HomeMy WebLinkAbout1997-06-02 City Council (27)TO:
City of Palo Alto
City Manager’s Report
HONORABLE CITY COUNCIL 13
FROM:
AGENDA DATE:
CITY MANAGER
June 2, 1997
DEPARTMENT: Planning and
Community Environment
CMR:263:97
SUBJECT:BUDGET AMENDMENT. -ORDINANCE AND FIRST
AMENDMENT TO AN AGREEMENT WITH MID-PENINSULA
HOUSING COALITION TO PROVIDE ADDITIONAL FUNDS
FOR THE DEVELOPMENT OF THE PAGE MILL COURT
APARTMENTS FOR PERSONS WITH DEVELOPMENTAL
DISABILITIES, 2700 ASH STREET
REQUEST
Council action is requested to adopt a Budget Amendment Ordinance and approve
Amendment Number One to the agreement with Mid-Peninsula Housing Coalition (MPHC)
to provide additional funds for construction and other expenses for the development of the
Page Mill Court Apartments Project at 2700 Ash Street. The Budget Amendment
appropriates $180,400 in Commercial Housing In-Lieu funds, which is in addition to the
$756,000 loan previously provided by the City.
RECOMMENDATIONS
Staff recommends that the Council:
1)
)
Adopt the attached Budget Amendment Ordinance to appropriate an additional
$180,400 in Commercial Housing In-Lieu funds to the Page Mill Court Apartments
Project.
Approve the attached Amendment Number One to the Agreement (with its attached
form of promissory note and deed of trust) between the City of Palo Alto and Mid-
Peninsula Housing Coalition providing additional funds for construction and other
development costs and including other changes related to the additional funding and
federal requirements.
CMR:263:97 Page 1 of 5
3)Authorize the City Manager to execute the agreement in substantially similar form,
and direct the City Manager to administer the provisions of the agreement and to
execute any other documents required to close the transaction for the construction
funding for the 2700 Ash Street project, including an assignment and assumption
agreement and a required subordination agreement with the federal Department of
Housing and Urban Development (HUD).
POLICY IMPLICATIONS
The actions recommended in this staffreport are consistent with the City’s adopted housing
program objectives and with previous Council actions in support of MPHC’s efforts to
develop permanent rental housing for adults with developmental disabilities in Palo Alto.
EXECUTIVE SUMMARY
¯MPHC, the project sponsor and developer, has requested $180,400 in additional subsidy
funds, beyond the $756,000 provided in the funding .and loan agreement approved by
Council on September 16, 1996, for the 24-unit apartment project for.persons with
developmental disabilities at 2700 Ash Street. With this additional funding, the City’s
contribution will equal $936,400, with $431,000 from Community Development Block Grant
(CDBG) funds and $505,400 from the City’s Commercial Housing In-Lieu fund. Overall,
the project budget has increased by about $439,000 (or 14 percent) from MPHC’s projections
last fall when the City loan was approved by Council. MPHC proposes to cover this gap by
securing an increase in the HUD Section 811 capital subsidy of at least $234,000, using the
additional $25,000 in CDBG funds awarded by Los Altos Hills last winter and requesting the
remaining $180,400 from the City of Palo Alto. About $113,400 of MPHC’s request is for
actual cost increases, principally in hard construction costs, but also in other categories such
as fees and engineering. The remaining $67,000 will be used to increase the project’s
contingency budget from about three percent to six percent of construction costs. Any funds
not actually used for documented project expenses must be repaid to the City after the
project’s completion, pursuant to the terms of the City funding agreement.
A detailed explanation of the reasons for the budget increases, and a summary of MPHC’s
efforts to reduce costs and seek other funding sources, are attached to this report. The key
reasons .are:
¯higher construction bids, in excess Of inflation, due to an upsurge in building
activity and to material shortages, especially in rough carpentry and concrete;
¯a new HUD labor standards policy interpretation which results in the elimination
of small, generally less expensive, subcontractors from federally funded projects;
¯ the imposition of school fees after the project budget and funding was set;
- additional utility infrastructure engineering and construction costs;
¯changes resulting from HUD and City plan check comments and requirements; and
CMR:263:97 Page 2 of 5
¯insufficient allowances in the original budget for City permits, transaction costs
such as title, escrow, transfer taxes and marketing and furnishings.
MPHC has filed a formal request with the Palo Alto Unified School District for a waiver of
the school fees and the matter has been agendized for the Board’s meeting of June 3, 1997.
MPHC is continuing to negotiate with HUD on the labor standards interpretation which
eliminates the small, sole proprietor subcontractors from most federally funded construction.
The prior and revised development budget and sources of funds are compared below. This
information is not final until the firm commitment is received from HUD (expected in early
June) and other outstanding issues resolved, such as the HUD questions related to
subcontractor selection. The numbers are rounded.
BUDGET COMPARISONS: PAGE MILL COURT APARTMENTS
Category
Site Acquisition
Hard Construction, Site Improvs.
Architecture, Engineering, Soils,
Consultants
Fees, Permits, Legal, Escrow,
Transaction, Audit, Marketing,
Furnishings, Sponsor Capital
Contingency
Sponsor Developer Fee
TOTAL BUDGET
HUD Section 811 Grant
City of Palo Alto
Other Jurisdictions
TOTAL SOURCES
8/96 Estimates
$1,100,000
$1,726,000
$20.0,000
$98,500
$50,000
$60,000
$3,234,50O
$2~140,500
$756,000
$338,000
$3,234,500
4/97Revised
$1,093,250 (aetu~)
$2,014,750
$220,000
$168,700
$117;300
$60,000
$3,674,000
$2,374,600
$936,400
$363,000
$3,674,000
Efforts to Seek Funding from Other Sources: At staff’s suggestion, MPHC previously sought
and obtained $363,000 in FY 96,97 CDBG funds from the jurisdictions of Santa Clara
County, Sunnyvale, Los Altos and Los Altos Hills for site acquisition and predevelopment.
(MPHC did not originally approach Mountain View, since MPHC had just received two large
commitments for housing projects utilizing their entire housing budget.) This was the first
CMR:263:97 Page 3 of 5 ~
time, within recent years, that other jurisdictions have provided financial support for a
housing or community development activity located within Palo Alto. Due to HUD’s
methodology for calculating the exact amount of the Section 811 capital grant, the additional
funds now needed must come from non-federal sources, as any additional federal funds will
reduce the Section 811 grant. MPHC recently contacted all five jurisdictions to determined
if any more funding could be obtained, at this time, to assist with the budget gap. The only
two jurisdictions with local (non-federal) housing funds both restrict those funds to projects
within their city boundaries. Thus, only federal funds (CDBG and HOME) could possibly
be obtained. MPHC was informed that all five jurisdictions’ federal housing funds were
fully committed to other activities.
MPHC has also sought private foundation support, both for capital costs and equipment.
$4,000 has been awarded for computer equipment for the community building from local
foundations. MPHC also applied to the Valley Foundation for a $50,000 grant for-
construction costs of the project’s community building. Although the proposal met the
foundation’s criteria, the grant was turned down in early May. MPHC .has committed to
reapplying to the Valley Foundation for the September 1997.application round and is also
investigating other foundation grant possibilities. Other than the somewhat unlikely prospect
of greater foundation funding, there are no other sources of housing development subsidies
known to staffthat meet these criteria: 1) available within Palo Alto; 2) non-federal sources,
and 3) funding terms compatible with the HUD Section.811 regulations.
FISCAL IMPACT
Total development costs are now budgeted at $3.674 million, including land. Just under two-
thirds of the total cost is expected to be covered by the HUD Section 811 funds. Slightly
more than one-third ($1.3 million) of the development costs will come from Palo Alto and
the other local jurisdictions. After allocating the additional $180,400 to this project, the
remaining balance in:the Commercial Housing In-Lieu Fund will be approximately
$480,000.
ENVIRONMENTAL ASSESSMENT
Because federal funds were provided for this project, an environmental assessment under the
National Environmental Policy Act (NEPA) was completed by staff on July 11, 1996 and
approved by HUD on September 12, 1996. A negative declaration under the California
Environmental Quality Act (CEQA) was completed on April 10, 1996 and certified by
Council on June 24, 1996.
STEPS FOLLOWING APPROVAL
MPHC is proceeding simultaneously with the processing of the HUD financing commitment,
the building permit review process, this request for additional City funding and finalizing the
construction contract documents in order to complete the closing of all construction funding
CMR:263:97 Page 4 of 5
by mid-June. Construction will begin immediately after the HUD closing, with completion
expected by April 1998.
ATTACHMENTS
1. Budget Amendment Ordinance
2. Amendment Number One to Agreement Between the City of Palo Alto and Mid-
Peninsula Housing Coalition
3. Letter dated May 22, 1997 from Mid-Peninsula Housing Coalition
PREPARED BY: Catherine Siegel, Housing Coordinator
DEPARTMENT HEAD REVIEW:
KENNETH R. SCHREIBER
Director of Planning and
Community Environment
CITY MANAGER APPROVAL:
Manager
CC w/attachments:
CC w/o attachments:
Mid-Peninsula Housing Coalition
City of Sunnyvale, Housing Division
County of Santa Clara, Housing & Community Development Program
CDBG Citizens Advisory Committee
Palo Alto Parent Support Group c/o Start Parry
Human Relations Commission
Office of Human Services
CMR:263:97 Page 5 of 5
ORDINANCE NO.
Attachment 1
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING’ THE BUDGET FOR THE FISCAL YEAR 1996-97 TO
PROVIDE AN ADDITIONAL APPROPRIATION FOR HOUSING FOR
PERSONS WITH DEVELOPMENTAL DISABILITIES AT 2700 ASH
STREET
WHEREAS, pursuant to the provisions of Section 12 of Article
III of the Charter of the City of Palo Alto, the Council on June
24, 1996 did adopt a budget for fiscal year 1996-97; and
WHEREAS, on September 16, 1996, Council approved an additional
appropriation of $711,000 to the Mid Peninsula Housing Corporation
(MPHC) for site acquisition and development of housing for persons
with developmental disabilities; and
WHEREAS, the project budget has increased substantially due to
an increase in hard construction costs, changes in HUD subcontractor
requirements, and unexpected costs for impact fees and design; and
WHEREAS, while MPHC has revised the project to reduce costs ~nd
has sought and received additional funding from HUD, $180,400 in
additional funds is still required to overcome the budget shortfall;
and
WHEREAS, in order to stay. on the development schedule, MPHC has
requested the additional $180,400 from the City of Palo Alto, having
sought, and been denied additional funding from local foundations and
other local jurisdictions; and
WHEREAS, ther~ are sufficient funds available in the Commercial
Housing In. Lieu Fund, and such an expenditure is in conformance with
adopted Housing Reserve Guidelines; and
WHEREAS, City Council .authorization is needed to amend the
1996-97 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 Eighty Thousand and Four
Hundred Dollars ($180,400) is hereby appropriated to non-salary
expenses in the Commercial Housing In Lieu Fund, and the Commercial
Housing In Lieu Fund is correspondingly reduced.
SECTION 2. This transaction will reduce the Commercial Housing
In Lieu Fund Reserve balance from $664,214 to $483,814.
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. An environmental assessment under the National
Environmental Policy Act (NEPA) was completed by staff on July ii,
1996. A notice of finding ~f no significant impact on the
environment was published on August 7, 1996. The public comment
period expires on September 9, 1996. A negative declaration under
the California Environmental Quality Act (CEQA) was completed on
April I0, 1996 and certified by the City Council on June 24, 1996.
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
Senior Asst. City Attorney Acting Director, Administrative
Services Department
Director of Planning
Community Environment
and
Attachment 2
AMENDMENT NO. ONE TO AGREEMENT
BETWEEN THE CITY OF PALO ALTO AND
MID-PENINSULA HOUSING COALITION
This Amendment No. One to Agreement ("Agreement") is
¯ entered into , by and between the CITY OF PALO
ALTO, a chartered cityand a municlpal Corporation of the State of
California ("CITY") and MID-PENINSULA HOUSING COALITION, a
California nonprofit public benefit corporation located at 658 Bair
Island Road, Suite 300, Redwood City, California 94063 ("MPHC").
RECITALS:
WHEREAS, on September 16, 1996, the Agreement was entered
into between the CITY and MPHC in connection with the construction
and operation of a multifamily residential housing facility
("Project") by MPHC and the loan of funds by the CITY to MPHC for
purposes associated with such housing facility; and
WHEREAS, the Project’s budget has increased substantially
since September 1996, due to circumstances beyond the control of
MPHC; and
WHEREAS, all funds necessary to complete the Project must
be committed and made available prior to the initial closing of the
HUD Section 811 capital advance and the start of construction; and
WHEREAS, MPHC has .requested, and "the CITY hereby agrees
to provide,-an increase in the CITY loan in the amount of ~180,400;
and o
WHEREAS, the partie’s wish to amend the Agreement;
NOW, THEREFORE, ~in consideration of the covenants, terms,
conditions, and provisions of this Amendment No. One, the parties
agree:
follows:
SECTION i.Subsection 3.3.i is hereby added to read as
"3.3.1 Immediately prior to the initial closing of
the HUD Section 811 Capital Advance Grant for the construction of
the Project, the CITY .will provide, by negotiable instrument
payable to MPHC or to escrow, the amount required by HUD from the
additional CITY loan funds, up to, but not exceeding, the sum of
one hundred eighty thousand four hundred dollars ($180,400). MPHC
shall, submit a written request to CITY for the referenced funds
together with a copy of the HUD firm commitmentapproval, including
the final HUD-approved Project budget. CITY funds that are not
required by HUD to be made available for the Section 811 initial
closing shall be retained by CITY and shall be made available for
disbursement to MPHC for eligible Project costs in accordance with
970528 syn 0071222
1
Subsection 4.2.2 until the construction of the Project, performance
of the HUDorequired cost certification audit, and completion of the
final accounting process as described in Section 4.2. To the
extent permitted ~by HUD, one-half of the developer fee in the
amount of thirty thousand dollars ($30,000) shall be retained by
CITY and sh~ll be made payable to MPHC upon the issuance of the
first certificate of occupancy for the Project."
follows:
SECTION 2.Subsection 4.2.2 is hereby amended to read as
"4.2.2 Eligible uses of the Commercial Housing
In-lieu Funds include excess costs not covered by the
Section 811 Capital Advance Grant funds, such as legal
fees, architect and engineering costs, closing costs,
CITY’s title insurance, off-site improvements, "costs not
attributable" to dwelling use as defined ~in the HUD
regulations and determined by HUD, construction change
orders, environmental and site mitigation andmonitoring,
the cost of required local fees, funding a replacement
reserve account required by HUD for maintenance of excess
amenities, a sponsor/developer fee to be paid to MPHC in
the maximum amount of $60,000 and any other reasonable
and necessary hard construction costs approved in advance
by CITY. Eligible uses of CITY funds shall not include
the HUD-required sponsor’s minimum capital investment."
follows:
SECTION 3.Subsection 4.2.4 is hereby added to read as
"4.2.4 MPHC shall use reasonable efforts on an
~on-going basis to seek and obtain additional funding from
various sources% including from HUD (in accordance with
Section 811 regulations and procedures)- and from
philanthropic foundations to defray the capital
improvement costs of the Project and the costs of
furnishings, fixtures and equipment for the Project."
SECTION 4. EXHIBIT "B" entitled "Promissory Note" is
hereby replaced by new EXHIBIT "B" entitled "Amended and Restated
Promissory Note". EXHIBIT "C" entitled "Short Form Deed of~Trust" is
hereby amended by that document entitled "Modification Agreement".
EXHIBIT "D" entitled "Stated Uses of CDBG and Commercial Housing In-
lieu Funds" is hereby replaced by new EXHIBIT "D" entitled "Revised
Development Budget and Source of Funds". EXHIBITS "B", "C" and "D",
as amended, are attached ~hereto and are incorporated in full by
this reference.
SECTION 5. Except as herein modified, all other
provisions of the Agreement, including any exhibits and subsequent
amendments thereto, shall remain in full force and effect.
970528 syn 0071222
2
IN WITNESS WHEREOF, the parties have by their duly
authorized representatives executed this Amendment on the date
first above written.
ATTEST:CITY OF PALO ALTO
City Clerk Mayor
APPROVED AS TO FORM:
Senior Asst. City Attorney
APPROVED:
City Manager
Director of Planning and
Community Environment
Acting Director of
Administrative Services
Risk Manager
Attachments :
EXHIBIT "B" :
EXHIBIT "C" :
EXHIBIT "D" :
Amended & Restated Promissory Note
Modification Agreement
Revised Development Budget and Sources of Funds
97052~ syn 0071222
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code § 1189)
STATE OF
COUNTY OF
)
)
)
On
.notary public
, before me, the undersigned, a
in and 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.
970528 syn 0071222
4
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code § 1189)
STATE OF
COUNTY OF
)
)
)
On f~~ /~W7 , before me, the undersigned, a
notary publiq in# and for said County, personally appeared
personally know~~ t4 Wme (or ~proved. to me on the b&sis ..... of
satisfact_or_r_y evidence) to be the person(~) ~ o~ name(~) is/a~
subscribed to the within instrument, and acknowledged to me that
~/she/th~y executed the same in h~/her/th~ir authorized
capacity(is), and that by h~/her/th~ir signature(~ on the
instrument .the person(~), or the entity upon behalf of which the
person(@) acted, executed the instrument.
WITNESS my hand and official seal.
~m. #1052881
3ALIFORNtA,~3OUNTYI’,~,an’-h 5,1999
970528 syn 0071222
5
Exhibit
AMENDED AND RESTATED
PROMISSORY NOTE
Secured by
Short Form Deed of Trust and Assignment of Rents
as modified
.$936,400 Palo Alto, California
, 1997
FOR VALUE RECEIVED, the undersigned, Mid-Peninsula Housing
Coalition, a California nonprofit public benefit corporation
("MPHC"), hereby promises to pay to the order of the City of Palo
Alto, a California municipal corporation ("CITY"), the principal
sum of nine hundred and thirty-six thousand four hundred dollars
($936,400) .
I. MPHC’s Obliqations. This amended and restated promissory
note ("Amended Note") evidences the obligation of MPHC to pay to
CITY all sums due hereunder. MPHC agreesto use the funds loaned
to MPHC ("Loan") under the "Agreement between City of Palo Alto and
Mid-Peninsula Housing Coalition Concerning the City’s Funding of the
Construction and Development of a Rental Apartment Building to be
Used as Rental Housing for Persons with Developmental Disabilities"
("Agreement") and Amendment No. One to Agreement ("Amendment") and
this Amended Note for the development of a multifamily residential
housing building for very-low income persons with developmental
disabilities, to be commonly known as Page Mill Court ("Project"),
as more fully described ~n Planned~ Community (PC) Zone Ordinance
Number 4354, adopted on June 24, 1996, and m%de effective on
July 8, 1996. The Project is to be constructed at the southwest
corner of Page Mill Road and Ash Street in the city of Palo Alto
("Property’,), the~le~al description of which is more specifically
described in Exhibit "A" to the D~ed of Trust, as amended by that
Modification Agreement, securing this Amended Note.
2. Interest. The outstanding principal balance shall bear
interest at the simple rate of three percent (3%) per year until
the Loan is paid in full. Notwithstanding any other provisions of
this Amended Note, or any instrument securing the obligations of
MPHC under this Amended Note, the payment of any sums by MPHC
pursuant to the terms of Sections 2 and 6(e) hereof shall not
result in the payment of interest, which will exceed the amount
that CITY may .legally charge under the laws of the State of
California. Except as provided otherwise herein, no payments of
principal and interest are required during the term of this Amended
Note.
3. Term. The term of this Amended Note shall commence on the
date that the Deed of Trust and Modification Agreement securing
this Amended Note are recorded, and shall continue for the period
of time set forth in section 2 of the executed and recorded Capital
Advance Use Agreement ("Use Agreement") for the Project by MPHC and
the united States Department of Housing and Urban Development
("HUD"), unless earlier terminated as provided in the Agreement or
the Use Agreement, Prior to the recordation of the Use Agreement,
if the initial closing of the Section 811 Capital Advance Grant for
the Project does not occur on or before December 31, 1998,
including any extension thereof approved by CITY’s project manager,
this Note shall be immediately due and payable.
4.Terms of Payment.
(a) Prior to the end of the Term, and provided that no
Event of Default has occurred that remains uncured, the parties
shall attempt to negotiate the terms under which CITY will waive
MPHC’s obligation to repay the outstanding principal balance of the
Loan and accrued interest. Any waiver by CITY shall take into
consideratfon the period of time following the expiration of the
Term that MPHC will continue to rent the Project to very-low income
persons with developmental disabilities. Subject to Section 4(b)
hereof, upon the occurrence of any uncured Event of Default,
following any applicable notice and cure periods contained herein,
the entire amount advanced hereunder, .together with interest
thereon, shall, become immediately due and payable.
(b) CITY and MPHC acknowledge that the operation of the
Project for very-low income persons with developmental disabilities
in accordance with the Section 811 Program contemplates that MPHC
will receive rental assistance payments under a Project Rental
Assistance Contract between MPHC and HUD. In the event HUD
terminates, discontinues, does not renew or substantially reduces
the amount of the rental assistance payments through no fault of
MPHC and after MPHC has exercised its good faith efforts and due
diligence to have the r4n~al assistance payments continued, renewed
or maintained, and the rental assistance payments or operating
subsidies are not funded by some other federal, state or local
program or entity~ ~ITY acknowledges that .it may no longer be
economically f4asible for MP~C to rent the .Projec£ to very-low
income persons with developmental disabilities.
In such event MPHC may request a partial or full waiver
of the income, rent and/or use restrictions set forth in the
Agreement referred to in Section 1 hereof or otherwiseimposed by
CITY if a waiver of the restrictions is necessary to maintain the
Project as, or return the Project to, an Economically Feasible
Project. MPHC shall request the waiver, in writing, and shall
submit to CITY such information and documentation as CITY may
reasonably request in order for CITY to determine, in its
reasonable judgment, (i) whether the waiver is necessary, (ii) the
number of units to be affected by the waiver, (iii) the number of
years of the~duration of the waiver, and (iv) whether to approve or
disapprove the waiver.
For the purPoses of this Section 4(b), an "Economically
Feasible Project" shall mean a Project which is meeting its
operating expenses (including expenses necessary to maintain the
Project in good and tenantable condition), taxes and assessments,
debt service due o~ loans secured by the Property, reasonable
management fees and reasonable reserve requirements, and is
970528 syn 0071223
2
otherwise in compliance with the terms of all loans secured by the
Property and any regulatory agreement between MPHC and any federal
state or local agency.
If, in the event CITY and MPHC cannot agree upon the
terms of them waiver(s), CITY and MPHC agree that MPHC shall have
the right ~to exercise the following options before CITY can declare
an Event of Default:
(i) MPHC shall~havean additional six (6) months
from the date a party hereto informs the other party, in writing,
that it is unable to agree on the proposed terms of a waiver to
obtain substitute financing sufficient to pay the outstanding
principal and interest due on the Note; and
(ii) In the event MPHC is unable to obtain
substitute financing with terms reasonably acceptable to MPHC and
MPHC’s other mortgage lenders, within three (3) months thereafter,
if MPHC so elects, MPHC shall for one dollar ($i.00) execute and
record a grant deed and bill of sale to transfer title to the
Project and the real and personal property to CITY or CITY’s
designee ~subject to all then existing liens and encumbrances.
Effective upon the conveyance of the Property and the Project to
CITY, CITY or CITY’s designee shall assume the mortgage loans
secured by the Property or the Project. MPHC’s decision to convey
the Property and the Project to CITY shall not be deemed to be a
default hereunder or an Event of Default under the Agreement, and
the conveyance shall not be deemed to be a deed in lieu of
foreclosure.
In the event MPHCo does not convey the Project or the
Property to CITY as set forth above and is unable to operate the
Project in acco~d%nc~ with the Agreement referred~.to in Section 1
hereof, CITY may declare an Event. of Default hereunder.
(c) The payments due under this Amended Note shall be
paid in currency of the United States of America, which at the time
of payment is lawful for the payment of public and private debts.
(d). The payments on this Amended Note shall be made or
given to CITY in care of the Revenue Collection Office, City of
Pa!o Alto, 250 Hamilton Avenue, Palo Alto, California 94301, or to
such other place as CITY may from time to time designate°
(e) This Amended Note shall be subject to prepayment,~ in
whole or in part, at any time without premium or other penalty. If
the Project is financed with capital grant funds provided by HUD,
then any prepayment(s) shall be made only with (i) Residual
Receipts, as that term is defined in the Capital Advance Program
Regulatory Agreement ("HUD Regulatory Agreement") between MPHC and
HUD and executed in connection with the Project, and only after
obtaining the prior written approval of HUD, or (ii), funds which
are separate and apart from the Project or the assets or income of
the Project (except Residual Receipts as approved by HUD) o
Prepayment(s) made from Residual Receipts may .be made only after
970528 syn 0071223
3
final closing of the Section 811 Capital Advance Grant provided by
HUD and only after the end of a semi-annual or annual fiscal period
as approved by HUD. In this regard, CITY shall have no claim and
will not later assert any claim for payment against the mortgaged
Property, the proceedsof the Section 811 Capital Advance Grant,
any reserve or deposit required by HUD and deposited ~with HUD or
another in connection with the capital advance transaction, or
against the rents or other income from the mortgaged Property.
5. .Security. This Amended Note shall be secured by a deed of
trust on the Property ("Deed of Trust") and the modification to
Deed of Trust ("Modification Agreement") executed by MPHC in favor
of CITY as the beneficiary.
6. Default.
(a) Subject to Section 4 hereof, any of the following
shall constitute an Event of Default under this Amended Note,
following~any applicable notice and cure periods:
(i) Any failure to pay in full any payment required
under this Amended Note when due;
(ii) Any failure in the performance ~by MPHC of any
material term, condition, provision or covenant set forth in this
Amended Note, the Deed of Trust, Modification Agreement, the
Agreement or Amendment No. One to Agreement; or
(iii) The occurrence of any material default under
any other instrument s@curing the obligations of MPHC under this
Note or under any other promissory notes hereafter issued by MPHC
to CITY.
(b) "Up6n the occurrence of such an E~ent of Default,
CITY shall provide to MPHC w~itten notice of said occurrence and
MPHC shall have fifteen (15) days, or such additional time as may
be reasonably required, to cure. If, after the time provided in
this Section 6(b), MPHC has not cured the default, the entire
unpaid principal balance, together with all other sums then payable
under this Note shall at the option of CITY become immediately due
and payable upon written notice by CITY to MPHC without further
demand.
(c) If an Event of Default shall occur and be
continuing, CITY may pursue all rights and remedies available under
this Note or as may be otherwise available, to CITY, subject to
Section 6(d) below.
(d) Notwithstanding paragraphs (a) and (b) of this
Section 6, and so long as the Section 811 Program is still in
effect as respects the Project and the Property, CITY shall not
declare any Event of Default under this Note without the prior
written approval of HUDo
970528 syn 0071223
4
(e) Upon the occurrence of an Event of Default following
any applicable notice and cure periods contained therein, and
without waiving any other remedy of CITY, interest shall be deemed
to have accrued on the outstanding principal balance of the Loan at
a simple rate of seven percent (7%) per year commencing, on the date
of the Event of Default through the date on which all such funds
are paid to CITY. Capitalized terms used herein and not otherwise
°defined shall have the meanings set forth in the Agreement.
(f) If any default is made hereunder, MPHC promises to
pay reasonable attorneys’ fees and costs and expenses incurred by
CITY in connection with any such default or any other action or
other proceeding brought to enforce any of the provisions of this
Note. CITY’s right to such fees shall not be limited to or by its
representation by staff.attorneys of CITY’s Office of the City
Attorney, and such representation shall be valued at the customary
and reasonable rates for private sector legal services.
7. Waivers.
(a) MPHC expressly agrees that this Amended Note or any
payment hereunder may be extended from time to time with CITY’s
consent, and that CITY may accept further security or release any
security for this Amended Note, all without in any way affecting
the liability of MPHC.
(b) No extension of time for payment of this Amended
Note or any installment hereof made by agreement by CITY with any
person now or hereafter liable for the payment of this Amended Note
shall operate to releaSe.or discharge any liability of the person
liable under this Amended Note, either in whole or in part.
(c) The pbligations of MPHC under this Amended Note
shall be absol~t~ and MPHC waives any and all rights to offset,
deduct or withhold any paymenhs or charges due under this Amended
Note for any reason whatsoever.
(d) ~Any failure of CITY or other holder to exercise any
rights under this Amended Note shall not constitute a waiver of
such rights or of any other rights under this Amended Note.
Nonrecourse note
This Amended Note shall be nonrecourse against MPHC and
its assignees (collectively, the "Maker")° No judgment, or
execution thereof, entered in any action, legal or equitable, on
this Note shall be enforced directly against Maker or any officer,
director or employee of Maker, but shall be enforced only against
the collateral described in the Deed of Trust, and such other or
further security as, from time to time, may be hypothecated for
this Note. The foregoing limitation shall not be applicable in the
event of (a) fraud by Maker or any material misrepresentation made
by Maker to CITY in the CITY Documents, or (b) the sale or transfer
or other conveyance of all or any part of Maker’s interest in the
Project without CITY’s prior written consent. Furthermore, the
970528 syn 0071223
5
foregoing limitation shall not be applicable to the extent of any
loss incurred by CITY due to (a) misappropriation by Maker of any
rents (including, without limitation,the application of rents to
other than operating expenses and debt service), security deposits,
insurance or condemnation proceedings, (b) waste caused by or
permitted by-Maker to the Project, or (c) the presence or release
of any hazardous or toxic substances on or in the Property
.encumbered by the Deed of Trust.
9.Miscellaneous Provisions.
(a) All Notices to CITY or MPHC shall be made in writing
~and shall be deemed to have been given or made if personally
delivered, placed in the United States certified mail, return
receipt requested, postage prepaid, or delivered by courier service
addressed as follows:
To CITY:City ofPalo Alto
Office of City Clerk
250 Hamilton Avenue
Palo Alto, CA 94301
Copy to:City of Palo Alto
Director, Department of Planning
& Community Environment
250 Hamilton Avenue
Palo Alto, CA 94301
To MPHC:Mid-Peninsula Housing Coalition
.658 Bair Island Ro@d, Suite 300
Redwood City, CA 94063 ~
Attention: Executive Director
(b) "Thg t~rms and conditions of this ~mended Note may
not be changed orally, but onl~ by an agreement, in writing, signed
by .the party against whom enforcement of any waiver, change,
modification or~discharge is sought.
(c) This Amended Note shall be governed by and construed
in accordance with the laws of the State of California.
(d) The times of the performance of .any obligation
hereunder shall be strictly construed, time.being of the essence.
(e) In the event that suit is brought by either party,
the .parties agree that trial of such action shall be vested
exclusively in the state courts of California in the City of San
Jose, County of Santa Clara, or in the United States District Court
for the Northern District of California in the City of San Jose.
The prevailing party in any action brought to enforce the terms of
this Agreement or arising out of this.Agreement may recover its
reasonable costs and attorneys’ fees expended in connection with
such an action from the other party.
97052g syn 0071223
6
(f) This Amended Note may be assigned to and assumed by
Mid-Peninsula Page Mill Court, Inc., a Section 501(c) (3) nonprofit
corporation, after its incorporation in California only with the
written consent of CITY, which shall not be unreasonably withheld.
Upon the assumption of this Amended Note by Mid-Peninsula Page Mill
Court, Inc.,. MPHC shall be released from liability hereunder.
I0. Replacement Note. This Note incorporates and
replaces that Promissory Note, dated December 18, 1995, and that
Promissory Note, dated September 26, 1996, in the original
principal amounts of $45,000 and $756,000, respectively, made by
MPHC in favor of CITY. Upon the execution of this Note by MPHC and
the written acknowledgment of CITY below, the Promissory Note,
dated December 18, 1995, and the Promissory Note, dated September
26, 1996, are hereby cancelled and shall have no force or effect.
Mid-Peninsula Housing Coalition, a
California nonprofit public benefit
corporation
Fran Wagstaff
:tor
The undersigned ~CITY, acting through its City Manager,
acknowledges that the $45,000 Promissory Note, dated December 18,
1995, and the $756,000 Promissory Note, dated September 26, 1996,
and referred to in ~ection i0 above are hereby cancelled.
’ Ci{y of Palo Alto
By:
City Manager
970528 syn 0071223
7
Exhibit
RECORDING REQUEST BY &
WHEN RECORDED MAIL TO:
Record at No Fee per Government
Code Section 6103, 27383
City of Palo Alto
¯ Office of City Attorney
250 Hamilton Avenue
Palo Alto, CA 94301
(APN 002-304-010)
(2700 Ash Street)
(Palo Alto, CA)
MODIFICATION AGREEMENT
Short Form Deed of Trust
and Assignment of Rents
This Agreement is made as of June __, 1997, by and among
Mid-Peninsula Housing Coalition, a California nonprofit public
benefit corporation (the "Borrower") and the City of Palo Alto, a
municipal corporation (the "Lender"), in connection with the
following facts:
A. Borrower owns all that real property located in the
City of Palo Alto, CounSy. of Santa Clara, California, described in
the Deed of Trust described below. ¯
B. Borrower is obligated to lender under the following
documents, among 6thers: ¯
(i) Promissory Note dated September 26, 1996, in
the original principal amount of $756,000.00~ payable to Lender,
which note is being amended concurrently herewith to increase the
principal amount to $936,400.00; and
(2) Short Form Deed of Trust with Assignment of
Rents dated September.26, 1996, and~recorded on October i, 1996, as
series no. 13466054 in the Official Records of Santa Clara County
(the "Deed of Trust").
C. Borrower and Lender agree to modify the Deed of
Trust as hereinafter described.
Now, therefore, for valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree
as follows:
i. Borrower and Lender hereby amend the Deed of Trust
by replacing the last paragraph on page 1 with the following:
970528 syn 0071224
1
FOR THE PURPOSE OF SECURING: I. Performance of each
agreement of Trustor set forth in the "Agreement between
the City of Palo Alto and Mid-Peninsula Housing-Coalition
concerning the City’s Funding of the Construction and
Development of a Rental Apartment Building to be Used as
Rental Housing for Persons with Developmental
Disabilities," as amended (the !’Agreement"), incorporated
herein by reference. 2. Payment. of the indebtedness
evidenced by that Amended and Restated Promissory Note
("Amended Note"), and any extensions or renewals thereof,
in the principal amount of $936,400 executed by Trustor
in favor of Beneficiary or order.
2. Confirmation of~ Security Interest. Except as
amended hereinabove, the Deed of Trust remains unchanged and in
full force and effect. Nothing in this Agreement shall affect or
be construed to affect the lien created by the Deed of Trust or the
priority of such lien.
3. Attorney’s Fees; Enforcement. If any attorney is
engaged by either party to enforce or defend any provision of this
Agreement, the prevailing party shall be entitled to costs and
reasonable attorney’s fees.
4. Miscellaneous. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of
California. Any provision of this Agreement which is determined by
a court to be invalid or unenforceable shall be deemed severed from
this Agreement, and the remaining provisions shall remain in full
force and effect as.if’the invalid or unenfQrceable provision had
not been a part hereof. The h~adings used in this Agreement are for
convenience only and shall be disregarded in interpreting the
substantive prqvi~ioDs of this Agreement.
In witness whereo£, ~he parties h~ve caused this
Agreementto be duly executed as of the date first above written.
MID-PENINSULA HOUSING COALITION,
a California Nonprofit Public Benefit
Corporation
By:
Its:
CITY OF PALO ALTO, a Municipal
Corporation
By:
Its:
970528 syn 0071224
2
SUMMARY USES OF FUNDS:
Exhibit D
Site Acquisition
Construction, Off-site work, Site
Improvements, Bonds; Materials
Testing:
Design, Consultants:
Transaction, Holding Costs:
Local Permits & Fees
Furniture
Marketing
Contingency
Sponsor’s Developer Fee
Minimum Capital Investment
TOTAL USES OF FUNDS
$1,093,250
$2,014,750
$220,000
$48,700
$85,000
$15,000
$10,000
$117,300
$60,000
$10,000
$3,674,000
SOURCES OF FUNDS:
Projected HUD Sec. 811 Capital $2,374,600
Advance
City of Palo Alto 936,400
County of Santa Clara 188,000
Town of Los Altos Hills 75,000
City of Sunnyvale 50,000
City of Los Altos 50,000
TOTAL SOURCES OF FUNDS $3,674,000
Attachment 3
May 22, 1997
Honorable Mayor Joseph Huber and
Members of the City Council
City of Palo Alto
P. O. Box 10250
Palo Alto, CA 94303
Mid-Peninsula Housing Coalition
658 Bair Island Road, Suite 300
Redwood City, California 94063
Tel. [415] 299-80(X)
Pax [415] 299-8010
Request for Additional Loan Amount for Page Mill Court Housing Project for
Low-Income Developmentally Disabled Persons
Dear Mayor Huber and Members of the Council:
Attached is an updated memo which outlines our request for an addition to the
City loan previously made for the Page Mill Court housing complex. We are requesting
that the City loan be increased by $180,400 from Commercial Housing In-Lieu funds to
offset some of the additional costs that the project has encountered since we submitted our
projected budget in early Fall of 1996.
We greatly appreciate how supportive the Council and City staff has been of this
project, including the large amount of financial resources contributed as well as your
positive comments during our zoning and architectural review process. We are working
diligently to close our HUD financing and to start construction in late June, hopefully, so
that residents can be living there by next April.
Thank you again for the City’s support and enthusiasm, which have made this
project possible.
Fran W,
Executive Director
enclosure
co: June Fleming, City Manager
Catherine Siegel, Housing Coordinator
e\jesXpa~eity’cou2
.MAY
Date:
Memo to:
From:
May 22, 1997
June Fleming, City Manager
Janet Stone, Project Manager (’~.
Mid-Peninsula Housing Coalition"
Mid-Peninsula Housing Coalition
658 Bair Island Road, Suite 300
Redwood City, California 94063
Tel. [415] 299-8000
Fax [415] 299-8010
Request for Additional Loan Allocation for Page Mill Court
Attached is an update of the summary provided to you 5/5/97 regarding Mid-Peninsula’s
request for an additional loan allocation for the Palo Alto housing development which will
serve developmentally disabled persons. Please note the following:
1) Although we are requesting that the City approve an additional $180,400 from the
Housing In-Lieu Fund, we are continuing to work on ways to keep the City
contribution as low as possiblr~ and may be able to return a portion or all of the
additional amonnt at the end of construction (projected to be March 1998).
2)To keep the City contribution as low as possible, we are:
- seeking from HUD the highest possible amount of capital funding for the project
- requesting from PAUSD a waiver forSchool Impact fees
-applying for foundation support
- lobbying to reverse the HUD Labor Relations policy which negatively impacts
the project costs
3)Other efforts to keep the City contribution as low as possible:
-generated $363,000 from other jurisdictions
-after preliminary construction bids came in, worked with architect and
contractor to achieve $170,000 in value-engineering cost reductions
- negotiated with the Seller (County) some cost-sharing for environmental testing
4) HUD will not close .their capital advance funding for the project (close now anticipated
to occur in early June) without assurance that there are adequate funding sources to cover
project uses. This additional City loan allocation is needed to cover the anticipated gap in
funding sources, based on our current estimate of what the total HUD allocation will be.
We will not know our exact HUD allocation until right before close, and therefore must
ask the City for an additional loan amount at this time.
Snmmary Statement Requesting Additional Loan Amount
t~equest $180,400 additional loan allocation, from In-Lieu Housing Fund.
This amount reflects the maximum amount webe!ieve we would need.
May be able to return a portion or all of the additional amount, at end of construction:
1) if we receive foundation support (we are applying to select foundations)
2) if the final HUD allocation amount is greater than anticipated (impossible to
assess prospects; should know by end of May)
3) if we do not use all of our contingency funds (fair to good prospects; will not
know until the end of construction)
4) if School Impact fees are waived or reduced (should know in June)
Cannot ask other jurisdictions for additional CDBG or HOME funds, as the use of
additional federal dollars will result in a reduced HUD capital allocation.
Reason for Additional Loan Request
o The 12/95 budget was necessarily an estimate. We had only a schematic design at that
time; we had not yet submitted a formal PC zone change application.
We have been in a boom construction period over the last year, with building materials
and labor prices rising dramatically. The recent floods have exacerbated the
situation. Many subs are too busy to bid on the project, or charge inflated prices.
Prevailing wage projects are hit even harder than other projects.
o. Although we now anticipate more sources than were projected in 12/95, the overall
project costs have increased by more than the increase in project sources.
~ Increases in project costs: (see attached page for more detail)
$280,300 - increase in construction costs, including off-sites
$158,839 - increase in soft costs
$439,139 Total Amout of Increase in Costs
~ Increases in project sources:
$234,676 - estimated increase in HUD capital allocation
25,000 - additional amount of Los Altos Hills CDBG allocation (over reques0
$259,676 - Total Amount of Increase in Sources
Mid-Peninsula’s Efforts to Keep City Contribntion as Low as Possible
When School Impact fees were proposed by the School Board, we requested that the
Board exempt this project and similar affordable, special needs projects. We
have submitted a formal request for waiver of school.fees.
We successfully sought funding from other jurisdictions, which is normally not done for
a project located in a city like Palo Alto, which has its own federal allocation.
Generated $363,000 from Urban County, Sunnyvale, Los Altos, Los Altos Hills.
Organized parent support in these jurisdictions to demonstrate there is true
regional need. In Urban County, Citizen’s Advisory Committee disagreed with
staff’s lower recommendation and voted for full funding at the requested level.
We are seeking additional funding from charitable foundations.
Worked diligently with general contractor and architect to reduce project costs
through value engineering, without sacrificing quality, and managed to achieve
$170,000 in value-engineering reductions.
Negotiated with the Seller (County) cost-sharing of certain environmental testing
expenses necessary to get HUD approval of the site.
Page Mill Court - Palo Alto Housing for Developmentally Disabled
Detail of Proiect Cost Increases
To summarize: From December 1995 to the present, our overall project costs have
increased by approximately $439,000 (an increase of 14%). The main elements of this
increase are:
1) $280,300 - Total Increase in Construction Costs (64% of the total increase)
[3 inflated construction market, which has a greater impact on prevailing-wage
construction projects, is the cause for most of the increase.
[] HUD’s interpretation of labor relations policy, which has already increased
project costs by $37,000, and may add further costs if other small sub-contractors
cannot be used.
[3 additional hard costs resulting from the plan-check process. Major examples
include:
¯ Our engineer’s design for gas service has had to be revised. The City found
out the gas line along Ash Street is "dead." Costs to install a functional gas line
and other costs related to having this second source of gas service to the site will
be approximately $8,000. Gas heating is being used in order to keep residents’
utilities bills as low as possible, given their limited income.
o City requirements for electrical service to the property result in approximately
$9,000 more in costs than our contractor and architect had calculated.
It was discovered that our Civil engineer designed the storm drainage plan based
on public records that were inaccurate. The storm drain design had to be
completely revised so that the project drains toward Page Mill Road and not
Sheridan, resulting in approximately $5,000 additional costs.
City requirements for elevator cab size/capacity exceed usual interpretation of
ADA; have resulted in approximately $4,000 increase for the elevator cabs and
approximately $5,000 for costs of accommodating a larger elevator shaft.
The City’s interpretation of the building code resulted in approximately $10,000
increased costs related to stairs/landings, changes in the placement of bathroom
fans, changes in certain materials which are normally standard in other cities, etc.
2) $158,800 - Increase in Other Project Costs (36% of the total increase), Including:
[3 Additional $33,000 for School impact fees, unless waiver is given.
71 Additional architectural design fees and engineering costs of approximately
$18,000 for modifications to the design so that a second elevator could be added,
increasing accessibility.
[] Additional $35,000 contingency needed if new HUD interpretation of Labor
rules eliminates the use of small subcontractors who gave lowest bids.
[] Additional costs of approximately $10,000 for second City transfer tax fees,
recalculation of building permit fees, various encroachment permits, etc.
[] Additional pre-construction and construction testing, such as accoustical
engineering required by HUD to prove sound attenuation measures are adequate.
[] Costs not in preliminary budget, such as HUD-required $10,000 minimum
capital contribution by Sponsor.
c\jes\pa~citymem5
Page Mill Court -- Palo Alto Housing for Devel?pmentally Disabled