for the project to move forward. To the second point, the cost per unit is relatively high for this project. Windsor Pointe is located in the heart of Carlsbad Village, a historic beach community in North County San Diego where land is very expensive. Currently, no affordable housing exists in this prime location. The project will include a concrete podium on the ground floor (to accommodate the parking), with wood framing on the second and third floors. The parking garage on the ground floor restricts the space available for additional units that could increase economies of scale. Further, nearly half of the units are designed as single resident occupancy units (24), and there will be 16 additional 1-bedroom units included. This results in higher costs due primarily to the ratio of bathrooms and kitchens to number of units. The project will include ample community space, accessible and adaptable ADA standards, and higher energy standards (GreenPoint certified) than a typical apartment building. Jan.28,2020 13520 Evening Creek Dr. N., Ste. 1601 San Diego, CA 92128 www.affirmedhousing.com 858.679.2828 Item #18 Page·20 of 61. AFFIRMED HOUSING Finally, the project is required to pay prevailing wages, per the County of San Diego's funding requirements. A recent study funded by the California Home Building Foundation notes that prevailing wages increase hourly labor costs by 89%, resulting in an overall construction cost increase of 37%. For all of these reasons, Affirmed requests that the City provide additional capital funds for the Windsor Pointe project. The project simply cannot move forward in a timely manner without this commitment. As soon as the project secures this funding and a tax credit award, Affirmed is ready to begin the construction loan dosing process and break ground prior to the end of 2020. We appreciate your consideration, please let us know if we can provide any additional information. ~~-a____ Marie Allen Project Manager, Affirmed Housing Group . Jan.28,2020 13520 Evening Creek Dr. N., Ste. 160, San Diego, CA 9Z128 www.affirmedhousing.com 858.679.2828 Item #18 Page 21 of 61 SOURCES City Funding-Commitment #1 NPLH COSRNPLH Citv Fundino-Commitment #2 State Tax Credit EQuitv Federal Tax Credit Equity Contributed developer fee Windsor Pointe 50 Unit Scattered Site (2 sites, 2 buildings) 4% Tax Credits + City ContrlbuUon + NPLH Capital+ NPLH COSR + CLIHTC 1110120 Per Unit %Total INCOME $ 4,250,000 85,000 12.8% Type Qty. Sub- total s 5,265,000 105,300 15.9% Studio-NPlH 12 $ 4,875,000 97,500 14.7% Studio 12 24 $ 4,043,392 80,868 12.2% 1BR-NPLH g $ 5,128,878 102,578 15.5% 1BR 0 $ 9,081,896 181,638 27.4% 1BR 0 $ 500,000 1BR 3 ¾AMI 25% 60% · 25% 40% 45% 50% TOTAL SOURCES s 33,144166 662,883 100:0% 1BR 4 60% 1BRMar 1 17 mkt 2BR-NPLH 3 25% 2BR 0 40% 2BR ·o 45% 2BR 1 50% 2BR 2 60% 2BRMar 1 7 mkt 3BR 1 30% . 3BR 0 40% USES 3BR 0 45% Land Purchase $ 3,265,000 65,300 9.9°% 3BR 0 50% Land Carry (bridge loan) & Broker Fee $ 980,791 19,616 3.0% 3BR 1 2 60% Land Acqusition Total Cost $ 4,245,791 84,916 12.8% I TOTAL I 50 I 50 I Site Work $ 1,417,450 28,349 4.3% Annual Residential Income structures & Prevailino Waqe $ 11,645,724 232,914 35.1% Excess PBV Income: Hard Cost subtotal s 15,046,752 300,935 45.4% Other Income Construction Continqencv $ 1,053,000 21,060 3.2% Total Gross Annual Income $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ I Architecture & Enqineerino $ 950,000 19,000 2.9% Vacancy@ 7.0% Conslruction Interest & Fees $ 1,261,688 25,234 3.8% TOTAL NET ANNUAL INCOME Capitalized Reserves $ 5,679,000 113,580 17.1% Taxes & Insurance $ 155,000 3,100 0.5% Cost of Issuance $ 150,000 3,000 0.5% EXPEN ES s Escrow & Tide $ 20,000 400 0.1% Administrative $ Legal Fees $ 185,000 3,700 0.6% Manaaement $ Devel Impact Fees & Permits $ 962;000 19,240 2.9% Utilities $ Tax Credit Fees $ 29,935 599 0.1% Pavroll $ Misc. Soft Costs $ 301,000 6,020 0,9% Insurance $ Total Relocation Expenses $ 331,000 6,620 1.0% Maintenance $ Soft Cost subtotal $ 10,024,623 200,492 30.2% Other: $ Sell Cos! Continaencv $ 274,000 5,480 0.8% Other Expenses Subtotal $ Developer Fee Paid $ 2,000,000 40,000 6.0% Resident Services s Developer Fee Deferred $ 500,000 10,000 1.5% R.eolacement Reserves $ TOTAL USES s 33,144,166 662,883 100.0% Real Estate Truces s Other: CMF A Issuer Fees + LP fees + Countv moni s ii ANNUAL EXPENSES ls CONFIOENTIAL WindsorPointe4% w NPLH + SCs + City Acq. MA +JSjr20,1.10 Property of Alfrmed Housing Group Rental Income Net Mon!l1Iy Total 280 $ 3,360 1,103 $ 13,236 325 $ 2,925 705 $ . 796 $ . 978 $ 2,934 1,178 $ 4,712 -$ . 427 $ 1,281 846 s . 955 $ . 1,173 $ 1,173 1.414 $ 2,828· . $ . 719 $ 719 972 $ - 1,098 $ - 1,351 $ - 1,629 $ 1,629 Is 34.797 I $ 417,564 $ . $ 8,400 $ 425,964 s (29,817 s 396,147 oerumt 2,527 $ 126.325 475 $ 23,769 820 $ 41,000 1,900 $ 95,000 300 $ 15,000 870 $ 43,500 . $ - 6,892 $ 344,594 880 $ 44,000 396 $ 19,800 100 $ 5,000 180 $, 9,000 8,448 I$ 422,394 I 111012020 2:28 PM Jan.28,2020 Item #18 Page 22 of 61 Council Memorandum Attachment C {city of Carlsbad Jan.27,2020 All Receive -Agenda Item II /5 For the Information of the-;-- CITY COUNCIL To: From: Via: Re: Honorable Mayor Hall and Members of the City Council David de Cordova, Principal Planner Elaine Lu key, Chief Operations Officer '('--- Date J./_2l/ll CA _><_ cc K.__ CM _K_ coo ...!S_ DCM (3) 2{__ Gary Barberio, Deputy City Mariager, Cominity Services Additional Information Related to Staff R ort Item No. 18 -Authorization to negotiate with Affirmed Housing Carlsbad (dba Veteran Housing, L.P.) to acquire property at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue, and approving $4,043,392 in additional financial assistance to construct fifty affordable apartment units restricted for homeless and lower income veteran families, as well as people experiencing homelessness with Severe Mental Illness (SMI). This memorandum provides a revision to the recommended resolution of approval in Agenda Item #18 for the City Council meeting on January 28, 2020. At their Jan. 21, 2020 meeting, the Housing Commission recommended approval of the additional funding assistance request by Affirmed Housing, with the condition that a preference be given to Carlsbad residents for tenancy at the future Windsor Pointe apartments. The City Attorney's office, in consultation with outside legal counsel, reviewed the potential for conflicts to arise with fair housing laws from such a condition. To avoid potential conflicts while preserving the intent of the Housing Commission's recommendation, the City Attorney's office recommends that paragraph 11 of the City Council resolution of approval (Exhibit 1, p. 13 of Item #18) be revised as follows: 11. That, to the extent consistent with applicable law, a preference shall be given to Carlsbad residents, and/or households with an individual that works in Carlsbad, for tenancy at Windsor Pointe Apartments. (Mark-up version) 11. That, to the extent consistent with applicable law, a preference shall be given to Carlsbad residents, and/or households with an individual that works in Carlsbad, for tenancy at Windsor Pointe Apartments;-WReFe- ~ated by federal and state-ktw. Community Services Branch Housing Services 1200 Carlsbad Village Drive I Carlsbad, CA ZIP 92008-1949 I 760-434-2812 t Honorable Mayor Hall and Members of the City Council Jan.27,2020 Page 2 cc: Scott Chadwick, City Manager Celia Brewer, City Attorney Cindie McMahon, Assistant City Attorney Jeff Murphy, Community Development Director Mike Peterson, Assistant Community Development Director Sheila Cobian, City Clerk Services Manager Hector Gomez From: Council Internet Email Sent: Thursday, January 30, 2020 2:42 PM City Clerk To: Subject: FW: City of Carlsbad Plans to Place 'Severe' Mentally Ill Homeless Next to Elementary and Preschools From: Denis Jensen Sent: Thursday, January 30, 2020 9:36 AM To: Council Internet Email <CityCouncil@carlsbadca.gov>; Priya Bhat-Patel <Priya.Bhat-Patel@CarlsbadCA.gov>; Keith Blackburn <Keith.Blackburn@carlsbadca.gov>; Matthew Hall <Matt.Hall@carlsbadca.gov>; Cori Schumacher <Cori.Schumacher@CarlsbadCA.gov> Cc: Lara Benusis Subject: City of Carlsbad Plans to Place 'Severe' Mentally Ill Homeless Next to Elementary and Preschools We're writing to express our absolute objection to the plan to acquire 3606-3618 and 3630 Harding Street to construct housing for homeless and housing for homeless with Severe Mental Illness. This is the wrong location for such a facility. This project was misleadingly sold to the public simply as an aid for Veterans but we've been the victims of a bait & switch. This location is a residential neighborhood near an Elementary School, two Preschools and frankly, regular tax-paying residents that do not want this nearby. A more industrial location is a better choice and placing known schizophrenics and people struggling with PTSD near our kids and is an outrage. We demand this plan be abandoned immediately: • This location is dangerous by design, dangerous to both nearby kids and residents in general • The Barrio location choice is an obvious racially-biased selection • This location is a financially irresponsible expenditure of tax dollars • This is property-value damaging for neighborhood homeowners This reasoning behind our objection is pretty straight-forward and I hope to both have your attention and your pledge to take action accordingly to cancel this plan. We are currently working with the schools as well as local and county media to publicize the many problems this application has and this location selection will not be fast-tracked without major exposure. Here are some media stories in development: • "City of Carlsbad plans to place 'Severe' mentally ill homeless next to Elementary and Preschools" • "City of Carlsbad plans to dump 'Severe' Mental Illness homeless on hispanic residential neighborhood" • "City of Carlsbad places misleading public notices for 'Homeless with Severe Mental Illness' facility by describing the application on the signs as plans for a 'Veteran Homeless Shelter'" • "Can't afford to live West of Highway 5? City of Carlsbad is spending $21 million of your property taxes to give the homeless a beachside vacation lifestyle" This location is frankly baffling and we're also looking into potential conflicts of interest. Please join the right side of this assessment and cancel this development. Sincerely, Denis Jensen & Lara Benusis Carlsbad/Barrio Homeowners 1 Carlsbad, CA 92008 CAUTION: Do not open attachments or click on links unless you recognize the sender and know the content is safe. 2 Attachment D Carlsbad Veterans Housing Affordable (city of Carlsbad Housing Financial Assistance Request David de Cordova Principa l Planner Jan .28,2020 Summary Recommendation Adopt a resolution, as amended, to take all actions necessary to provide $4,093,392 in additional financial assistance to Affirmed Housing to construct 50 affordable apartment units for homeless and lower income veteran families, as well as people experiencing homelessness with severe mental illness. (city of Carlsbad -~..,. --- •· . .,_·:. ~.i\.-.{ll:__'t,,\_:.,;~~... . :-----c.,.,,,.~~=- Background • 2016 -Project application submitted • July 14, 2016 Housing Commission reviewed ist funding request • Jan. 18, 2017 Planning Commission approved project • Feb. 14, 2017 City Council approved ist funding request {city of Carlsbad Background • Additional financing efforts -2017 CTCAC (9% LIHTC) -2017, 2018 HCD (VHHP) -2018 SD County (IHTF) • Aug. 2019 -received NPLH funding • Nov. 2019 -4% tax credit application {city of Carlsbad ~~ Proforma Summary $8.2M Soft Costs 25% (city of Carlsbad $4.2M Land 13% Project Cost $33.lM ($663K/unit) SOURCES Contrib . .... 1% $4.lM f! $10.lM NPLH 31% ~ t ' $14.ZM Tax Credits 43% Considerations for Approval • Cost reasonableness -Land -Construction -Design -Relocation costs -Developer fee {city of Carlsbad Considerations for Approval • Risk -Predevelopment -Construction -Operation -Financing {city of Carlsbad Considerations for Approval • Mitigating factors -Development team experience -Multiple funders/supportive services -Capitalized operating reserve -Form of city assistance {city of Carlsbad Public Benefits • Special Needs Housing • Military veterans • Homeless and SMI • Provides onsite supportive services • Meets share regional housing needs (RHNA) • Very low & extremely low-income households {city of Carlsbad . ~:.'"':-. . "' Public Benefits • Aligns with city policies/ priorities • Leveraging -every local $ matched by $3 from other sources • Well-designed, new development/redevelopment; ideal location with services & shopping near by; smart growth neighborhood {city of Carlsbad Housing Commission Review • Jan . 17, 2020 Housing Commission Review • Recommended approval of the assistance request (city of Carlsbad • Rental preference for Carlsbad residents Housing Commission Review • City attorney recommends revision to preference (resolution para. no. 11): (city of Carlsbad 11. That, to the extent consistent with applicable law, a preference shall be given to Carlsbad residents, and/or households with an individual that works in Carlsbad, for tenancy at Windsor Pointe Apartments. Next Steps • Negotiate property acquisition and execute documents to provide funding {city of Carlsbad Recommended Action Adopt a resolution with an amendment to revise condition no. 11 as stated in a memorandum to City Council dated Jan. 27, 2020 to: 1) authorize the real estate manager to negotiate with Affirmed Housing (dba Carlsbad Veteran Housing, L.P.) to acquire property it owns at 3606-3618 and 3630 Harding Street and 965-967 Oak Avenue and to execute al l documents necessary to provide $4,043,392 in additional financial assistance to Affirmed Housing for construction of fift y (50) affordable apartment units for homeless and lower income veterans and their fam ilies, and for homeless people with SMI, on two noncontiguous sites in the northwest quadrant of the City of Carlsbad; and {city of Carlsbad ---~----,._..,'<,4·., ·cc--,~ • ~ ,,·, ,,, ''<¼;>;c··,c"is 1~'1';,r~ . ..., •. ,JI •~<o;·...;·i-,·a-.",.._ili'.C"i.llla~== 1!t-,._. "' Recommended Action {cont.) 2) appropriate and authorize expenditure of $50,000 from the Housing Trust Fund for costs related to the property acquisition and execution of documents, including market appraisal services, relocation and consultant services, outside legal counsel expenses and other relocation transaction costs. {city of Carlsbad