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HomeMy WebLinkAbout1998-02-02 City Council (13)City City of Palo Alto Manager’s Report TO:HONORABLE CITY COUNCIL FROM: DATE: CITY MANAGER FEBRUARY 2, 1998 DEPARTMENT: Planning and Community Environment CMR: 127:98 SUBJECT:APPROVAL OF AN AGREEMENT AND BUDGET AMENDMENT ORDINANCE TO PROVIDE FUNDS TO THE PALO ALTO HOUSING CORPORATION FOR EXPENSES RELATED TO THE ACQUISITION AND REHABILITATION OF THE SHERIDAN APARTMENTS AT 360 SHERIDAN AVENUE REPORT IN BRIEF On January 13, 1998, the Palo Alto Housing Corporation (PAHC) secured an agreement with the owners of the Sheridan Apartments at 360 Sheridan Avenue on the principal terms of an acquisition, including a $5.1 million purchase price. PAHC has requested $145,500 in Community Development Block Grant (CDBG) funds from the City for pre-development activities related to the completion of due diligence activities needed to evaluate the property and prepare financing applications. Staff is recommending to Council that a Budget Amendment Ordinance be approved to appropriate the requested $145,500 from the CDBG funds reserved for the Sheridan project by the Finance Committee on October 21, 1997 and that a pre-development loan agreement be approved. PAHC expects to submit an application for the federal and state housing tax credits and private bank financing in May, 1998. As part of those applications, PAHC intends to submit a complete analysis of the project’s total cost, financing strategies and a request for a City funding commitment in the magnitude of $2.6 million in April or May. The City’s funding would come from the approximately $1.1 million balance in the FY 1997-98 CDBG housing development fund, the allocation of a major portion of the FY 1998-99 CDBG grant and the balance of the Residential Housing In-Lieu Fund. CMR:127:98 Page 1 of 6 RECOMMENDATIONS Staff recommends that the Council: Approve and authorize the Mayor to execute the attached agreement in substantially similar form (with its attached form of promissory note) with the Palo Alto Housing Corporation (PAHC) in the amount of $145,500 to provide funds for pre-development activities related to the proposed acquisition and rehabilitation of the Sheridan Apartments at 360 Sheridan Avenue. Adopt the attached Budget Amendment Ordinance authorizing the transfer of $145,500 in Community Development Block Grant (CDBG) funds from the "New Housing Development Program" account to be used for PAHC’s expenses under the agreement. BACKGROUND The Sheridan Apartments is a 57-unit complex housing elderly and disabled, very low- income households. The entire project is assisted under a HUD Section 8 rental assistance contract, which expires in April 1999. The apartments were constructed in 1979 by a for- profit investment partnership on a site purchased directly from-the City at its then market value of$211,000. The City had assembled the one-acre site using CDBG funds as part of the land banking program. Recorded deed restrictions require that the property be used as Section 8 assisted elderly housing for an initial 20-year period, then require any owner to make good faith efforts to extend the rental assistance for a remaining 20-year term. The City also reserved a right to repurchase the property if the owners intended to sell. In April 1997, the Sheridan’s owners initiated discussions to sell the property to PAHC. On May 12, 1997, the Council, based on a recommendation from the Finance Committee, reserved the entire FY 1997-98 CDBG Housing Development Fund balance of $1,160,249 for use in acquiring the Sheridan. By October, repeated attempts by PAHC and other interested nonprofit buyers to negotiate a reasonable purchase price and sales agreement had proven unsuccessful. On October 21, 1997, the Finance Committee discussed the situation and reafllmaed the Council’s policy direction that preservation of the Sheridan Apartments in its current use through acquisition by a nonprofit buyer was the top City housing priority. The Finance Committee continued the reservation of all available CDBG funding for the acquisition. A few days after the Committee’s action, the Sheridan’s owners presented the City with an executed purchase contract with an investor buyer for a price of $5.8 million. Therefore, the investor buyer withdrew from the transaction. In December, PAHC commenced purchase negotiations again. On January 13, 1998, PAHC secured agreement on the principal terms of an acquisition, including a $5.1 million purchase price, and a letter of intent to negotiate a formal purchase agreement was executed with the property’s owners. CMR:127:98 Page 2 of 6 DISCUSSION While PAHC and staff are confident that the necessary outside funding can be obtained to acquire the Sheridan and preserve the Section 8 project-based assistance, the timing, sources and exact amounts of the subsidies and financing are still being studied. The most recent estimate from PAHC’s financing consultant of the necessary City subsidy is approximately $2.6 million. Funds of this magnitude could be made available for the Sheridan by combining the existing balance of the CDBG Housing Development Fund, a major portion of the FY 98-99 CDBG grant, and the balance in the Residential Housing In-Lieu Fund. Other primary sources of funding for the project are a new FHA-insured loan and the federal and state housing tax credits, In April, PAHC expects to submit a request to the City for Council consideration of a Budget Amendment Ordinance (BAO) for the entire required City subsidy for the acquisition and rehabilitation. A binding commitment of any planned local government assistance is required as part of the tax credit application. There have been changes in the regulations governing the nine percent Low Income Housing Tax Credit program which have adversely affected applicants from the Bay Area. Since 1997, due to increasing competition and the State’s desire to apportion the credits based on an impartial measure of housing need, the largest counties have been assigned a cap based on their percentage share of the State’s total number of overpaying renter households. This cap limits the tax credit amount which can be awarded to projects located within those counties. For Santa Clara County, the assigned cap is typically too small to allow all high- scoring applications to receive awards. Additionally, applications with identical scores (which occurs often) are ranked by a random lottery. The lottery tie-breaker system, ~ combined with the county cap, results in a higher degree of risk than in previous years that even a well-designed, high scoring application will not be funded. Fortunately, ten percent of the State’s tax credit allocation is targeted for preservation of HUD-subsidized housing and there have been, to date, very few applications in that category. If the Sheridan acquisition can qualify as a preservation project, and if the competition remains low for that category, then PAHC’s chances for funding should be good. There is an alternative financing option which combines a larger mortgage, funded from a tax-exempt bond issue, and a noncompetitive, four percent tax credit. In the last two years, this type of affordable housing financing has become increasingly popular. The right to utilize tax-exempt multi-family housing bonds is allocated on a first-come, first-serve basis subject to a statewide volume cap. However, in 1997, the State’s multi-family housing bond authority was exhausted very early in the calendar year and that is expected to happen this year, as well. Due to these uncertainties, and the magnitude of the up-front costs which are at-risk during the time that other fmancing is sought, PAHC is requesting City assistance with the initial project costs. In the worst case scenario, in which other fmancing and subsidies are never secured, then the attached agreement provides that the pre-development loan to PAHC would be forgiven by the City. Assuming the project proceeds successfully, at close of escrow on CMR: 127:98 Page 3 of 6 the property purchase, this pre-development loan will be incorporated into a larger loan of funds provided for the entire project. All funds provided by the City will then be secured by the property, with the precise terms of the loan to be set at that time. RESOURCE IMPACT At this time, a Budget Amendment Ordinance in the amount of $145,500 is requested to fund costs described in the pre-development funding agreement ~related to the completion of the due diligence activities required to evaluate the property and prepare the tax credit and other funding applications. PAHC is paying the initial $10,000 good faith deposit from its own funds. $40,000 is included in the agreement’s budget to fund the increase in the deposit to $50,000, as required by the purchase terms when the physical condition of the property is accepted by the buyer. At that time, the entire deposit becomes nonrefundable. The agreement’s budget also includes $20,000 as an advance against the eventual project developer fee for PAHC’s up-front staff costs. Funds for the pre-development agreement will come from the $1,160,249 available balance in the CDBG Housing Development Fund. The funds will be loaned to PAHC at no interest and with no payments required. The pre- development budget is described in more detail below: Sheridan Apartments Acquisition: Pre-Development Budget Property Inspections & Testing Appraisal and Legal Fees Application & Reservation Fees for Tax Credits, Bonds Architecture & Engineering Financial Consultants Costs Related to Loan Applications PAHC Administration & Overhead Increased Purchase Price Deposit Miscellaneous & Contingency TOTAL $15,000 $17,500 $8,50O $10,000 $17,000 $10,000 $20,000 $40,000 $7,500 $145,500 POLICy IMPLICATIONS The staff recommendations are consistent with Program 26 of the 1990-2000 Housing Element, which states that the City will actively assist local nonprofits in the preservation of existing low-income units at risk of conversion to market rate housing and in pursuing funding to purchase such units. The agreement also implements the direction to staff from the Finance Committee on October 21, 1997 supporting the preservation of the Sheridan through nonprofit acquisition and the reservation of CDBG funds for that effort. TIMELINE Intense effort is required over the next four months in order to submit funding applications for the Sheridan acquisition. Unfortunately, there is now insufficient time to assemble an application for the February 1998 tax credit funding round. However, an application can still CMR: 127:98 Page 4 of 6 be made for the second, and final, round due in late May. There is a definite risk that financing will not be obtained in the 1998 application cycle, in which case, further applications will need to be submitted in 1999. Under the purchase terms, the property’s price increases by an inflation based factor (of 3.5 percent) if escrow has not closed by December 31, 1998. The major tasks PAHC must undertake, and deadlines or estimated milestone dates, are listed below. Most activities will proceed concurrently or overlap each other. ¯Prepare and obtain agreement on the formal Purchase contract, pay initial refundable $10,000 deposit (expected to be done by March 1) ¯Conduct physical inspections, determine rehabilitation needs and costs (February- March)¯Accept property’s condition and pay the additional $40,000 deposit (entire deposit then becomes non-refundable) ¯Analyze financing strategies, finalize project budget and submit request to City for a budget commitment (BAO) for the anticipated City subsidies (April - May) ¯Submit application in second round of nine percent tax competition (due May 29) ¯Second round tax credit awards announced (late July) ¯Deadline to complete purchase without increase in price (December 31, 1998) ENVIRONMENTAL REVIEW Approval of the pre-development funding agreement is not an action subject to the California Environmental Quality Act (CEQA). Staff has determined that the obligation of CDBG funds for the activities covered by the pre-development agreement including the payment of the purchase price deposit are categorically excluded under Section 58.35 (b)(6) of the CDBG program’s National Environmental Policy Act (NEPA) regulations. ATTACHMENTS- Attachment A: Agreement Between the City of Palo Alto and the Palo Alto Housing Corporation and attached Promissory Note Attachment B:Budget Amendment Ordinance Attachment C:Letter from Palo Alto Housing Corporation Prepared By:Catherine Siegel, Housing Coordinator Approved By: KENNETH R. SCHREIBER Director of Planning and Community Environment CMR:127:98 Page 5 of 6 City Manager Approval: Q~Manager Palo Alto Housing Corporation CDBG Citizen Advisory Committee Sam Webster, General Partner, Sheridan Associates Representatives of Residents of Sheridan Apartments CMR:127:98 Page 6 of 6 Attachment A AGREEMENT BETWEEN THE CITY OF PALO ALTO AND THE PALO ALTO HOUSING CORPORATION TO FUND PRE-DEVELOPMENT EXPENSES FOR THE ACQUISITION OF THE SHERIDAN APARTMENTS AT 360 SHERIDAN AVENUE THIS AGREEMENT ("Agreement") is made and entered into on , 1998, by and between the CITY OF PALO ALTO, a chartered city organized and existing under the constitution and laws of the State of California ("City") and the PALO ALTO HOUSING CORPORATION, a ,corporation organized and existing under the Nonprofit Corporation Law of the State of California, with offices at 540 Cowper Street, Suite 201, Palo Alto, California 94301 ("PAHC"). W I T N E S S E T H: WHEREAS, PAHC has secured an exclusive agreement to negotiate a purchase contract for the real property located at 360 Sheridan Avenue, Palo Alto, Santa Clara County, California [APN 132-36-081, the "Property"), and intends to purchase said Property in order~ to preserve its-use as HUD-assisted, very low-income rental housing ;and WHEREAS, the preservation of the City’s stock of existing, HUD-assisted Section 8 rental housing is a priority objective as stated in the Housing Element of the Comprehensive Plan and in the City’s Consolidated Plan; and WHEREAS, on May 12, 1997, the Council adopted the 1997- 1998 Community Development Block Grant (CDBG) Annual Action Plan which included the acquisition and rehabilitation of the Property as a priority project ("Project") for the use of CDBG housing development funds; and WHEREAS, the expenditure of funds for pre-development and site option costs for affordable housing is an eligible activity under the CDBG program regulations; and WHEREAS, PAHC has applied to the City for financial assistance with the pre-development expenses for the proposed Project; and WHEREAS, the city is willing to make a loan to PAHC to cover certain pre-development expenses that PAHC must incur in order to conduct due diligence investigations, complete applications for housing subsidies and permanent financing and maintain site control; NOW, THEREFORE, in consideration of the following covenants, agreements, terms and conditions, the parties to this Agreement agree: 980126 syn 0071354 1 SECTION 1 - TERM OF AGREEMENT I.I Term and Extension The term of this Agreement shall commence on the date of its execution by the parties, and shall terminate on March I, 2000, unless earlier terminated in accordance with Section 5 hereof or as otherwise provided herein. The term may be extended for an additional period not to exceed one (I) year, provided, however, any extension shall be approved by the City’s Director of Planning and Community Environment ("project Manager") only upon the receipt of written evidence, acceptable to the Project Manager, that the completion of the Project then remains feasible, and that reasonable progress can continue to be made and has been made by PAHC. If the Project Manager determines that PAHC has unreasonably delayed the Project, then the request for an extension of the term shall be denied, and all funds loaned to PAHC under this Agreement shall become immediately due and payable. A failure by PAHC to immediately pay such funds shall constitute a default under this Agreement. 1.2 Termination upon Excuse of Performance If, at any time during the term of this Agreement, the Project Manager determines that PAHC cannot perform its pre- development obligations under this Agreement due to factors beyond the reasonable control of PAHC, including, without limitation, obtaining the necessary project financing, then this Agreement shall be terminated by the City, and no repayment of any funds provided under this Agreement and the promissory note ("Note"), which shall secure the repayment of funds hereunder, shall be required. In such event, the City shall provide PAHC with not less than fifteen (15) days’ prior written or telegraphic notice of termination. Upon the effective date of termination, all duties of the City and PAHC shall terminate, excepting the obligation of PAHC to make its records concerning the preodevelopment phase of the Project available upon request to the City and HUD, which obligation shall survive the termination of this Agreement. SECTION 2 - LOAN OF FUNDS 2.1 Loan Amount The City agrees to loan to PAHC at its office address in an aggregate principal amount at any one time outstanding up to but not exceeding one hundred and forty-five thousand, five hundred dollars ($145,500). Within such limit, PAHC may borrow, repay, and reborrow at any time or from time to time from the date hereof to and including the expiration or termination date of this Agreement, whichever is earlier. 9~0126 syn 0071354 2 In the event that the amounts payable by PAHC to any and all sources for pre-development expenses shall exceed the sum of $145,500, then PAHC shall be solely responsible for paying any and all amounts in excess of $145,500, and the City shall not be obligated to loan in excess of the commitment set forth herein. 2.2 Promissory Note All requests for reimbursement ("borrowing") under this Agreement shall be evidenced by the Note of PAHC, in substantially the form of Exhibit "A", payable to the City of Palo Alto, upon demand, in writing, and executed by a duly authorized officer or representative of PAHC. The Note shall bear no interest. No periodic payments shall be required during the term of this Agreement. Nothing herein shall prohibit PAHC from paying the loan, or any part thereof, to the City before the Note shall become due. 2.3 Disbursement of Funds The City shall disburse loan funds under this Agreement to PAHC on a reimbursement basis only upon the receipt by the Project Manager of written proof of actual costs incurred and paid for by PAHC. Before PAHC requests reimbursement of costs, it shall submit to the Project Manager one (i) legible copy each of any and all contracts and subcontracts for services to be rendered or work to be performed, or both, in connection with the pre-development phase of the Project. Every contract shall clearly and fully describe the nature and scope of services to be rendered or work to be performed, or both, and the basis of payment of applicable costs. Any and all such costs shall be reasonable and necessary in order to conduct the due diligence investigations, develop financing strategies and plans, prepare and submit financing applications and maintain site control during the term of this agreement. The Project Manager may refuse to reimburse PAHC for any costs not approved, in advance, by him or her. Any borrowing under this Agreement shall be made in accordance with the City’s policies and procedures. PAHC shall submit with each borrowing a written certification that (i) the services or work, or both, has been satisfactorily rendered or performed, (2) the costs were paid in accordance with the applicable contracts and subcontracts, and (3) all funds were expended on behalf of and exclusively for the obligations of PAHC under the pre-development phase of the Project. Disbursement of funds for PAHC’s administration and overhead costs for the pre-development phase shall be established on a fixed fee basis and disbursed as follows: $20,000 - upon the submittal of a complete application for the Low Income Housing Tax Credits or upon submittal of an application for any substitute source of subsidy funds for the Project. 9~0126 s’yn 00713.~4 3 2.4 Pre-Development Expenses Funds shall be loaned to PAHC under the terms of this Agreement for the payment of certain pre-development expenses as generally described in the Pre-Development Budget, Exhibit "B". Eligible pre-development expenses shall include, without limitation, the costs of fees charged by various consultants such as property inspectors, appraiser, attorneys, architect, engineer, financing advisors; deposits required by the purchase agreement to maintain site control; fees and costs associated with applications for permanent and interim financing loans and subsidies to make the Project financially feasible, PAHC’s administration and overhead and other reasonable and necessary expenses. SECTION 3 -COVENANTS AND CONDITIONS 3.1 Project Development PAHC covenants and agrees to prepare, or cause to be prepared, an evaluation of the rehabilitation needs of the Property including plans and specifications and cost estimates together with an appraisal of the Property’s value. PAHC shall also prepare at least two alternative written financing strategies for review by the City prior to any request for additional funding for the Project. PAHC shall diligently pursue such financing strategies as are accepted by the City with the objective of obtaining sufficient funding and loans from sources other than the City to make the Project feasible and to complete the acquisition of the Property prior to the expiration of the term of this Agreement. 3.2 project Fundinq PAHC covenants and agrees to apply for an allocation of low income housing tax credits made available under the Internal Revenue Code of 1986, and any other public or private funding or loan programs including renewal of the existing HUD contract for Section 8 rental assistance, as appropriate, in addition to any funding committed by the City. PAHC shall submit further housing subsidy applications as appropriate, if the initial applications are not funded. PAHC shal! seek aggregate funding from all sources so that the proposed Project will be financially feasible and affordable rental housing for very low-income households. 3.3 Insurance PAHC, at its sole cost and expense, shall obtain and maintain during the term of this Agreement and any substituted agreement, insurance provided by responsible Companies authorized to engage in the offering of insurance services in California in such amounts and against such risks as shall be satisfactory to the City’s risk manager, including, without limitation, worker’s compensation, employer’s liability, commercial general liability~ comprehensive automobile liability, personal injury and property damage insurance, as set forth in Exhibit "C" as appropriate, insuring against all liability of PAHC and its directors, officers, 9~0126 ~ 0071354 employees, agents, and representatives arising out of or in connection~ with PAHC’s performance or nonperformance, under this Agreement. 3.4 Books and Records PAHC shall maintain in accordance with generally accepted accounting principles on a current basis complete records, including books of original entry, source documents supporting accounting transactions, service records, a general ledger, canceled checks, time sheets, and related documents and records to assure the proper accounting of funds and the performance of this Agreement. PAHC shall furnish any and, all information and reports which may be required by the Project Manager or other officer, employee, or representative of the City and HUD in connection with this Agreement. PAHC shall further pe .rmit access to its books, records and~ accounts by the representatives and emp!oyees of the City and HUD during regular business hours, for the purpose of investigation or audit to ascertain compliance with all applicable laws, regulations, rules and orders and for the purpose of evaluating and monitoring PAHC’s compliance with the provisions of this Agreement. All such records shall be retained by PAHC and shall be made available to the City and HUD, its officers, employees, and representatives upon request, for review or audit for a period of at least three (3) years following the expiration or termination of this Agreement. 3.5 Conflict of Interest PAHC covenants that it shall comply with the provisions of 24 CFR 570.611, as amended, concerning conflicts of interest.. Specifically, except for the use of CDBG funds tO pay salaries and other related administrative or personnel costs, no person who is an employee, agent, consultant, officer, or official of PAHC who exercises or has exercised any functions or responsibilities concerning the activities under this Agreement, or who is in a position to participate in a decision making process Or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from such activity, or have an interest in any contract, subcontract, or agreement with respect thereto, or the proceeds thereunder, either for him or herself or for those with whom he or she has family or business ties, during his or her tenure or for one year thereafter. PAHC further covenants that~it presently has no interest and shall not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the services hereunder. PAHC also covenants that, in the performance of this Agreement, no subcontractor or person having such interest shall be employed by PAHC. In additon, PAHC certifies that no one who has or will have any financial interest under this Agreement is an officer or employee of City. 9g0126 ~ 0071354 5 3.6 Assiqnment This Agreement is for the personal services of PAHC and shall not be assigned without the express prior written consent of the City, which consent shall be evidenced by resolution of the City Council.. Any assignment or attempted assignment shall be void and, at the sole discretion of the City, shall be deemed a material default of this~Agreement by PAHC, and the outstanding balance of the Note may be declared by City to be immediately due and payable. 3.7 Corporate Status PAHC covenants and agrees to maintain its status as a corporation duly organized, validly existing, and in good standing under the Nonprofit Corporation Law of the State of California.at all times during the term of this Agreement and any substituted agreement. SECTION 4- REPRESENTATIONS 4.1 Corporate Authority The making and performance by PAHC of this Agreement and the Note have been duly authorized by all necessary corporate action and will not violate any provision of law or of its charter or bylaws, or result in the breach of or constitute a default or require any consent under anylien, charge, or encumbrance upon any property or assets of PAHC pursuant to any indenture or other agreement to which PAHC is a party or by which PAHC or its property may be bound. The Executive Director of PAHC has been duly authorized to execute this Agreement on behalf of PAHC. 4.2 ~.~tiqation There are no suits or proceedings pending or, to the knowledge of PAHC, threatened against or affecting PAHC which, if adversely determined, would have a material adverse effect on the financial condition or business of PAHC, and there are no proceedings pending or, to the knowledge of PAHC, threatened, against PAHC which would have a material adverse effect on the performance of this Agreement by PAHC. SECTION 5 -SUBSTITUTION OF AGREEMENT AND NOTE In the event that’ PAHC decides to acquire the Property, the parties shall enter into a substitute agreement for the acquisition of the Property and its rehabilitation and operation. The terms and conditions of this Agreement and the Note shall be renegotiated~ and any additional funds provided, and to be provided by the City, for the Project shall be added to and consolidated with the outstanding unpaid principal balance of the Note. The new Note shall be secured by a deed of trust on the Property in favor of the City. 980126 ~ 0071354 6 SECTION 6 -APPLICATION OF FEDERAL REGULATIONS PAHC shall comply with the additional terms and conditions of this Agreement and the federal assurances as set forth in Exhibit "D". SECTION 7 INDEMI~ITY PAHC agrees to protect, indemnify, defend and hold harmless City, its Council members, officers, agents and employees, from any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, caused by or arising out of PAHC’s, its officers’, agents’, subcontractors’ or employees’ negligent acts, errors or omissions, or willfu! misconduct, or conduct for which PAHC may be strictly liable in the performance of or failure to perform its obligations under this Agreement. SECTION 8 -DEFAULTS The City shall be permitted, upon written notice, to (i) immediately terminate its commitment to loan funds hereunder, and (2) declare the principal of the loan or the Note to be immediately due and payable, whereupon the same shall become immediately due and payable, if any of the following events of default have occurred and have not been remedied: A. PAHC makes a representation in this Agreement which shall prove to have been false in any material respect; or B. PAHC shall default in the payment, when due, of any principal of the loan or the Note or any other sums payable by PAHC under this Agreement; or C. PAHC shall default for a period of thirty (30) days in the performance of any other non-financial obligation to be performed by PAHC under this Agreement; or D. PAHC shall-apply for or consent to the appointment of a receiver, trustee, or liquidator, or is unable, or admits in writing its inability to pay its debts as they fall due, or makes a general assignment for the benefit of its creditors, or is adjudicated a bankrupt or insolvent, or files a voluntary petition in bankruptcy; or E. PAHC is subjected to the entry of an order, decree, or judgment approving the reorganization of PAHC, and such order, decree, or judgment is unstayed for a period of more than thirty (30) days, or such period as may be permitted by law. SECTION 9 -NOTICES Any notice which may be or is required to be given under this Agreement shall be deemed given on the second day following the 980126 syn 0071354 date on which the same has been mailed by first class mail, postage prepaid, addressed as follows: CITY City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 ¯ Attn: City Clerk Copy to:Director of Planning & Community Environment City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 PA~C Palo Alto Housing Corporation 540 Cowper Street, Suite 201 Palo Alto, CA 94301-1806 Attn: Executive Director SECTION i0 -MISCELLANEOUS I0.i Neither the failure nor the delay on the part of the City to exercise any right, power, or .privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. 10.2 Nothing contained in this Agreement is intended to, or shall be construed in any manner, as creating or establishing the relationship of employer and employee between the parties. PAHC shall at all times remain an independent contractor with respect to the services to be rendered or work to be performed, or both, ~under this Agreement. 10.3 The covenants, agreements, terms, and conditions of this Agreement shall inure to and be binding on the successors and assigns of the parties. Any provision of this Agreement which is characterized as a covenant or a condition shall be deemed both a covenant and a condition. 10.4 Any amendment to this Agreement shall be binding upon th~ parties, provided such amendment is set forth in a writing signed by the party to be charged. The City Manager of the City is authorized on behalf of the City to approve any number of minor modifications to the Pre-Development Budget without obtaining the consent of the City Council, provided the aggregate amount of such budgetary modifications shall not exceed ten percent (10%) of the Pre-Development Budget. 10.5 This Agreement shall not be construed or deemed to be an agreement for the benefit of any third party, and no third party shall have any claim or right of action hereunder for any cause whatsoever. 980126 syn 0071354 8 10.6’If any provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid, illegal, void, or unenforceable in any respect, the validity of all other provisions herein shall remain in full force and effect. 10.7 PAHC shall lack any authority or power to pledge the credit of the City or incur any obligation in the name of the City. 10.8 This Agreement constitutes the entire agreement of the parties concerning its subject matter, and there are no other oral or written agreements of the parties not incorporated in this Agreement. 10.9 The Agreement and the Note shall be deemed to be a contract made under the laws of the State of California, and for the purposes hereof shall be governed and construed by and in accordance with the laws of the State of California. i0.I0 All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules which may,_from time to time, be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and shall be deemed to be part of this Agreement. 10.12 This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 10.13 The paragraph headings are not a part of this Agreement and shall have no effect upon the construction or interpretation of any part of this Agreement. 10.14 Each Party and its counsel have reviewed this Agreement. Accordingly, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the construction and interpretation hereof. III III III III III III III III III 980126 syn 0071354 9 IN WITNESS WHEREOF, the parties have executed this Agreement in Palo Alto, California on the date first above written. CITY OF PALO ALTO Mayor PAL(ALTO HOUSING By: IO Marlene H.. Prendergast Executive Director Executive Vice President ATTEST:SIGNATURE TO BE NOTARIZED City Clerk APPROVED AS TO FORM: Senior Assistant City Attorney APPROVED: Assistant City Manager Acting Director of Administrative Services Director of Planning and Community Environment Risk Manager ATTACHMENTS: Exhibit A: Exhibit B: Exhibit C: Exhibit D: Promissory Note Pre~development Budget Insurance Requirements Federal Assurances With Respect to CDBG Funds 980126 syn 0071354 10 CERTIFICATE OF ACKI~OWLEDGMENT (Civil Code § 1189) STATE OF CALIFORNIA ) ) COUNTY OF SANTA CLARA) On--~.~.~ ZT~ I~9~ , before me, the undersigned, a notary public in a~d for said County, personally appeared personally known to me (or pro~ed to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/ her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), Or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. 9g0126 syn 0071354 11 CERTIFICATE OF ACKNOWLEDGMENT (Civil Code § 1189) STATE OF CALIFORNIA ) ) COUNTY OF SANTA CLARA) On notary public in and , before me, the undersigned, a for said County, personally appeared !personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/ her/their authorized capacity(ies), and that by his/her/their signature(s) on.the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. 980126 .syn 0071354 12 EXHIBIT "A" PROMISSORY NOTE (COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS) $145,500.00 Date: Palo Alto, California FOR VALUE RECEIVED, .the undersigned, PALO ALTO HOUSING CORPORATION ("Borrower"), hereby promises to pay to the CITY OF PALO ALTO ("Holder"), or order, at its office of Revenue Collections, 250 Hamilton Avenue, Palo Alto, or at such other place as may be designated, in writing, by the Holder, the principal sum of One Hundred and Forty-five Thousand and Five Hundred Dollars ($145,,500) pursuant to the terms and conditions set forth in this Promissory Note ("Note"). The principal amount of this Note shall bear interest .at the rate of zero percent (0%) per annum. Payment of the principal sum shall made upon demand of the Holder, but in no event shall payment be made to the Holder later than March i, 2000, whether or not demand therefor is made by the Holder. This Note is subject to the additional terms and conditions set forth in this Note.. ADDITIONAL TERMS AND CONDITIONS I. This Note is made in connection with a contract entitled "Agreement Between the City of Palo Alto and the Palo Alto Housing Corporation to Fund Pre-Development Expenses for the Acquisition of the Sheridan Apartments at 360 Sheridan Avenue" (the "Agreement"), and is attached to and incorporated into the Agreement as Exhibit A. All covenants, representations, and terms of default and remedies for default set forth in the Agreement are incorporated herein by reference, and made a part hereof. 2. This Note evidences the obligation of the Borrower for the ful! repayment to the Holder, in accordance with this Note and the Agreement, of the funds loaned thereunder to the Borrower by the Holder. Such funds are to be used solely by the Borrower for the Project as described in the Agreement. 3. This Note is unsecured by a lien, encumbrance, or mortgage on the property of the Borrower, subject to any terms of the Agreement to the contrary. 4. The term of this Note shall commence on the date of its execution by the Borrower, and, subject to the terms and conditions 980126 sy. 0071355 of the Agreement, shall expire or terminate on the date on which the Borrower makes full payment of the principal sum of this Note. 5. At any time, and from time to time, the Borrower may prepay to the Holder the principal sum of this Note, or any part thereof, without penalty. 6. The Borrower and any maker, co,maker, indorser, guarantor~ or any other party (collectively, the "Obligors"), and each of them: (i) waive notice of default, notice of acceleration, notice of nonpayment, presentment for payment, demand, protest, notice of demand, notice of protest, notice of nonpayment, and any other notice required to be given under the law to the Obligors; (ii) consent(s) to any and all delays, extensions, renewals, or other modifications of this Note or waivers of any term hereof or release or discharge by the Holder of any of the Obligors or release, substitution, or failure to act by the Holder, from time to time, and agree(s) that no such action, failure to act, or failure to exercise any right or remedy on the part of the Holder shall in any manner affect or impair the obligations of any Obligor or be construed as a waiver by the Holder of, or otherwise affect, any of the Holder’s rights under this Note or the Agreement, under any indorsement or guaranty of this Note; and (iii) (jointly and individually, if ~more than one) agree(s) to pay, on demand, any and all costs and expenses of collection of this Note or of any indorsement or any guaranty hereof, including attorney’s fees. 7. The pleading of any statute of limitations as a defense to any demand against the Borrower is expressly waived by the Borrower. 8. If any default .is made hereunder, the Borrower and the Obligors, jointly and individually, promise to pay the Holder’s attorneys’ fees and other relatedcosts and expenses incurred by the Holder in connection with the enforcement of any rights of the Holder. The Holder’s right to such fees shall not be limited to its representation by staff attorneys of the Holder’s Office of the City Attorney, and such representation shall be valued at the customary and reasonable rates for private sector legal services. 9. The outstanding unpaid balance of the principal sum of’ this Note shall, at the option of the Holder, become immediately due and payable upon the failure of the Borrower to make any payment hereunder as and when due or upon the failure of the Borrower to perform or observe any other term or provision of this Note or the Agreement. If the outstanding unpaid principal balance of this Note is not paid within thirty (30) days of demand therefor, the Borrower shall pay to the Holder interest equal to one percent (1%) of the unpaid principal amount, or the highest rate permitted by law, whichever is less, per calendar month, or fraction thereof. If this Note be reduced to judgment, such judgment shall bear the statutory interest rate on judgments. i0. Any notice, demand, or other communication required hereunder shall not be deemed sufficiently given, unless sent by certified mail, postage prepaid, return receipt requested, or by express 980126 syn 0071355 delivery service or overnight courier service, to the principal office of the addressee, or at such other address as may be designated, in writing, from time to time: Holder:City of Palo Alto 250 Hamilton Avenue Palo Alto, California 94301 Attn: City Clerk Borrower:Palo Alto Housing CorpOration 540 Cowper Street~ Suite 201 Palo Alto, CA 94301-1806 Attn: Executive Director The delivery shall be effective on the date shown on the delivery receipt or the date on which the delivery was refused. II. The covenants, agreements, terms, and conditions of this Note shall inure to, and shall be binding on, the successors and assigns of the Borrower and the Obligors. PALO ALTO HOUSING ~PORATION Marlene H. Prendergas_~ ) Executive Director and~’ Executive Vice President 540 Cowper Street, Suite 201 Palo Alto, CA 94301 980126 mJn 007[355 3 EXHIBIT PRE - DEArELOPIqENT BUDGET SHERIDAN APARTMENTS ACQUISITION Property Inspections & Testing Appraisil and Legal Fees Application & Reservation Fees for Tax Credits, Bonds Architecture & Engineering Financial Consultants Costs Related to Loan Applications (FHA) PAHC Administration & Overhead Purchase Price Deposit ~ Miscellaneous & Contingency TOTAL $ 15,000 $17,500 $8,500 $io,ooo $17,ooo $io,ooo $2O,O0O $40,000 $7,50o $145,500 980126 ~!n 0071356 EXHIBIT "C" INSURANCE REQUIREMENTS POLICY MINIMUM LIMITS OF LIABILITY WORKERS’ COMPENSATION Statutory COMPREHENSIVE Bodily Injury AUTOMOBILE LIABILITY,Property Damage including owned hired, and nonowned’ automobiles $I,000,000 ea. person $I,000,000 ea. occurrence $i,000,000 ea. occurrence COMMERCIAL Bodily Injury GENEP~AL LIABILITY, including property Damage products and completed operations, broad form contractual, and personal injury. $1,000,000 ea. person $i,000,000 ea. occurrence $I,000,000 aggregate $i,000,000 ea. occurrence Each insurance policy required by this Agreement shall contain the following clauses: "This insurance shall not be canceled, limited in scope of coverage or nonrenewed until after thirty (30) days written notice has been given to. the: CITY OF PALO ALTO/Planning and Community Environment Department, P. O. Box 10250, Palo Alto, CA 94303." "All’ rights of subrogation are hereby waived against the CITY OF PALO ALTO and the members of the City Council and elective or appointive officers or employees, when acting within the scope of their employment or appointment." o "The CITY OF PALO ALTO is added as an additional insured as respects operations of the named insured, but only as to work performed under this Agreement. "It is agreed that any insurance maintained by the CITY OF PALO ALTO will apply in excess of, and not contribute to, insurance provided by this policy." All insurance coverage required shall be provided through carriers with a BEST KEY RATING GUIDE rating of A:X or higher that are admitted to do business in the State of California. The certificate(s) of insurance evidencing such coverage shall be .completed and executed by an authorized representative of the company providing insurance, and shall be filed with and approved by City’s risk manager. 980126 syn 0071357 EXHIBIT "D" FEDERAL ASSURANCES WITH RESPECT TO CDBG FUNDS PAHC agrees to comply with the requirements of 24 CFR Part 570 (the Housing and Urban Development regulations concerning Community Development Block Grants). PAHC also agrees to comply with all other applicable federal, state and local laws, regulations, and policies governing the funds provided under this Agreement. PAHC further agrees to utilize funds available under this Agreement to supplement rather than supplant funds otherwise available. A.PAHC hereby assures and certifies that: (2) (3) (4) (5) (6) It possesses legal authority to receive federal grant funds and to carry out the proposed program(s) assisted thereby. Its governing body has duly acquainted itself with the funds application, including all understandings and assurances contained therein, and directed and authorized the person identified as the official representative of PAHC to provide such additional information as may be required hereunder. It consents to accept the jurisdiction of the federal or California courts for the purpose of enforcement of its responsibilities imposed hereunder. The proposed program(s) has been developed so a’s to give maximum feasible priority to activities which will benefit low and moderate income persons. The receipt of any program income, as defined in 24 CFR 570.500(a), as amended, generated by the use of grant funds under this Agreement, will be recorded, reported and returned to CITY in accordance with 24 CFR 570.504, as amended. It will comply with the provisions set forth in 24 CFR 85.43 and 24 CFR 85.44 regarding the suspension or termination of a grant agreement for cause or convenience. (7)It will maintain and retain all books, documents, papers, financial, or other records which are pertinent to the grant for a period of not less than three (3) years following the expiration of this Agreement. PAHC will allow City and the U.S. Department of Housing and Urban Development, through any authorized representatives, access to such documents, papers and records. (8)If PAHC is a primarily religious entity, in connection with the provision of services ~required under this Agreement, PAHC agrees to comply with federal regulations specified in 24 CFR 570.200(j). PAHC further: 9g0126 syn 007135g (I) (2) (3) (4) (5) (6) (7) (b) (c) (d) will not discriminate against any employee or applicant for employment on the basis of religion and will not limit employment or give preference in employment to persons on the basis of religion; will not discriminate against any person applying for such services on the basis of religion and will not limit such services or give preference to persons on the basis of religion; will provide no religious instruction or counseling, conduct no religious worship or services,~ engage in no religious proselytizing, and exert no other religious influence in the provision of such services; and will ensure that the portion of PAHC’s facility used to provide the services shall contain no religious symbols or decorations, other than those permanently affixed to or are part of the structure. PAHC also hereby assures that it shall: Comply with the nondiscrimination provisions of public law 88- 352 (Title VI of the Civil Rights Act of 1964), and the fair housing provisions of public law 90-284 (Title VIII of the Civil Rights Act of 1968) and Executive Order 11063, as amended by Executive Order 12259, with respect to sale, lease or transfer of land acquired, cleared or improved with grant assistance. Comply with the provisions of Section 109 of Title I of the Housing and Community Development Act of 1974 which prohibit discrimination. Comply with the Fair Housing Act of 1989 (42 USC 3601-20), which prohibits discriminatory housing practices based on race, color, religion, sex, national.origin, disability or familial status. Comply with the Davis-Bacon Act, as amended, Federal Labor Standards provisions with respect to all construction contracts in excess of Two Thousand Dollars ($2,000). Comply with the requirement of the Flood Disaster Protection Act of 1973 and the National Flood Insurance Act of 1968 applicable to acquisition or construction projects. Comply with the relocation and displacement requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended. Comply with provisions of Executive Order 11246, as amended by Executive Orders 11375 and 12086, on e~aal employment opportunities and affirmative action relative to employees and applicants and nonexempt contracts and subcontracts. 980126 ~ 0071358 (8)Comply with 42 USC 4831(b), and 24 CFR 570.608 and 24 CFR Part 35 of the HUD regulations, prohibiting the use of lead-based paint in the construction or rehabilitation of residential structures. (9)Comply with the provisions of 24 CFR Part 24 which prohibit the utilization of debarred, suspended, or ineligible contractors or subrecipients. (i0)Comply with the uniform administrative requirements and cost principals of 24 CFR Part 85 and OMB circulars A-87, A-If0, A- 122, and A-128 and A-133 as they relate to the acceptance and use of federal funds by nonprofit organizations, and as other- wise may be required under 24 CFR 570.502, as amended. (II)Comply with the requirements of 24 CFR 85.36 and OMB circular A-f10 with respect to conflict of interest, and as otherwise may be required under 24 CFR 570o611, as amended. (12)Comply with the provisions of the Hatch Act which prohibit the use of federal funds for lobbying activit£es. (13)Comply with Section 319 of public law 101-121, which .generally prohibits recipients of federal contracts, grants or loans from using appropriated funds for lobbying the executive or the legislative branches of the federal government in connection with a specific contract, grant or loan. Accordingly, PAHC hereby certifies to the best of its knowledge and belief, that: (a)No federal appropriated funds have been paid or will be paid, by or on behalf of PAHC, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, or the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan, or cooperative agreement; and (b)If any funds other than federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this federal contract, grant, loan or cooperative agreement, PAHC shall complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying" in accordance with its instructions. 980126 syn 0071358 3 (14)Comply with the Age Discrimination Act of 1975, as amended, which states that no persons in the United States shall, on the basis of age, be denied the benefits of, or be subjected to discrimination under, any program or activity receiving federal financial assistance. (15)Comply with Section 504 of the Rehabilitation Act of 1973, which prohibits discrimination against people with disabilities in any federally assisted program. (16)Comply with the Americans with Disabilities Act of 1990, as amended, and implementing regulations when published. (17)Transfer to City any CDBG funds on hand, and any accounts receivable attributable to the use of CDBG funds, at the time of expiration of this Agreement. In addition, PAHC shall ensure that any real property under PAHC’s control that was acquired or improved in Whole or in part with CDBG funds in excess of. $25,000 is either: (a) (b) used to meet one of the national objectives in 24 CFR 570.208 until five years after expiration of this Agreement, or for such longer period of time as determined appropriate hereunder by City; or is disposed of in a manner which results in City being reimbursed in the amount of the then current fair market value of the property less any portion thereof attributable to expenditures of non-CDBG funds for acquisition of, or improvement to, the property. 980126 syn 0071358 4 Attachment B ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR THE FISCAL YEAR 1997-98 TO PROVIDE AN ADDITIONAL APPROPRIATION FOR ’PRE-DEVELOPMENT COSTS ASSOCIATED WITH THE ACQUISITION OF THE SHERIDAN APARTMENTS BY THE PALO ALTO HOUSING CORPORATION WHEREAS, pursuant to the provisions of Section 12 of Article III of the Charterof the City of Palo Alto, the Council on June 23, 1997 did adopt a budget for fiscal year 1997-98; and WHEREAS, for 1997-98 the City Council identified the preservation and rehabilitation of the Sheridan Apartments as a priority project for Community Development Block Grant (CDBG) New Housing Development funds; and WHEREAS, on October 21, 1997, the Finance Commi~ttee adopted a motion to continue to reserve $1,160,249 in CDBG Housing Development funds, until at least February I, 1998, to be used for assistance in the acquisition and rehabilitation of the Sheridan Apartments, pending the outcome of possible purchase negotiations; and WHEREAS, on January 13, 1998, the Palo Alto Housing Corporation (PAHC) obtained a letter of intent from the property owners to purchase the Sheridan Apartments,-and it is expected that a purchase agreement will be executed by March. 15, 1998; and WHEREAS, PAHC has requested financial assistance with the pre- development costs such as physical inspections, costs related to preparation of tax credit and financing applications, and a portion of the cost of a deposit, for a total request of $145,500; and WHEREAS, the City Council is asked to approve the use of the CDBG New Housing Development funds for the pre-development expenses; and WHEREAS, City Council authorization is needed to amend the 1997-98 budget as hereinafter~set forth. NOW, THEREFORE, the Council of the City of Palo Alto does ORDAIN as follows: SECTION I. The sum of One Hundred Forty-Five Thousand and Five Hundred Dollars ($145,500) is transferred to the project for pre- development expenses associated with acquisition and rehabilitation of the Sheridan Apartments, being initiated by the Palo Alto Housing Corporation, and the CDBG New Housing Development funds are correspondingly reduced. SECTION 2. This transaction will reduce the CDBG New Housing Development Fund from $1,160,249 to $1,014,749. SECTION 3. As specified .in Section 2.28.080(a) of the Palo Alto Municipal Code, a two-thirds vote of the City Council is required to adopt this ordinance. SECTION 4. Approval of the pre-development funding agreement is not an action subject to the California Environmental Quality Act because it can be seen with certainty that there is no possibility the project will have a significant impact on the environment. SECTION 5. As provided in Section 2.04.350 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST:APPROVED: City Clerk Mayor APPROVED AS TO FORM:City Manager City Attorney Acting Director, Administrative Services Department Director of Planning and Community Environment ~ ~ ":’~’k Attachment -PALO ALTO HOUSING 540 Cowper Street ¯ Suite 201 ¯ Palo Alto, CA 94301 ¯(415) 321-9709 ¯Fax (415) 321-434l January 26, 1998 June Fleming, City Manager City of Palo Alto P. O. Box 10250 Pato Alto, CA 94303 Re: Pre-Development Agreement for Acquisition of Sheridan Apartments Dear June: I am happy to inform you that the Palo Alto Housing Corporation (PAHC) and Sheridan Associates have reached an agreement about general terms and conditions for PAHC’s acquisition of the Sheridan Apartments at 360 Sheridan Avenue. We are in the process of finalizing a purchase agreement and beginning to schedule necessary inspections, appraisals, and loan applications. In order to make financing applications by May 1998, we must move ahead as rapidly as possible with necessary due diligence. City staffhas been very cooperative in getting our request for pre-development funds prepared for City Council action. I am writing to request that the agreement and budget ordinance to provide funds to PAHC for expenses related to this acquisition be agendized for the Council’s earliest possible meeting so that they can be approved and funds made available for immediate use. We appreciate the City’s great interest in this project. We hope to move quickly to accomplish the desired result. Sincerely, PALO ALTO HOUSING CORPORATION Marlene H. Prendergast~~ Executive Director