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HomeMy WebLinkAboutStaff Report 9177 City of Palo Alto (ID # 9177) Policy and Services Committee Staff Report Report Type: Action Items Meeting Date: 5/8/2018 City of Palo Alto Page 1 Summary Title: 2018 Draft Housing NOFA Title: 2018 Draft Notice of Funding Availability for Affordable Housing From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the Committee provide input regarding the Draft Housing Fund Notice of Funding Availability (Attachment A) for affordable housing. Executive Summary On February 12, 2018, the City Council adopted a Housing Work Plan aimed at increasing the rate of housing production – including affordable housing production – in the City of Palo Alto.1 The Work Plan grouped tasks into five categories, one of which involved leveraging City funding for affordable housing development. Specific tasks included: 4.1 Issue a Notice of Funding Availability (NOFA) and solicit proposals from non-profit developers for use of the City’s Commercial and Residential Housing Funds; and 4.2 Select projects for funding that maximize the use of the City’s funds for development of new affordable units and preservation of existing units that are at risk. In the Council’s motion, they referred these two tasks (and others related to the City’s inclusionary requirements) to the Policy & Services Committee for input.2 Staff would like to issue a NOFA based on the Committee’s input and return to the Committee for a recommendation to the City Council on funding once proposals are received and evaluated. 1 The Work Plan can be found here: https://www.cityofpaloalto.org/gov/depts/pln/long_range_planning/housing_programs_and_policies/housing_wo rk_plan.asp 2 The February 12, 2018 meeting minutes including this motion can be found here: https://www.cityofpaloalto.org/civicax/filebank/documents/63832 City of Palo Alto Page 2 Background & Discussion The City collects housing impact fees from residential and non-residential developers. The City also collects housing in lieu fees when residential developers meet their inclusionary requirements by paying fees instead of providing affordable units on site. All of these fees are deposited in the City’s housing funds to be used for the preservation, rehabilitation, and production of affordable housing. The City Council has adopted Fund Guidelines (Attachment B) specifying priorities and policies regarding use of the City’s housing funds. In addition to the Council adopted guidelines, state law imposes constraints on the City’s use of its various housing funds. Specifically, housing impact fees must be used to address the impacts of commercial and market-rate rental housing development on the City’s need for affordable housing (as provided in the City’s nexus study supporting those fees). Inclusionary housing in-lieu fees must be spent in a manner consistent with the ordinance and inclusionary housing program under which they were collected. The City currently has approximately $7.0 million available in the Residential Housing Fund and $6.2 million in the Commercial Housing Fund, for a total available balance of approximately $13.1 million that can be allocated to one or more qualified affordable housing project. As indicated in the February 2018 Draft Housing Work Plan, development of new affordable housing units is extremely expensive (over $500K per unit based on five recent affordable housing projects in the County) and requires generous city subsidies (over $135K per unit based on five recent housing projects in the County). Based on these numbers, staff hopes that the available funding can be used to support development of around 100 new units of affordable housing. The Draft 2018 Housing Fund NOFA and application (Attachment A) are attached for review and input. Suggested parameters and evaluation criteria emphasize the City’s need for new affordable units, and the City’s desire to leverage City funds to the maximum extent feasible. After receiving the Committee’s input, staff plans to issue the NOFA and then return to the Committee for a recommendation to the City Council on funding once proposals are received and evaluated. Given staff vacancies, these tasks may take somewhat longer than originally anticipated. The City last issued a NOFA in 2014 and elected not to fund any of the proposals received at that time. The housing funds were used more recently, however, to support acquisition and preservation of the Buena Vista Mobile Home Park. Environmental Review The requested action is not a “project” requiring review under the California Environmental Quality Act (CEQA). However the City’s ultimate decision to fund one or more projects based on the NOFA and resulting proposals will require CEQA review. Attachments: City of Palo Alto Page 3  Attachment A: Draft NOFA April 26_2018  Attachment B: Affordable Housing Fund Guidelines Draft Document - Subject to Change April 26, 2018 Page 1 DRAFT CITY OF PALO ALTO NOTICE OF FUNDING AVAILABILITY DATE: PENDING TO: All Interested Organizations FROM: James Keene, City Manager SUBJECT: Notice of Funding Availability Residential In-Lieu Housing Fund and Commercial In-Lieu Housing Fund The City of Palo Alto invites proposals from qualified organizations seeking funding from the City to increase the supply of deed-restricted affordable housing as described in this Notice of Funding Availability (NOFA). I. Introduction The Residential Housing In-Lieu Fund (“Residential Fund”) and the Commercial Housing Fund (“Commercial Fund”) are local housing trust funds established by the City Council of the City of Palo Alto to provide financial assistance for the development, acquisition and rehabilitation of housing affordable to extremely low, very low, low income households that live or work in the City. In developments of three or more for-sale housing units, the City currently requires that 15% of the housing must be set aside as Below Market Rate (BMR). While the City encourages providing the BMR units in the development, at times developers are allowed to pay an in-lieu fee instead of providing the required BMR units. Those fees are placed in the Residential Fund along with housing impact fees paid by developers of market rate rental housing. The City also requires payment of a housing impact fee by developers of new commercial square footage. These fees are placed in the Commercial Fund. Over the past 10 years, the two housing funds have provided over $35 million for the development and preservation of affordable housing. The funds have been used to develop a variety of housing types ranging from housing for seniors and large families and to preserve the City’s only mobile home park. Draft Document - Subject to Change April 26, 2018 Page 2 II. Funding Parameters, Categories and Maximum Request Amounts Uses of the two housing funds must be aimed at addressing the impacts of development for which fees were charged or (in the case of in lieu fees) in accordance with the City’s inclusionary housing program. The nexus studies prepared when the City’s housing fees were last adopted are available for review here: https://www.cityofpaloalto.org/civicax/filebank/documents/50935. The City’s Affordable Housing Fund Guidelines also provide guidance on allowable uses of the funds and can be found here: https://www.cityofpaloalto.org/civicax/filebank/documents/53195.1 The Residential housing fund may be used for: (a) new affordable housing projects; (b) acquisition of existing housing; or (c) rehabilitation of existing affordable housing. The Commercial housing fund may be used for: (a) construction of new affordable housing units; (b) addition of new affordable units to existing buildings; (c) conversion of non-residential space to affordable housing units; or (d) acquisition, rehabilitation and preservation of existing affordable housing. While the Guidelines do not specify a maximum amount of funding that can be made available per development, the City desires to use the funds to support construction of as many new affordable housing units as possible, and expects organizations to identify other funding sources in addition to City funds. The City wishes to support construction of two or more projects with the currently available funds. III. Notice of Funding Availability As of March 30, 2018, the City had approximately $6.2 million in the Commercial Fund and $6.9 million in the Residential Fund, for a total of approximately $13.1 million. The City wishes to make these funds available for development of new deed-restricted affordable housing and is seeking proposals from qualified parties consistent with this NOFA. This NOFA will be widely noticed to community organizations and affordable housing developers. Copies of the application are available online at: https://www.cityofpaloalto.org/gov/depts/pln/long_range_planning/housing_programs_and_policies/a ffordable_housing_fund.asp Copies of the NOFA application are also available at the City’s Department of Planning and Community Environment, 250 Hamilton Avenue, Palo Alto, CA 94301. All applications must contain a completed application form as well as the supplemental materials specified in the form. Submitted materials will receive a technical review by City staff or consultants for eligibility, completeness, and accuracy of information. Staff or consultants will summarize and present the information to a Review Panel. Any confidential financial information or other proprietary information, including trade secrets, contained in an application should be clearly and specifically marked as such. The Review Panel will be composed of representatives from the Department of Planning and Community Environment and non-City housing construction and finance experts. After reviewing and evaluating the staff recommendations, the Review Panel will develop recommendations to be 1 The Affordable Housing Fund Guidelines have not been updated since preparation of the nexus study and adoption of the new affordable housing ordinance in 2016. If there are any inconsistencies between the Guidelines and the nexus study or the Citywide Affordable Housing Requirements in Palo Alto Municipal Code Section 16.65, the later shall prevail. Draft Document - Subject to Change April 26, 2018 Page 3 forwarded to the Policy & Services Committee of the City Council and then the full City Council for final approval based on the following criteria: 1. The experience and track record of the applicant organization in developing successful affordable housing projects in the City or comparable jurisdictions (15 points) 2. The ability of the project to leverage funding from other public and private sources and the per unit subsidy requested from the City (20 points) 3. The number of new affordable housing units provided and the per-unit cost of the proposed project (20 points) 4. The ability of the project to provide appropriate support services for any residents belonging to extremely low income or special needs populations (15 points) 5. Demonstrated site control and the readiness of the proposed project for implementation (15 points) 6. The ability to minimize impacts on the surrounding community (15 points) IV. City Reservation City reserves the unqualified right to reject any and all proposals, in whole or in part, for any reason, and to discuss modifications with the applicants regarding change, revision, (in whole or in part), and/or modifications of the proposals. Submission of an application in response to this NOFA constitutes agreement on the part of the applicant to comply with this and all other rules and conditions of this NOFA. V. Terms of Funding Long term financing is available in the form of 55 years at 3% simple interest, either amortized or deferred, depending on the circumstances of the project’s financial need. The loan must be secured by a promissory note and deed of trust. Loans will be residual receipts notes and require a split of residual receipts between City and the project sponsor. VI. Tentative Timeline Funds will remain available until disbursed. If funds are still available, applications will be reviewed on a quarterly basis. An initial timeline follows: June 2018 Release of NOFA June/July 2018 Application Workshop July 31, 2018, 12 p.m. Application deadline August/September 2018 Applicant interviews August/September 2018 Review panel meets to prepare recommendations to staff October 2018 Staff Submits Recommendations to the Policy & Services Committee for a recommendation November 2018 City Council Selection/Notice of Intent 1- Draft Document - Subject to Change April 26, 2018 DRAFT CITY OF PALO ALTO DATE PENDING NOFA APPLICATION PROJECT APPLICANT 7. Project Applicant: Applicant Name (Organization/Agency): Principal (with Power of Attorney): Primary Contact Person: Address: Phone No.: Fax No.: E-Mail: Federal Tax ID No.: What is the role of the Applicant in the project? (check all that apply)  Ownership Entity  Managing Partner or Managing Member  Sponsoring Organization  Developer  Other (describe): 2. Legal Status of Applicant:  General Partnership  Limited Partnership  Corporation  Joint Venture1  Nonprofit  Other (specify): 3. Status of Organization:  Currently Exists  To be formed, estimated date: 1 If the Applicant is a Joint Venture, a Joint Venture Agreement is required, clearly describing the roles and responsibilities of each partner, who is the lead partner or if the responsibilities are approximately equally split between the partners. 2- Draft Document - Subject to Change April 26, 2018 4. Name(s) of individual(s) who will be General Partner(s) or Principal Owner(s): PROJECT DESCRIPTION 5. Project Name: Project Address: Assessor's Parcel No.: Census Tract: 6. Project Type (check all that apply):  Rental  Ownership  SRO/Studio Apartments  Family  Special Needs  Senior  Other (describe) 7. Project Activity (check all that apply):  Acquisition  Rehabilitation  Redevelopment  New Construction  Expiring Tax Credit Property  Mixed Income  Mixed Use  Other (please specify): 8. Project Description: No. Units: Commercial/Office Uses (specify): No. Res. Bldgs.: Commercial Floor Area: No. Stories: Office Floor Area: Land Area: Elevators: Residential Floor Area: Other Uses (specify): Community Room(s) 3- Draft Document - Subject to Change April 26, 2018 9. Parking: Total Parking Spaces: Parking Type: Residential Spaces and Ratio: Guest Spaces: Commercial Spaces and Ratio: Office Spaces and Ratio: 10. Number of Housing Units by Income Category: Category Number of Units Percentage of Units 0% to 30% AMI (Extremely Low-Income) 31% to 50% AMI (Very Low-Income) 51% to 80% AMI (Low-Income) Unrestricted 11. Unit Amenities (air conditioning, laundry in unit, balconies, etc.): 12. Number of Unit Types: Studio 1 Bedroom 2 Bedroom 3 Bedroom 4- Draft Document - Subject to Change April 26, 2018 PROJECT NARRATIVE 13. Project Description: Provide a brief narrative summary of the proposed project. Please include location, project type (new versus rehab), target population and any unique project characteristics. 14. Project Design: Provide a description of the project's architectural and site plan concepts and how these concepts address the opportunities and limitations of the site and location. 15. Green Building Features: Describe the green building features that will be incorporated into the project. 16. On-Site Amenities: Describe any on-site amenities, including any project characteristics that address the special needs of the population you intend to serve. 5- Draft Document - Subject to Change April 26, 2018 17. Neighborhood/Off-Site Amenities: Describe the property location, neighborhood, transportation options, local services and amenities within 1/4-mile and 1/2-mile of the site. 18. Potential Development Obstacles: Are there any known issues or circumstances that may delay or create challenges for the project? If yes, list issues below, including an outline of steps that will be taken and the time frame needed to resolve these issues. SITE INFORMATION 19. Site Control: a. Site control at the time of application is required. What is the level of site control currently held by the applicant? b. If site acquisition is required, will it be a purchase or long-term lease? 6- Draft Document - Subject to Change April 26, 2018 c. If site acquisition is required, what is the purchase price of the land? (For proposed leaseholds, indicate the amount of the annual lease payment and the basis for determining that amount). d. What is the appraised value of the site? Briefly describe the type of valuation cited. e. Who is the current property owner and what is their address and contact information? 20. Site Information: a. Total square footage of site: b. Existing uses on the site, number of existing units, existing unit size and the approximate square footage of all structures: c. Planned use of on-site existing structures:  Demolish Rehabilitate  Other (describe): 7- Draft Document - Subject to Change April 26, 2018 d. Provide the following information for each on-site building to be retained as part of this project: Square Footage: Date Built: No. of Stories: e. Provide a brief description of the condition of any buildings to be rehabilitated. f. Describe unique site features (Heritage trees, parcel shape, etc.). g. Identify problem site conditions (high noise levels, ingress/egress issues, etc.). h. Is the site in a floodplain? Yes  No  Map used: If yes, type of floodplain (number of years): i. Describe adjoining land uses: West: East: North: South: 8- Draft Document - Subject to Change April 26, 2018 21. Zoning: a. What is the current zoning of the project site? b. Is the proposed project consistent with the existing zoning status of the site? Yes No (explain) c. Indicate any discretionary review permits required for the project (Planned Community Permits, Design Review Permits, Rezoning, etc.). d. If rezoning is required, identify the requested zoning district for the project. 9- Draft Document - Subject to Change April 26, 2018 22. Households and Businesses on Site a. If residential units exist on the proposed site, how many households currently reside on the property? b. How many of the residential units are vacant? c. Have the tenants signed a lease or a month-to-month rental agreement? d. If businesses are located on the site, provide the name, type of business and the associated square footage for each business. 23. Community Priorities: a. Explain how this project meets the objectives of the housing goals and priorities identified in this NOFA and the goals and objectives of the City's Housing Element and Comprehensive (General) Plan. PROJECT FUNDING 24. Project Budget: a. City Funds Requested: $ Funds Per Assisted Unit: $ b. Total Project Cost: $ Cost Per Assisted Unit: $ 10- Draft Document - Subject to Change April 26, 2018 c. Other Sources of Permanent Financing (not including private bank loans): Type of Funding Amount  9% Low-Income Housing Tax Credits  4% Low-Income Housing Tax Credits  CalHFA/Conventional Lender  Tax-Exempt Multi-Family Bonds  Multi-Family Housing Program (MHP)  Affordable Housing Program (AHP)  Measure A, County of Santa Clara  Housing Trust Silicon Valley  Stanford Housing Funds (administered by County of Santa Clara)  Other: d. How will the requested City funding be used? e. Amount of developer fee and percentage of project cost: f. Assess the chances of the project securing required funding and steps that will be taken to make the project competitive. What is the self-scored nine percent (9%) tax credit tie breaker score for the project (if applicable)? 11- Draft Document - Subject to Change April 26, 2018 DEVELOPER EXPERIENCE Developers must have successfully completed a minimum of three affordable housing projects of similar size and complexity as the proposed project to qualify for this NOFA. 25. Provide a summary of affordable housing experience: Years of Experience: Number of Projects: Number of Projects in Santa Clara County: Number Size of Projects: Number of Units Placed in Service: 26. Describe awards given to projects completed in the last 10 years. 27. Describe three or more projects completed in the last ten years that are similar to the proposed project and provide photographs of each project: a. Project 1 Name of Project: Location: Number of Units: Type of Development (senior, family, etc.): Name of Project Manager: Number of Stories: Unit Types (studio, 1-bedroom, etc.): Type of Construction: Project Amenities: Entitlement Date: Occupancy Date: Funding Sources: 12- Draft Document - Subject to Change April 26, 2018 b. Project 2 Name of Project: Location: Number of Units: Type of Development (senior, family, etc.): Name of Project Manager: Number of Stories: Unit Types (studio,1-bedroom, etc.): Type of Construction: Project Amenities: Entitlement Date: Occupancy Date: Funding Sources: c. Project 3 Name of Project: Location: Number of Units: Type of Development (senior, family, etc.): Name of Project Manager: Number of Stories: Unit Types (studio, 1-bedroom, etc.): Type of Construction: Project Amenities: Entitlement Date: Occupancy Date: Funding Sources: 13- Draft Document - Subject to Change April 26, 2018 28. Personnel: List the names of key members of the applicant's development team, their titles, responsibilities and their years of experience in affordable housing: Project Staff Name Role in Proposed Project Years of Hsg Dev Experien ce Years with this Developer Project Manager Director of Real Estate Development Executive Director Chief Financial Officer Other Other Other 29. Other Team Members: Indicate which of the following development team members have been selected and identify them: Developer, if Different from Applicant: Architect(s)/Engineer(s): Attorney(s) and/or Tax Professionals: Property Management Agent Financial and Other Consultant(s) General: Contractor: Investor: 14- Draft Document - Subject to Change April 26, 2018 30. List all other participants and affiliates (people, businesses and organizations) proposing to participate in the project: Name Address 31. Property Management: Describe how the property will be managed, including the number of staff, locations and management office hours. 32. If the project will be managed by an agency other than the project applicant, describe the project applicant's role in the ongoing management of the project and resolution of management issues. 15- Draft Document - Subject to Change April 26, 2018 33. List the names of key property management staff, their titles, responsibilities and their years of experience in affordable housing: Name Title (e.g., project manager, intake staff) Job Responsibilities Years of Experience in Affordable Housing 34. Explain your marketing strategy and the tenant selection process (including how local preferences will be handled) and the establishment and management of waiting lists. 16- Draft Document - Subject to Change April 26, 2018 Applicant Certification I certify that the information submitted in this application and all supporting materials is true, accurate and complete to the best of my knowledge. I acknowledge that if facts and/or information herein are found to be misrepresented, it shall constitute grounds for disqualification of my proposal. I further certify that all of the following statements are true, except if I have indicated otherwise on this certification: a. I have not sold any of the projects listed on the "10-Year Projects" list (Section 27 of the application); b. No mortgage on a project listed by me has ever been in default, assigned to the government or foreclosed, nor has mortgage relief by the mortgagee been given; c. I have not experienced defaults or noncompliance under any contract or regulatory agreement nor issued IRS Form 8823 on any Low-Income Housing Tax Credit (LIHTC) project on the "10-Year Projects" list; d. To the best of my knowledge, there are no unresolved findings raised as a result of Agencies' audits, management reviews or other investigations concerning me or my projects for the past ten years; e. I have not been suspended, debarred or otherwise restricted by any state agency from participating in the LIHTC program or other affordable housing programs; and f. I have not failed to use state funds or LIHTC allocated to me in any state. Statements above (if any) to which I cannot certify have been deleted by striking through the words with a pen. I have initialed each deletion (if any) and have attached a true and accurate signed statement (if applicable) to explain the facts and circumstances which I think helps to qualify me as a responsible principal for participation in this NOFA. Applicant Name(s) Signature Date Print Name and Title 18- Draft Document - Subject to Change April 26, 2018 In addition to submitting a complete application, the following additional supporting material must be provided with the application. 1. Cover Letter Provide a brief summary of the proposed project and discuss your agency's qualifications and why your proposal should be selected for funding. 2. Evidence of Site Control At the time a development proposal is submitted, the developer must have site control of the property for which funding is requested. The developer must provide documentation that if the proposal is selected, site control can be maintained through completion of the entitlement process and until the property can be acquired. As evidence of site control, one of the following documents must be submitted with the application: • Purchase agreement, including evidence that the agreement is for a term that is sufficient to hold the property until the anticipated date of purchase. • Option to purchase or lease, binding on seller or landlord, including evidence that options are renewable until the anticipated date of purchase. • A long-term lease agreement with a term of not less than 55 years. • Executed land sales contract or other enforceable agreement for acquisition. • Other evidence that developer has site control. Land acquisition costs must be justified and represent a competitive market price. Prior to closing on any City funding, the City will commission its own appraisal to confirm property value. 3. Appraisal An appraisal is required that has been completed within three (3) months of submitting an application. The appraisal must conform to the Uniform Standards of Professional Appraisal Practice and the appraisal requirements of the Appraisal Institute's Regulation 3. All appraisers must be California State licensed/certified. The appraisal must include a separate as-is value for any improvements to be retained, or a 19- Draft Document - Subject to Change April 26, 2018 demolition cost for any to be removed. Site value must be as-is, with no presumed condition such as a rezoning or environmental cleanup. 4. Preliminary Title Report A preliminary title report dated within thirty (30) days of the application deadline. 5. Ten-Year Projects List Provide the following information on at least six projects completed in the past ten years, in a consistent format as follows. (Information provided in application Section 27 does not need to be repeated.) • Name of Project: • Location: • Type of Development (senior, family, etc.): • Number of Units: • Mix of Unit Sizes: • Number of Affordable Units and Level of Affordability: • Number of Stories: • Type of Construction: • Project Amenities: • Total Project Cost: • Funding Sources and Amounts: • Entitlement Date: • Occupancy Date: • Name of Project Manager: 20- Draft Document - Subject to Change April 26, 2018 6. Rehabilitation Scope of Work, Property Inspection and Cost Estimate If the project involves rehabilitation, include the following information: • Preliminary Scope of Work; • A third-party physical needs assessment, property inspection report or predesign report; • A preliminary independent cost estimate; and • Basic unit configurations/plans. 7. Preliminary Relocation Analysis If the project involves temporary or permanent relocation of residential or commercial tenants, provide a description of tenants eligible for relocation assistance and a preliminary budget for the relocation assistance. (A full Relocation Plan will be required during the entitlement process for projects that received reserved funding.) The preliminary relocation analysis should include: • A description of the applicable relocation requirements and relocation benefits to be provided; • A reasonable cost estimate of the relocation expenses; • Identification of the number of households or businesses to be displaced; • The current rent roll; and • Name, contact information and a description of the consultant or agency that will prepare the Relocation Plan and provide assistance to the displaced households/businesses. 8. Community Outreach Plan A plan for conducting community outreach to neighbors of the proposed development and community groups. The Outreach Plan should describe how the developer intends to build support for the project and address community concerns. The Outreach Plan should also discuss some anticipated community concerns and how they would be handled. 21- Draft Document - Subject to Change April 26, 2018 9. Development Schedule Detailed project schedule, identifying all major milestones. The schedule must include major milestones for the development approval process, purchase of the property, community outreach process, financing applications, approvals and closings, project construction and lease-up. 10. Resident Services Plan A Resident Services Plan that describes services to be provided to tenants (child care, computer training, etc.) and demonstrates how supportive and social services for the tenant population will be provided and funded. Projects with units set aside for formerly homeless households or special needs groups must provide sufficient supportive services for the target population and show sufficient funding commitments for services. 11. Management Companies If the proposal includes the use of a management company other than the applicant, provide detailed information on that company, including: • References; • Total number of projects and units managed; • Listing of projects managed and their locations, • Number of company employees; and • Management philosophy. 12. Marketability of Mixed-Use Projects Proposals for development of housing with commercial space must include evidence of demand for commercial/retail and marketability of space by submitting a market study or a survey of comparable and vacancy rates or have at least half of the commercial/retail space preleased. 22- Draft Document - Subject to Change April 26, 2018 13. Development Budget Provide a detailed development budget that includes all anticipated funding sources and provides a breakdown of all development costs. The following requirements should be considered in preparing the budget: • Construction Contingency The City requires a 10 percent minimum construction contingency, which should be factored into the development budget. For projects involving extensive rehabilitation work, a 15 percent construction contingency may be required. • Prevailing Wage Requirements It is the City’s policy that any affordable housing projects funded by the City will require State prevailing wage payments or if Federal funds are used for the project, Davis-Bacon wage payments. Applicants will be expected to comply with all State and Davis-Bacon wage requirements. Any previous unsettled violation of the prevailing wage requirements of the City may disqualify the contractor or any subcontractors from participating bidding as contractors or subcontractors on City financed projects. • Insurance/Bonding Requirements The selected agency will be required to comply with the City's insurance requirements, which should be factored into the project budget. Please refer to Attachment 1 for more information on the City’s insurance and bonding requirements. 14. Detailed Operating Budget and 30-Year Pro Forma Analysis (Rental Projects Only) For rental project proposals, a detailed operating budget and 30-year pro forma analysis should be submitted which uses the assumptions detailed below: • Five percent (5%) annual vacancy/collection loss for family and senior projects. • Ten percent (10%) annual vacancy/collection loss for efficiency studio, SRO or special needs projects. 23- Draft Document - Subject to Change April 26, 2018 • Three and one-half percent (3.5%) annual increase for expenses (other than property taxes and replacement reserve deposit). • Two and one-half percent (2.5%) annual increase for income. • Tenant utility allowances should be based on the Housing Authority of Santa Clara 2018 Utility Allowance Table available at: https://www.scchousingauthority.org/assets/1/6/2018_UA_Schedule_.pdf • If Section 8 or other rental or operating assistance is assumed, an additional operating pro forma should be included that assumes the contract will expire after its initial term. Applicants should include transition reserves in their budgets due to the risk that rental assistance contracts may not be renewed. • Partnership/Asset Management fees (for tax credit projects only) may not exceed a combined total of $25,000 annually but may increase by 3 percent per year. • The interest rate on the City's funds for low-income housing tax credit projects will be set on a case-by-case basis. The interest rate typically will range from 1 percent to 3 percent simple interest per annum, where there is a financial benefit to the project. Payments of interest and principal will be due from excess cash flow from operations after payment of operating costs, senior debt, reserves and deferred developer fee. All loans are due on sale, refinancing or transfer (except to a related entity, such as a limited partnership, subject to City approval). The pro forma should clearly list all assumptions and include information on all debt sources, including term, interest rate information and name of intended debt providers. The pro forma should also include information on the number of units, sizes, rent and utility levels, targeted levels of affordability and basis of rent level calculations. 15. Developer Financial Reports Provide independent audit reports for the last three (3) years, including copies of management letters. This should include complete financial statements, including balance sheets, income statements and statement of cash flows with notes for the last three (3) years. 24- Draft Document - Subject to Change April 26, 2018 16. Experience and References Provide resumés and project experience for all key staff working on the project, including, but not limited to, principals, project manager, project staff and financial officer. Indicate the level of experience of the project manager with projects similar to the proposal. Provide at least three (3) references from City or County staff involved with projects completed in the last six (6) years. Information specifically related to experience in successfully completing projects with prevailing wage or Davis-Bacon wage requirements is preferred. It is highly desirable that the developer’s contractor has experience in this area, but it is not mandatory. 17. Partnership Agreement or Corporate Articles and Bylaws (if applicable) 18. 501(c)(3) Letter of Determination from IRS (if applicable) 19. Photos Attach recent, clearly labeled photos of the project site and surrounding area. 20. Board of Directors Provide a listing of the Board of Directors, including the city of residence. 25- Draft Document - Subject to Change April 26, 2018 ATTACHMENT 1 INSURANCE REQUIREMENTS The City’s standard insurance requirements for projects with reserved City funding and appropriated predevelopment funding are as follows: (a) A commercial general liability policy in the amount of Two Million Dollars ($2,000,000) each occurrence, Two Million Dollars ($2,000,000) annual aggregate, together with Three Million Dollars ($3,000,000) excess liability coverage, or such other policy limits as City may require in its reasonable discretion, including coverage for bodily injury, property damage, products, completed operations and contractual liability coverage. Such policy or policies shall be written on an occurrence basis and shall name the Indemnitees as additional insureds. (b) A comprehensive automobile liability coverage in the amount of Two Million Dollars ($2,000,000), combined single limit including coverage for owned and non-owned vehicles and shall furnish or cause to be furnished to City evidence satisfactory to City that Owner and any contractor with whom Owner has contracted for the performance of work on the Property or otherwise pursuant to this Agreement carries workers’ compensation insurance as required by law. Automobile liability policies shall name the Indemnitees as additional insureds. (c) Applicant shall furnish or cause to be furnished to City evidence satisfactory to City that Applicant and any contractor with whom Applicant has contracted for the performance of work carries statutory Workers’ Compensation insurance and Employer’s Liability insurance in a minimum amount of One Million Dollars ($1,000,000) per accident. (d) Companies writing the required insurance required shall be licensed to do business in the State of California. Insurance shall be placed with insurers with a current A.M. Best's rating of no less than A: VII. The Commercial General Liability and comprehensive automobile policies required shall name the Indemnitees as additional insureds. (e) Applicant shall furnish City with certificates of insurance in form acceptable to City evidencing the required insurance coverage and duly executed endorsements evidencing such additional insured status. The certificates shall contain a statement of obligation on the part of the carrier to notify City of any material adverse change, cancellation, termination or non-renewal of the coverage at least thirty (30) days in advance of the effective date of any such material adverse change, cancellation, termination or non-renewal. Page 1 of 13  City of Palo Alto Affordable Housing Fund Guidelines Approved by the City Council on August 17, 2015 by Resolution No.9539 A. Definition of the City of Palo Alto’s Affordable Housing Fund The Affordable Housing Fund is a local housing trust fund established by the City Council of the City of Palo Alto, California to provide financial assistance for the development, acquisition and rehabilitation of housing affordable to extremely low, very low, low and moderate income households that live or work in the City. The City currently administers five distinct Sub-Funds for affordable housing that together comprises the City’s Affordable Housing Fund. The BMR Emergency Fund has the sole purpose of preservation of the BMR ownership housing stock, whereas the other four funds have the broader purposes listed above. 1) Commercial Housing Fund 2) Residential Housing Fund 3) Community Development Block Grant (CDBG) Housing Fund 4) Home Investment Partnerships (HOME) Fund 5) Below Market Rate (BMR) Emergency Fund These Administrative Guidelines summarize the City’s goals, policies and priorities for both the overall Fund and the Sub-Funds. These Guidelines cover eligible projects, eligible and ineligible costs, funding criteria and priorities, typical loan terms, application process and administrative procedures. B. Program History, Summary and Description 1. Commercial Housing Fund In 1977, the City of Palo Alto began requiring affordable housing mitigation payments on large industrial and commercial projects under its environmental review authority under the California Environmental Quality Act (CEQA). Mitigation payments were deposited into a separate account and the funds were used exclusively to assist in the development of new housing units, with most units affordable to very low and low-income households. Originally, this fund was named the Industrial – Commercial Account; later it was renamed the Commercial Housing In-Lieu Fund. It is now to be called the Commercial Housing Fund. In 1984, the City Council adopted Chapter 16.47 of the Palo Alto Municipal Code requiring that all commercial, retail, hotel and industrial projects pay an affordable housing mitigation fee on net new square footage as a condition of project approval. In March 2002, the Council increased the fee rate from $4.21 to $15.00 based on updated nexus study findings; the current fee is much less than the full cost of affordable housing impacts. The fee rate is adjusted annually to reflect inflation and is currently $19.85 per square foot. Collection, administration and reporting concerning the commercial housing mitigation fee is consistent with provisions of the State’s Mitigation Fee Act (Sections 66000 et seq. of the California Government Code). The fees collected must be utilized in ways that preserve or increase affordable housing for Palo Alto’s Page 2 of 13  workforce. Since the Fund’s inception, Palo Alto’s Commercial Housing Funds have been used by developers in combination with other State and federal housing programs, such as the Low Income Housing Tax Credits, project-based Section 8, HUD Section 202 and Section 811, HOME, AHP and the Multi-Family Housing Program (MHP). 2. Residential Housing Fund Starting in 1974, the City required developers of market-rate housing to include below market rate (BMR) housing units in housing developments containing more than a minimum number of units. At that time, Palo Alto also started collecting housing in-lieu fees from small projects, for fractional units and for residential developments where it is infeasible to provide below market rate units on-site. Based on a court decision in 2009, this inclusionary housing program and in lieu fee are currently applicable only to units produced for sale, rather than rental housing. (Like other jurisdictions, Palo Alto is seeking to address this issue by preparing a new nexus study, which will update impact fees for commercial and residential development projects where inclusionary units are not provided. It is also expected that legislation will be introduced to allow rental units to be subject to inclusionary requirements.) Residential fees, along with interest earnings of the Fund and other miscellaneous revenues related to housing, are placed in the Residential Housing Fund. Examples of miscellaneous revenue sources have included proceeds from the sale of surplus public land, payments pursuant to housing development agreements, and repayment of loans made from the Residential Housing Fund. The Residential Housing Fund may be used to provide funding for new housing development or for the conversion of existing housing to affordable housing through acquisition. The Fund may also be used for the rehabilitation and preservation of existing affordable housing. Throughout the history of the Fund, all housing assisted has been rental and most of the units have been affordable to very low and low-income households. 3. CDBG Housing Fund The City has been an entitlement recipient of federal Community Development Block Grant Funds (CDBG) since the creation of the program in 1974. Policies and priorities for the use of CDBG funds are stated in the HUD Consolidated Plan prepared by the City every five years. Historically, Palo Alto has allocated a large portion (typically 50%) of its annual CDBG grant for housing development activities. Any use of CDBG funds for housing activities must comply with the federal CDBG regulations (see CFR Section 570.200) as the regulations apply to Palo Alto’s grant. CDBG funds have been provided by the City to non-profit organizations for housing activities such as land acquisition for housing construction, housing pre-development costs, acquisition of existing rental apartment buildings, rehabilitation of rental units, construction or rehabilitation of shelters and transitional housing facilities for homeless persons, preservation of HUD-assisted rental housing, and acquisition and rehabilitation of group housing for persons with disabilities.   Page 3 of 13  4. Home Investment Partnerships (HOME) Program and Program Income Fund The City does not receive federal HOME funds on an entitlement basis from HUD. In 2014 the City joined the Santa Clara County Home Consortium (SCCHC) for the period July 1, 2015 and June 30, 2018. Participation in the HOME consortium does not guarantee the City a direct allocation of HOME funds. Instead, through this effort the City of Palo Alto has become a participating jurisdiction and serves as a partner in bringing in additional funding into the County to help address regional affordable housing needs. Applications will be directly submitted through the County's request for proposal process for available HOME funds. It is anticipated that funding through the SCCHC for the first two years of the agreement will be available for pre- development, development, construction, acquisition, preservation and substantial rehabilitation of affordable, permanent or transitional, housing units. During the third year of the agreement, the SCCHC may choose to implement a Countywide Tenant Based Rental Assistance (TBRA) program. The County will only fund a project that has the local support of the City. Therefore before a project can be considered by the County for funding under the SCCHC, staff will present the proposed project as part of the CDBG annual action plan and budget. This will provide the City Council with the opportunity to determine local support.      Certain nonprofit organizations known as Community Housing Development Organizations (CHDOs) may also apply for funding from State HCD for housing projects located within Palo Alto. The City received one HOME grant from 1992 HOME funding for the Barker Hotel project. Proceeds from HOME loan repayments must be deposited into a HOME Program Income Fund and used in accordance with the HOME program regulations. 5. Other Funds BMR Emergency Fund: On September 9, 2002, the City Council adopted Ordinance 4761 together with the “Assessment Loan Program: Criteria, Need, Priorities, Definitions and Loan Terms” to establish the “Below Market Rate Program (BMR) Emergency Fund”. The Fund was created to preserve and maintain the City’s stock of BMR ownership units and to assist owners with low incomes and/or very limited assets pay for large mandatory assessments for capital repairs and improvements. An appropriation transfer of $150,000 from the Residential Housing In-Lieu Fund provided the initial funding. C. Eligible Housing Types, Projects and Activities 1. Housing Types Palo Alto’s Affordable Housing Fund revenues will primarily be used to assist the following types of affordable housing:  Rental housing, typically apartments (new and existing)  Rental housing with supportive services for elderly and special needs populations  Single room occupancy (SRO) rental units  Transitional rental housing  Group homes serving special needs populations Page 4 of 13   Shared housing, co-housing, mobile home parks and other special or innovative housing products  Below Market Rate ownership housing with resale deed restrictions Some affordable housing activities such as down-payment assistance for home purchases and rehabilitation loans to low-income single-family homeowners are eligible, but either have never been offered, or in the case of rehabilitation loans, were discontinued. 2. Eligible Projects and Activities for Each Fund Commercial Housing Fund: Historically City policy has restricted the Commercial Housing Fund for use in funding activities that increase Palo Alto’s affordable housing stock through:  The construction of new housing units,  The addition of new units to existing buildings, or  The conversion of non-residential space to housing units. Effective in August 2015, the Commercial Housing Fund may also be used for acquisition, rehabilitation, and preservation of existing housing whose long term affordability will be protected through deed restriction or other mechanism. Reasonable related administrative costs incurred by the City may also be paid from the Fund; examples of appropriate administrative costs include:  Direct staff costs for the collection of housing mitigation fees and the administration of the fund,  The cost of periodic consultant studies required to determine or update the fees charged, and  Direct costs for the City to implement the affordable housing new construction program. Residential Housing Fund: All housing types are eligible for assistance utilizing Residential Fund monies. This Fund may be used for new housing projects, for acquisition of existing housing and for rehabilitation of existing housing serving any household type. Because most of the monies deposited to the Fund are from in-lieu fees received pursuant to the City’s BMR housing program requirements, a reasonable portion of the Fund’s average annual revenue may be used for administrative costs of operating the BMR program. Historically, the City has used Residential Housing Funds for the costs of an annual contract with an outside organization for the administration of certain aspects of the BMR program. CDBG Housing Fund: Uses of CDBG funds for housing must comply with the federal regulations, as stated previously. Broad funding priorities are established every five years as part of the City Council’s adoption of the Consolidated Plan. The current plan covers the period from July 1, 2000 to June 30, 2005. Council also approves an Annual Action Plan with specific funding priorities and awards, usually in May. The annual CDBG funding cycle begins in the fall for funding for the fiscal year beginning the following July. HOME Program Funds: Housing assisted with HOME funds must comply with the federal regulations for the HOME program. Given the State’s once per year funding cycle, the focus of Palo Alto’s affordable housing programs and the local housing market, the City intends to seek HOME funds only for major rental housing projects. HOME program income will also be used only for rental housing activities. Page 5 of 13  BMR Emergency Fund: This Fund may be used for activities related to the preservation of the City’s BMR ownership housing stock. In September 2002, Council authorized: 1) An assessment loan program to provide deferred payment, low interest loans to assist BMR owners facing severe financial hardship in paying major capital assessments on their condominium homes. Regular monthly homeowner’s dues do not qualify for these loans. The Director of Planning and Community Environment establishes specific eligibility criteria and procedures within the general guidelines set by Council. 2) Protection and preservation of units within the program from loss due to foreclosure, typically by legal action and / or direct purchase by the City; 3) Repair, holding, and resale costs of BMR units acquired by the City; and 4) Short-term loans to correct deferred maintenance or rehabilitate older BMR units at resale Overall City Affordable Housing Loan Program Administrative Costs: From the inception of the City’s affordable housing program in the late 1970’s through 2003, the City has utilized the General Fund budget to cover staff administrative costs and third party direct costs, such as outside legal costs in administering and monitoring the loan program. The portion of the City’s CDBG grant that may be used for staff costs is very limited and has historically been only sufficient to cover the cost of the CDBG program management staff. The General Fund has covered the cost of affordable housing activities, including staff work in the Planning Division, the City Attorney’s Office and the Administrative Services Department. 3. Eligible Uses of Funds Commercial and Residential Housing Funds: All reasonable and necessary costs to the development of eligible affordable housing types may be funded from these two Funds. Examples of eligible costs are: feasibility studies, site evaluation, due diligence and environmental studies; all pre-development “soft” costs, including design, engineering, legal, costs necessary to apply for and close the project’s permanent and construction financing and subsidies, demolition and clearance, land acquisition, acquisition of air rights or by long-term lease, acquisition of buildings, hard construction costs, rehabilitation, on and off-site improvements, developer fees, impact fees, permit fees, marketing, initial funding of replacement and operating reserves, buy down of interest rates on permanent and construction financing and furnishing of on-site facilities that will primarily serve project residents, such as community rooms, playgrounds and child care centers. City funding may be used at any stage of project development from site search to long-term permanent loans. CDBG Housing Fund: The most commonly funded affordable housing activities in Palo Alto that are eligible under the federal regulations, are compatible with City housing priorities and the realities of the local housing market include:  Acquisition of land for housing construction  Acquisition of existing housing or buildings for conversion to housing  Rehabilitation and major repairs of existing affordable rental housing projects Page 6 of 13   Feasibility studies, environmental and pre-development activities related to the acquisition of land or buildings  Relocation studies and benefits  Pre-development costs for new housing (to the extent allowed under HUD rules)  Clearance & disposition of land or buildings  Construction of off-site utilities necessary for housing  Installation of accessibility improvements  Construction, acquisition and rehabilitation for transitional housing  Acquisition and / or rehabilitation of group homes for special needs populations 4. Specific Limitations, Restrictions and Ineligible Uses by Fund Commercial Fund: By Council policy, all costs must be directly related to the development of new housing units or to the preservation of existing housing whose long term affordability will be protected through deed restriction or other mechanism. In addition, because the Fund’s revenues are linked (as required by State law) to the affordable housing needs of Palo Alto’s work force, funded projects should provide housing for households likely to be participating in the work force. Housing with occupancy restrictions for individuals with statistically low work force participation (such as the elderly) will only be eligible for these funds in proportion to the extent that the intended residents typically participate in the work force. Furthermore, housing projects assisted with this Fund must be located within the City limits of the City of Palo Alto. Residential Housing Fund: There are no special limitations or restrictions on the use of this Fund. CDBG Housing Fund: Federal regulations prohibit the use of CDBG funds (except in unusual situations) for the actual construction costs of housing. Palo Alto is also very limited, by the way federal regulations are applied, in the amount of CDBG funds that can be provided for predevelopment costs of certain kinds of housing. 5. Eligible Applicants; Project Sponsors; Developers The typical funding applicant and project sponsor is a nonprofit housing development organization, a social service nonprofit, or a public agency (such as a city, county or the Housing Authority of Santa Clara County). Eligible non-governmental applicants are nonprofit corporations and limited partnerships (in which an eligible applicant, or an affiliate of an applicant, is a controlling general partner), that have as part of its organizational purposes the development of housing or operation of housing programs for households of extremely low-, low, very low- or moderate-income. The City will consider applications for funding from for- profit housing developers for the Commercial and Residential Funds on a case-by-case basis, providing provisions for long-term affordability can be met. All entities involved in a housing project, particularly the applicant, sponsor, consultants, developer, general partner, management entity, services provider and their principals or key staff, must have appropriate experience in affordable housing relative to the complexity, scale and type of project for which funding is sought. The City may require that applicants with insufficient Page 7 of 13  housing development or management experience secure a joint venture partner and / or agree to ownership and / or management of the housing units by an experienced affordable housing organization approved by the City. The CDBG and HOME regulations should also be carefully reviewed by applicants for specific rules regarding the types of organizations that are eligible funding recipients. D. Funding Priorities, Housing and Household Types, and Evaluation Criteria 1. Priorities for Affordable Housing Funding (Commercial, Residential, CDBG and HOME Funds)  New construction of permanent rental housing, especially for households with children  Preservation of existing, federally subsidized rental housing from conversion to market-rate  New construction of permanent rental housing for households with special needs or disabilities  New or existing permanent rental housing for homeless households or those at- risk of homelessness linked with supportive services  Transitional rental housing linked with supportive services  Acquisition and / or rehabilitation of existing affordable rental housing, including group and shared residential facilities, and mobile homes, especially for households with children and special needs households  New construction of permanent rental housing primarily serving Palo Alto’s low- income work force, including Single Room Occupancy (SRO) units  New construction of permanent rental housing primarily serving extremely low- income elderly  Acquisition and rehabilitation of existing market rate rental housing for conversion to affordable housing for extremely low-income, very low-income, and low-income households Other Priorities To Meet the City’s Housing Production Goals as Stated in the Adopted Housing Element: Palo Alto also has important unmet housing production needs for low and moderate-income households as described in the City’s Housing Element of the Comprehensive Plan. The BMR requirements are the City’s principal method of addressing these housing needs. Developers must provide the required BMR units, and any BMR units that satisfy a public benefit agreement, within the market-rate project or off-site, without funding assistance from the City. However, the City could consider providing funding to assist a developer provide additional BMR units (above and beyond the required units) if there was a significant or unique opportunity to substantially increase low and moderate income housing production, as follows: Page 8 of 13   New construction of very low and low-income rental housing units within, or in connection with, market-rate housing projects under the City’s BMR program requirements.  New construction of moderate-income homeownership units, including units within market-rate projects under the BMR program. Two groups of households will be served: those with incomes between 80 and 100% of median income and households with incomes between 100 and 120% of median income. 2. Rent and Occupancy Standards: Income Targeting The primary objective of Palo Alto’s affordable housing program is to increase the City’s housing stock for those households with the most serious housing needs. To meet this objective, the City prioritizes and focuses the program and the available funding on serving extremely low, very-low and low-income households. Most rental housing projects funded with City Affordable Housing Funds also are funded by at least one, and often several, State, local or federal housing programs with rent and occupancy requirements. The City sets appropriate rent and occupancy requirements for each project giving consideration to factors such as:  Financial feasibility  Coordination with other funding rules, such as tax credits, HUD, State  Availability of rental subsidies such as Section 8  Needs and income level of project’s target population (for example, elderly, homeless, working families, etc.) A loan agreement, deed of trust, and note are prepared for all City housing loans. A long-term regulatory agreement must be recorded against the property as a condition of any City housing loan. This regulatory agreement will include the City’s affordability and occupancy requirements. To the extent consistent with fair housing laws, local occupancy preferences for households living or employed within the City of Palo Alto may be required. The City may also require that existing rental assistance contracts be renewed and that the owner seek and give preferences to households receiving Section 8 assistance. 3. Evaluation Criteria for Project Selection and Underwriting Standards The following factors will be considered in evaluating applications for City housing funds. All factors will be assessed in relationship to the type of project being proposed and the difficulty and risk involved:  Affordable Housing Fund Guidelines  Housing needs and priorities stated in the most recent Consolidated Plan  Relevant Housing Element and Comprehensive Plan goals, policies and programs  Provision of a significant number of units (at least 30% of total units) affordable to extremely low-income households  For family housing projects, whether there is a significant number of three or more bedroom units (at least 30% of total units)  For special needs housing and housing for the homeless, the coordinated provision of supportive services available to the residents  Lack of relocation of residential tenants and owners, especially low income tenants Page 9 of 13   Experience & staff capability of the development team and management entity  Financial strength and fiscal record of sponsor & developer  Project readiness & ability to meet a reasonable schedule  For major projects, the likelihood of securing other State, federal or local housing subsidies to leverage City housing funds  Matching of City housing funds including sponsor and developer commitments of equity funding, in-kind staff support, partial waiver or deferral of developer fees and other matching funds or resources committed  Reasonable cost per unit for type of housing proposed  Reasonable percentage of City funding to total development costs  Management plan and experience of management entity  Rehabilitation projects require specific information regarding the scope of work, specifications, inspections and written cost estimates. In addition to the above factors, funding applications involving new housing construction, demolition or conversion of use, especially where a site will require a rezoning, will be subject to City review for site-related factors such as the following. The City may require that a formal feasibility study be completed and reviewed by Council prior to application for, or approval of, site acquisition funding or development subsidies.  Compatibility of the proposed use, density, height and other features with the surrounding neighborhood  Suitability of the site for the proposed project  Environmental review issues including traffic, access, parking and historic preservation  Displacement and relocation issues  Soil or groundwater contamination, including costs of remediation  Provisions for site control, land acquisition costs and terms E. Loan Provisions and Terms Grants, Unsecured Loans: The City does not provide grants of housing funds, except for emergencies or very unusual circumstances and then only for small amounts, generally under $50,000. Funding for preliminary feasibility studies may be provided subject to an unsecured loan, if the property, or site, is not owned by the applicant If the project proceeds, then the feasibility loan will be combined with any further funding provided by the City into a permanent loan against the project. Non-profit organizations are the only entities eligible for grants and unsecured loans. Expenditure Limits: There are no per unit or per project expenditure limits. Leverage and Matching Funds: Project applicants should seek to maximize the leverage of the City funds and secure matching funds, to the extent feasible. Security: All loans must be secured against the real property with a promissory note and recorded deed of trust. Page 10 of 13  Subordination of City Loan Documents and Regulatory Agreements: The City normally consents to subordinate its loan to the loans of construction and permanent lenders, when required for the developer to secure the necessary funding to complete the project. Subordination of the City’s regulatory agreement to the loan documents and regulatory agreements of other lenders may also be approved, if absolutely necessary for the project to proceed to completion. All subordination agreements will be reviewed by the City Attorney’s Office on a case-by-case basis. Typically, the City Council delegates the authority to approve subordination agreements to the City Manager, with the recommendation of the City Attorney. Applicants must provide the City with information as soon as possible about the subordination policies and requirements of the other lenders, funders and investors in the project. Loan Terms: Typical minimum City loan terms are:  3% simple interest  Deferred payment of interest and principal until senior debts, such as commercial lender mortgages, are repaid, or  Annual payments from residual receipts (surplus cash flow)  Principal and interest are due atrefinancing (depending on structure)or at the end of the affordability term  Projects with substantial numbers of Section 8 assisted units will usually require the funding of an affordability reserve fund Loan interest rates, repayment provisions, and subordination provisions are negotiated on each project. Lending terms are tailored to the project’s cash flow and the specific requirements and legal regulations of other financing sources. Higher interest rates, loan amortization or other loan terms may be a condition of loan approval, depending on the specifics of the project. The Council must approve loan and regulatory agreements and other documents or specifically delegate such approval to the City Manager. Term of Affordability and Regulatory Agreements: Palo Alto’s policy is that housing provided with City Affordable Housing Fund subsidies remain affordable for the longest possible period of time with the ultimate goal of permanent affordability. The use and occupancy restrictions for affordability must be included in legal agreements between the applicant / developer, property owner and the City and will be recorded against the property. For City housing funds, regulatory agreements that survive repayment of the loan are required for funding exceeding $50,000. Where CDBG funds are used for housing, the federal regulations regarding the disposition or change in use of real property funded with federal assistance may apply when there is an early termination of the affordable housing use. The minimum term of the affordability controls are based on the source and amount of City funding, as follows: Page 11 of 13  Minimum Affordability Terms for City Housing Funding Source of Loan Funds Term of Affordability and Use Restrictions Other Provisions - Commercial & Residential Housing Fund Loans; - HOME & CDBG funding (Loans of over $150,000) 55 years -With provisions for extended affordability, where possible - Regulatory agreement required - CDBG Housing Fund (Loans over $50,000) 30 years - Regulatory Agreement required - CDBG Housing Fund (Loans under $50,000) 5 years or more - Subject to CDBG regulations regarding the disposition or change in use of real property acquired with federal funds F. Administrative Procedures and Responsibilities The Department of Planning and Community Environment is responsible for administering the City’s affordable housing programs and the Affordable Housing Fund. The Administrative Services Department provides financial management, accounting and reporting services for the Fund. The Affordable Housing Fund is regularly audited by the City’s outside auditor and may also be examined by the City Auditor’s Office. Exceptions and Revisions to the Affordable Housing Fund Guidelines: The City Manager may approve revisions to these Guidelines, or exceptions for a particular project, in order to comply with the regulations or requirements of other housing funding sources or with the regulations for the CDBG or HOME program, as necessary. Significant permanent revisions to the Guidelines shall be presented to the City Council for review and approval. G. Application Process Applications for Affordable Housing Funds shall be submitted to the Department of Planning and Community Environment for review and recommendation by the City Manager to the City Council.                   Page 12 of 13  City of Palo Alto Affordable Housing Fund Guidelines Appendix A) Definition of Income Categories and Limits The City of Palo Alto generally uses the income categories and definitions established in State law. These income categories are derived from the HUD Area Median Income (AMI) for a four- person household. HUD publishes updated median income figures for major cities and metropolitan areas annually, usually in the early part of the year. HUD’s median income figure for the San Jose PSMA covers all of Santa Clara County. The State HCD uses HUD’s AMI figure to calculate income limits by household size for the following categories:  Extremely low income (up to 30% of AMI)  Very low income (up to 50% of AMI)  Lower income (This category is equal to HUD’s low income limit for the CDBG program. The calculation is prescribed by federal regulations and varies from year to year; it has ranged from about 65% to 80% of AMI.)  Median Income (this category is equal to the 100% of median figure)  Moderate Income (up to 120% of AMI)  Above Moderate Income is a household with incomes exceeding the 120% of median income For the BMR program, the City of Palo Alto uses as its “Low” Income limit the actual 80% of AMI figures, rather than the CDBG program definition of low income. Various State and federal housing assistance programs also target other income levels. City program staff should be contacted for information describing current income categories and the maximum income for each household size within each income category. B) Definition of Affordable Rents and Prices Affordable Rent: The City of Palo Alto generally using the methodology for the Low Income Housing Tax Credit Program to calculate a maximum affordable monthly rent at various levels of affordable housing. The Tax Credit Program rents are updated each year based on changes in the HUD AMI. Rents are published for different unit types by the number of bedrooms. Normally, if a project is regulated by another funding program such as the Tax Credit program, then the rents required by that program will be acceptable to the City. Affordable Sales Prices: The City of Palo Alto sets price guidelines annually for newly built BMR units using the target income ranges for the program, current interest rates and estimates of other ownership costs such as homeowners dues, insurance, maintenance and property taxes. Page 13 of 13  C) Application Forms The application forms to apply for funding from the Affordable Housing Fund are the same as the forms used for CDBG funding proposals together with the separate housing project proposal attachment. Contact City staff for copies of the forms and instructions or download them from the Internet at: Web Site: http://www.cityofpaloalto.org/cdbg/application.html D) Program Staff Contact Information The Affordable Housing Fund is administered by: Department of Planning & Community Environment Hillary Gitelman, Director City of Palo Alto 5th Floor City Hall 250 Hamilton Avenue Palo Alto, CA 94301 (650) 321-2441 (Department’s main information number) (650) 329-2154 (Fax) For information about the Guidelines, the Affordable Housing Fund, or the CDBG Program, please contact: Eloiza Murillo-Garcia, CDBG Planner at eloiza.murillogarcia@cityofpaloalto.org E) Income Standards and Rent Limits (Palo Alto & Santa Clara County) Contact City staff for current income standards and rents. F) Price Guidelines for New BMR Units (Palo Alto) Contact City staff for current price guidelines for new ownership and rental BMR units.