HomeMy WebLinkAbout2023-11-07; City Council; ; Two-year Extension of a $1.5 million Loan Commitment from the Housing Trust Fund for the West Oaks Affordable Housing Project and Authorization to Negotiate Acquisition oCA Review __RK__
Meeting Date: Nov. 7, 2023
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Mandy Mills, Director of Housing & Homeless Services
mandy.mills@carlsbadca.gov, 442-339-2907
Vicki Quiram, Utilities Director
vicki.quiram@carlsbadca.gov, 442-339-2307
Subject: Two-year Extension of a $1.5 million Loan Commitment from the Housing
Trust Fund for the West Oaks Affordable Housing Project and
Authorization to Negotiate Acquisition of the Buena Outfall
District: 2
Recommended Action
1.Adopt a resolution approving a two-year extension of the loan commitment period for a
$1.5 million loan from the Housing Trust Fund to Chelsea Investment Corporation for
the West Oaks Affordable Housing Project (DEV 2013-018).
2.Adopt a resolution authorizing city staff to negotiate with the City of Vista’s subsidiary
Buena Sanitation District for Acquisition of the Buena Outfall by the City of Carlsbad.
Executive Summary
Chelsea Investment Corporation has partnered with Integral Communities to build the
affordable housing portion of the West Oaks project. West Oaks received approval from the
Planning Commission to build 192 apartment units on the site on the south side of Palomar
Airport Road and west of Palomar Oaks Way. (Location map, Exhibit 3.) Forty-two of the units
are to be affordable to lower-income households.
The City Council approved a $1.5 million loan to Chelsea from the city’s Housing Trust Fund on
Dec. 7, 2021, to go toward development of 42 affordable units to serve extremely low and very
low-income households. This fund can only be used to support affordable housing and
homelessness-related projects, programs and services.
The loan commitment was for 24 months. However, the project has been delayed because of
challenges associated with the project’s sewer connection and the developer has requested an
extension of the city loan commitment for another two years.
The City Council is the final decision-maker for funding requests from the Housing Trust Fund.
Nov. 7, 2023 Item #2 Page 1 of 11
A possible resolution to the project’s sewer connection challenges is for the City of Carlsbad to
acquire the Buena Outfall sewer line, which is owned by the City of Vista’s subsidiary Buena
Sanitation District. Carlsbad currently shares capacity in the sewer line with the Buena
Sanitation District. Agreements between the agencies and their respective sewer master plans
have long contemplated the Carlsbad’s acquisition, at a price that reflects Buena Sanitation
District’s capital investment in the Buena Outfall, less appropriate depreciation. To explore this
possible resolution, city staff are requesting authority to commence negotiations with Buena
Sanitation District for the acquisition of the Buena Outfall, subject to final approval by the
agencies’ governing bodies.
Explanation & Analysis
In January 2021, Integral Communities, the master developer of West Oaks, received approval
to build 192 apartment units on the Palomar Airport Road site. The overall project consists of a
clubhouse and nine apartment buildings. The 42 affordable units will be integrated on the same
site and will occupy two of the nine buildings. Chelsea will own and operate the West Oaks
affordable apartments on the west end of the site and they applied for Housing Trust Fund
assistance to deepen the affordability to serve extremely low and very low-income households.
The City Council approved the 24-month loan commitment to Chelsea from the city’s Housing
Trust Fund for the development of the West Oaks affordable apartments on Dec. 7, 2021.
The developer has been working with the Carlsbad U�li�es Department, Vallecitos Water
District, and the Buena Sanita�on District, a subsidiary district of the City of Vista, to connect
the project to the Buena Ou�all sewage pipe that conveys wastewater to the Encina
Wastewater Treatment Plant, consistent with the condi�ons placed on the development.
The sewer pipeline extension that serves the property that is being developed is connected to
the Buena Ou�all, and the use of the Buena Ou�all is governed by a long-standing agreement
between Carlsbad and Buena Sanita�on District. Currently, the Buena Ou�all does not have
exis�ng capacity to accept the addi�onal capacity required by the development project, so the
project has not yet received authoriza�on from Buena Sanita�on District to discharge sewer
flows to the Buena Ou�all.
A staff report published for a Buena Sanita�on District Board mee�ng on Sept. 12, 2023, stated
the Buena Ou�all was “scheduled to be replaced in calendar year 2021, by the Buena
Forcemain Phase 3 project,” however the new forcemain project has “experienced opera�ng
issues since its ini�al commissioning and cannot be operated in high flows that occur during the
winter raining season.”1
As a result of Buena Sanita�on District’s ongoing opera�onal issues with their new forcemain,
Buena Sanita�on District has had to “divert flow back to the [old] Buena Ou�all during the
winter while modifica�ons are pursued on the [new] forcemain.” Because of this diversion,
there is not exis�ng capacity during peak flow to accommodate the addi�onal capacity from the
development project.
1 Force mains are pipelines that convey wastewater under pressure from the discharge side of a pump to a
discharge point.
Nov. 7, 2023 Item #2 Page 2 of 11
In addi�on, two exis�ng sewer pipelines located within the building improvement areas will
need to be moved as part of the project. The two sewer pipelines that need to be moved are
owned by the Vallecitos Water District and the Buena Sanita�on District. Although discussions
are ongoing, these agencies have not yet approved the reloca�on plan presented in the
project’s tenta�ve map.
The developer has been processing final engineering plans but cannot proceed until the sewer
connectivity and pipeline relocation issues are resolved. Because the delay in sewer collection
services has been out of the developer’s control, it has requested a two-year extension on the
city loan commitment.
The City Council adopted City Council Policy No. 90 in December 2020 to guide administration
of the city’s Housing Trust Fund. The policy identifies priority uses of the fund, provides criteria
for evaluating financial assistance requests, and describes the review process, form of
assistance and affordability covenants. The policy calls for Housing Trust Fund dollars to be
expended within 24-months following fund commitment so that the fund can respond to
current housing needs. If the sewer issue is resolved in the next few months, it is possible that
the project could begin construction at the end of 2024, which would be a one-year delay from
the original loan’s expiration date of December 2023.
Staff are recommending a two-year loan extension because the delay in sewer collection
services has been out of the developer’s control, the funding will support the creation of
deeper affordable units —a goal of the Housing Element section of the city’s General Plan —
and there is sufficient balance in the Housing Trust Fund to support other affordable housing
projects requesting financial support.
Staff recommend the City Council approve the extension of the loan. This will allow for the
construction of 42 units for extremely low, very low and low-income households, subject to
Chelsea successfully securing additional financing through bonds, tax credit equity or other
sources. Not approving this extension significantly increases the funding gap for the affordable
housing project, jeopardizing the viability of both the market rate and affordable units. The
developers will have to evaluate and restructure the project with an alternate funding plan and
both the market rate and affordable units would be at risk of not being built.
Once Buena Sanitation District is able to remove its flow from the Buena Outfall, agreements
between the district and Carlsbad and their respective sewer master plans anticipate the Buena
Outfall may be acquired by Carlsbad at a price that reflects the district’s capital investment in
the Buena Outfall, less appropriate depreciation. Carlsbad’s acquisition of the Buena Outfall
may help expedite the resolution the development project’s sewer connection challenges.
In anticipation of the fact that Buena Sanitation District’s forcemain modifications will resolve
the forcemain’s operating issues and allow the district to remove its flow from the Buena
Outfall, city staff are requesting City Council authority to pursue negotiations with the Buena
Sanitation for the transfer of the Buena Outfall to Carlsbad.
The proposed negotiating team are City Manager Scott Chadwick and Utilities Director Vicki
Quiram, with as-needed assistance from Assistant City Manager Geoff Patnoe, City Attorney
Cindie McMahon and Deputy City Attorney Gina Herrera.
Nov. 7, 2023 Item #2 Page 3 of 11
Fiscal Analysis
The City Council committed the loan to the project for a period not to exceed 24 months. Staff
recommend that the City Council extend the commitment of $1.5 million from the city’s
Housing Trust Fund for the loan for an additional two years. in the loan’s principal plus interest
will be returned to the Housing Trust Fund, which had an available balance of $10.1 million at
the end of June 2023.
No funding is being requested to initiate negotiations with the Buena Sanitation District for
acquisition of the Buena Outfall, as the negotiations are expected to be accomplished with
existing staff resources. Any agreement to acquire the Buena Outfall and the associated
acquisition costs, will be presented to and subject to the City Council’s approval.
Next Steps
Staff will draft implementing agreements with Chelsea and appropriate the loan funds
contingent upon the developer’s ability to secure all other project approvals and funding. The
resolution authorizes the City Manager, or designee, to execute all documents necessary to
provide the financial assistance.
The city’s negotiating team will meet with their counterparts at the Buena Sanitation District to
commence negotiations.
Environmental Evaluation
This action does not require environmental review because it does not constitute a project
within the meaning of the California Environmental Quality Act under Public Resources Code
section 21065 in that it has no potential to cause either a direct physical change in the
environment or a reasonably foreseeable indirect physical change in the environment.
Exhibits
1.City Council resolution – loan extension
2.City Council resolution – authorize acquisition negotiations
3.City Council Resolution No. 2021-267
4.Location map
Nov. 7, 2023 Item #2 Page 4 of 11
RESOLUTION NO. 2023-272
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING A TWO-YEAR EXTENSION OF THE LOAN
COMMITMENT PERIOD FOR A $1.5 MILLION LOAN FROM THE HOUSING
TRUST FUND TO CHELSEA INVESTMENT CORPORATION FOR THE WEST OAKS
AFFORDABLE HOUSING PROJECT (DEV 2013-018)
WHEREAS, on Dec. 7, 2021, the City Council authorized a loan commitment in the amount of
$1,500,000 to Chelsea Investment Corporation for the West Oaks affordable housing project for a
period of 24 months; and
WHEREAS, the project developer has experienced a delay in the project processing due to
challenges outside of the developer's control associated with the project's sewer connection; and
WHEREAS, the project developer has requested a two-year extension of the city loan
commitment; and
WHEREAS, the financial assistance supports the city's affordable housing needs and priorities
expressed in the Housing Element.
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 extending the approval for financial assistance to Chelsea Investment Corporation
is consistent with the goals and objectives of the City of Carlsbad's Housing Element,
and the General Plan.
3.That the findings adopted in City Council Resolution 2021-267 are extended for an
additional 24-month period from the original expiration date of Dec. 7, 2023.
Exhibit 1
Nov. 7, 2023 Item #2 Page 5 of 11
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 7th day of November, 2023, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
Blackburn, Bhat-Patel, Acosta, Burkholder, Luna.
None.
None.
None.
KEITH BLACKBURN, Mayor
SHERRY FREISINGER, City Clerk
(SEAL)
Nov. 7, 2023 Item #2 Page 6 of 11
RESOLUTION NO. 2023-273
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, AUTHORIZING CITY STAFF TO NEGOTIATE WITH THE CITY OF
VISTA'S SUBSIDIARY BUENA SANITATION DISTRICT FOR ACQUISITION OF
THE BUENA OUTFALL BY THE CITY OF CARLSBAD
WHEREAS, the City Council of the City of Carlsbad, California has determined that it is in the
best interests of the City to negotiate with the City of Vista's subsidiary Buena Sanitation District for
the acquisition of the Buena Outfall; and
WHEREAS, the City of Carlsbad and Buena Sanitation District entered into an Agreement for the
lease of capacity in the land sewage outfall commonly referred to as the "Buena Outfall" on June 20,
1966;and
WHEREAS, the City of Carlsbad and Buena Sanitation District rescinded the 1966 Agreement
and replaced it with a new Agreement in 1981; and
WHEREAS, on June 11, 2015, the City of Carlsbad and Buena Sanitation District entered into a
joint agreement related to the Buena Outfall, for the construction, operation, and maintenance of the
Buena Outfall Odor Control Unit ("Joint Agreement"); and
WHEREAS, as part of the Joint Agreement the parties agreed to transfer the Buena Outfall to
the City of Carlsbad, following the completion of Buena Sanitation District's new Buena Outfall Force
Main Extension Project (District CIP 8131) and the subsequent removal of Buena Sanitation District's
flow from the old Buena Outfall, at a price that reflects Buena Sanitation District's capital investment
in the old Buena Outfall, less appropriate depreciation; and
WHEREAS, on September 12, 2023, an agenda report published for a Buena Sanitation District
Board Meeting, stated the old Buena Outfall was "scheduled to be replaced in calendar year 2021, by
the Buena Forcemain Phase 3 project," however the new forcemain project has "experienced operating
issues since its initial commissioning and cannot be operated in high flows that occur during the winter
raining season"; and
WHEREAS, as a result of the Buena Sanitation District's ongoing operational issues with their
new forcemain, Buena Sanitation District has had to "divert flow back to the [old] Buena Outfall during
the winter while modifications are pursued on the [new] forcemain"; and
Exhibit 2
Nov. 7, 2023 Item #2 Page 7 of 11
WHEREAS, once Buena Sanitation District is able to remove its flow from the old Buena Outfall,
the City of Carlsbad may acquire the old Buena Outfall consistent with the terms of the Joint
Agreement; and
WHEREAS, city staff are requesting City Council authority to pursue negotiations with the Buena
Sanitation District for the transfer of the Buena Outfall to Carlsbad.
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 City Manager is authorized to commence negotiations with the City of Vista's
subsidiary Buena Sanitation District for acquisition of the Buena Outfall by the City of
Carlsbad with a negotiating team to include City Manager Scott Chadwick and Utilities
Director Vicki Quiram with as-needed assistance from Assistant City Manager Geoff
Patnoe, City Attorney Cindie McMahon, and Deputy City Attorney Gina Herrera.
3.That any agreement for the City of Carlsbad to acquire the Buena Outfall, and associated
acquisition costs, will be subject to further approval by the City Council.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 7th day of November, 2023, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
Blackburn, Bhat-Patel, Acosta, Burkholder, Luna.
None.
None.
None.
KEITH BLACKBURN, Mayor
SHERRY FREISINGER, City Clerk
(SEAL)
Nov. 7, 2023 Item #2 Page 8 of 11
RESOLUTION NO. 2021-267 ,
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING A $1,500,000 LOAN FROM THE HOUSING TRUST
FUND TO CHELSEA INVESTMENT CORPORATION FOR THE WEST OAKS
AFFORDABLE HOUSING PROJECT (DEV 2013-018)
EXHIBIT 1
WHEREAS, Chelsea Investment Corporation has requested financial assistance for the
construction of 42 apartment units to be affordable to extremely low (5 units), very low (5 units), and
low-income (32 units) households located southwest of the intersection of Palomar Airport Road and
Palomar Oaks Way; and
WHEREAS, the request for financial assistance was submitted to the City of Carlsbad's Housing
Commission for review and consideration at their public meeting on Nov. 18, 2021, on which date said
Commission recommended that the City Council approve the requested financial assist,ance in the
amount of $1,500,000; and
WHEREAS, the Planning Commission approved said housing development on Jan. 20, 2021.
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 Chelsea Investment Corporation is
consistent with the goals and objectives of the City of Carlsbad's Housing Element, and
the General Plan.
3. That the request for financial assistance will assist the affordable housing developer in
constructing a total of 42 apartment units affordable to extremely low (5 units), very
low (5 units), and low-income (32 units) households. The project, therefore, can
effectively serve the city's housing needs and priorities expressed in the Housing
Element.
4. That the City Council authorizes the Deputy City Manager, Administrative Services, to
assign for a 24-month period from the Housing Trust Fund and to appropriate funds to
provide a cash assistance loan in the amount of $1,500,000 to Chelsea Investment
Corporation for the West Oaks affordable housing project once all project funding is
secured by the developer.
Dec. 7, 2021 Item #11 Page 7 of 63
Exhibit 3
Nov. 7, 2023 Item #2 Page 9 of 11
EXHIBIT :.
5. That the City Council authorizes the City Manager, or designee, to prepare and execu1e
all documents related to the provision of the city loan, subject to review and approv3~
by the City Attorney.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City o=
Carlsbad on the 7th day of December 2021, by the following vote, to wit:
AYES:
NAYS:
ABSENT:
Hall, Blackburn, Bhat-Patel, Acosta, Norby.
None.
None.
(SEAL)
Clerk Services Manage t
Dec. 7, 2021 Item #11 Page 8 of 63Nov. 7, 2023 Item #2 Page 10 of 11
Exhibit 4
WEST OAKS
LOCATION MAP
Nov. 7, 2023 Item #2 Page 11 of 11