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HomeMy WebLinkAbout1998-10-26 City Council (10)City of Palo Alto City Manager’s Report TO: FROM: HONORABLE CITY COUNCIL CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT 7 AGENDA DATE: OCTOBER 26, 1998 CMR:400:98 SUBJECT:AUTHORIZATION TO SUBMIT APPLICATION FOR FY 1998 FEDERAL HOME FUNDS TO THE STATE DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT FOR THE SHERIDAN APARTMENTS PROJECT RECOMMENDATION .Staff recommends that Council approve the attached resolution, which authorizes the submittal of an application for up to $835,000 in FY 1998 Federal HOME funds, for the Sheridan Apartments project, to the California Department of Housing and Community Development and authorizes the_ City Manager, or her designee~ to execute the application, the certifications and the standard grant agreement and any amendments thereto on behalf of the City. BACKGROUND " .... ......... The HOME Program was established by the National Affordable Housing Act of 1990. The City does not qualify as an entitlement jurisdiction under the U~ S, Department of Housing and Urban Development’s (I-IUD) allocation formula. However;the City is eligible to apply for grants from the State on a competitive basis. For the 1998 ~ding cycle, $30 million is available on a statewide basis; however, after the required 15 percent set, aside for a specific type of nonprofit called a Community Housing Development Organization. or CHDO, the pool of funds available to local jurisdictions is $25.5 million. Applications are due November 2, 1998 and, by State regulation, awards must be announced within 80 days; or by January 21, 1999. The City previously received a$1 million grant of FY 1992 HOME funds and successfully used the entire award for a portion of the Barker Hotel funding. Since the Barker Hotel project award, the HOME grant application process has become extremely competitive. The State has established criteria favoring rural and high poverty areas. For anapplication from Palo Alto to be competitive, the application must propose a project that can score highly on its feasibility and readiness criteria, The project must be ready to CMR:400:98 Page 1 of 3 proceed immediately and have all other financing in place. The Sheridan Apartments acquisition, sponsored by the Palo Alto Housing Corporation (PAHC), should score well under these measures and make a competitive application. Since PAHC does not qualify as a CHDO, and thus cannot apply directly to the State, the City must submit the application. On May 18, 1998, Council approved a Budget Amendment Ordinance which, with previously approved funds, authorized up to $2.5 million in CiU financing for the Sheridan project. The City’s $2.5 million funding commitment is composed of $825,801 in Residential Housing In-Lieu funds .and$1,674,199 in Community Development Block Grant (CDBG) funds. Since last May, PAHC applied for, and received, an award of State and Federal Low Income Housing Tax Credits for the Sheridan. PAHC has also finalized the project’s first mortgage financing, which is an FHA-insured loan. A full report on the Sheridan project’s costs and fmancing, together with proposed loan documents and funding agreement, will be scheduled in the near future for Council action. DISCUSSION Staff proposes to submit an application for $835,000 in HOME funds for Sheridan project costs. Of the request, $10,000 would be used for City staff administration of the HOME grant and the project and $825,000 would be used for project costs. While it is possible to apply for up to $1 million, limiting the grant request to $835,000 avoids triggering the Federal prevailing wage requirement that would, in turn, increase rehabilitation .and administration costs. If the City is awarded HOME funds, the $825,000 in project funds would b.e used to replace the City Residential Housing In-lieu funds previously committed to the Sheridan. This would then free up those funds for other housing projects. To comply with requirements of the tax credit program, PAHC must close escrow on the acquisition of the Sheridan Apartments by mid-December of this year. The HOME funds, if awarded, will not be available until about April 1999, because a grant agreement between the City and the State must be prepared and executed before any funds are expended. In order to utilize HOME funds for the Sheridan, the portion of the City’s loan funded from the Residential Housing In-Lieu funds will be provided as a bridge financing loan with the housing in-lieu funds to be replaced with HOME funds, provided the City receives the HOME grant. If the City does not receive the HOME grant, then the housing in-lieu funds will remain as part of the Sheridan project’s permanent funding. RESOURCE IMPACT An award of HOME funds Will have a positive impact on the City’s financial resources to meet its housing objectives. The HOME .funds will be used to replace the Residential Housing In-Lieu funds already committed to the Sheridan and thus will allow the City to support a greater number of housing projects than possible without the availability of a HOME grant. Additionally, the $10,000 requested for grant administration costs will cover the additional stafftime related to the use of HOME funds in the Sheridan project. CMR:400:98 Page 2 of 3 POLICY IMPLICATIONS This action does not involve any change to existing City policies. Submittal of an application for HOME funds would implement Program H-28 of the Housing Element of the Comprehensive Plan which supports seeking state and Federal funding for affordable housing. TIMELINE The following milestones are key steps in the Sheridan project and the HOME grant process: o November 2, 1998: HOME Application Due at State ¯Early November: Council Action on Sheridan Loan Documents ¯Mid-December: Acquisition of Sheridan Apartments by PAHC ¯January 1999: Rehabilitation of Sheridan Begins °January 21, 1999: Deadline for State to Announce HOME Grant Awards °April 1999: HOME Grant Agreement Executed (if award received) and Funds Could Be Drawn Down by City o May 1999: Sheridan Rehabilitation Completed ENVIRONMENTAL REVIEW The application for a grant is not an action subject to the Califomia Environmental Quality Act (CEQA) or the National Environmental Policy Act (NEPA). Environmental review will be conducted prior to obligating the HOME grant funds to the Sheridan project. ATTACHMENTS A. Draft Resolution Authorizing Application for HOME Funds PREPARED BY: Catherine Siegel, Housing Coordinator DEPARTMENT HEAD REVIEW: G. EDWARD GAWF Director of Planning and Community Environment CITY MANAGER APPROVAL: HARRISON Assistant City Manager CC:Palo Alto Housing Corporation CDBG Citizens Advisory Committee CMR:400:98 Page 3 of 3 Attachment A RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO’ALTO AUTHORIZING APPLICATION FOR FUNDING UNDERTHE HOME INVESTMENT PARTNERSHIPS PROGRAM WHEREAS, on August 28, 1998 the California Department of Housing and Coramunity Development. (~HCD")" issued a Notice of Funding Availability (~NOFA") for the Home Investment Partnerships Program ("HOME program"), and is authorized to approve funding allocations which will be made available directly through the United States Department of Housing and Urban Development (’[HUD") to be used for the purposes set forth in Title II of.the Cranston- Gonzalez National Affordable Housing Act of 1990, the implementing regulations set forth in Title 24 of the Code of Federal Regulations, Part 92, and Title 25 of the California Code of Regulations, commencing with~Section 8200; and WHEREAS, the City of Palo Alto, a chartered city and a municipal corporation of the State of California, wishes to submit an application for and receive an allocation of HOME funds; NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: ~. In response to the NOFA, the City Council hereby authorizes the City of Palo Alto to submit an application to HCD for funding under, the HOME program and request a funding allocation of up.to Eight Hundred and Thirty-five Thousand Dollars ($835,000.00) for acquisition and rehabilitation of Sheridan Apartments, an existing 57-unit rental housing facility located at 360 Sheridan Avenue inthe City of Palo Alto, and for associated administrative costs. ~. If the application for funding is approved, the City of Palo Alto by its City Council hereby agrees to use the HOME funds for eligible activities in the manner presented in the application as approved .by HCD and in actordance with the implementing regulations cited above. The City. Council also. .authorizes the execution of any and all other instruments necessary or required by HCD or HUD for participation in the HOME program. SECTION 3. The City Council hereby authorizes the City Manager, or her designee, to execute in the name of the City of Palo Alto the application, the Standard Agreement, as approved as to form by the City Attorney, and all other documents required by HCD or HUD for participation in the HOME program, and any amend- ments thereto. ~. The City Clerk is hereby directed to prepare a certified copy of this resolution to be submitted to HCD with the 981014 V~0090044 application for HOME funds. ~. The action taken hereby does not constitute a project for purposes of the California Environmental Quality Act ("CEQA"), therefore, no environmental assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST:APPROVED: City Clerk APPROVED AS TO FORM: Mayor Senior Asst. City Attorney City Manager Director of Planning and CommunityEnvironment Director of Admin. Services 2981014 v~fO090044