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Home My WebLink About1996-09-16 City Council (28)TO: FROM: City of Palo Alto City Manager’s Report HONORABLE CITY COUNCIL CITY MANAGER DEPARTMENT: Planning and Community Environment AGENDA DATE: September 16, 1996 CMR:389:96 SUBJECT:Budget Amendment Ordinance and Agreement with Mid-Peninsula Housing Coalition to Provide Funds for Site Acquisition and Other Expenses Related to the Development of the Page Mill Court Apartments for Persons with Developmental Disabilities at 2700 Ash Street REQUEST Council action is requested to adopt a Budget Amendment Ordinance and approve an agreement with Mid-Peninsula Housing Coalition (MPHC) to provide funds for site acquisition and other expenses for the development of the Page Mill Court Apartments project at 2~00 Ash Street. The Budget Amendment appropriates $411,000 in Community Development Block Grant (CDBG) funds and $300,000 in Commercial Housing In-Lieu funds for the project. These funds are in addition to $45,000 previously provided by the City through a predevelopment loan. RECOMMENDATIONS Staff recommends that the Council: 1) 2) 3) Adopt the attached Budget Amendment Ordinance to appropriate $411,000 in CDBG funds and $300,000 in Commercial Housing In-Lieu Funds to the Page Mill Court housing development project. Approve the attached loan agreement (with its attached form of promissory note and deed of trust) between the City of Palo Alto and Mid-Peninsula Housing Coalition providing funds for site acquisition and other development costs. Authorize the Mayor 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 acquisition of the 2700 Ash Street property. CMR:389:96 Page 1 of 5 POLICY IMPLICATIONS The actions recommended in this staffreport are consistent with the City’s affordable housing development objectives as stated in the Housing Element of the Comprehensive Plan, the HUD required Consolidated Plan for 1995 - 2000 adopted by the Council on May 1, 1995, 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 In 1993, a group of Palo Alto parents of young people with developmental disabilities requested that MPHC sponsor the development of an apartment project for independent supportive living under HUD’s Section 811 program. In July 1995, after two years of effort pursuing various Palo Alto properties, MPHC obtained an option to purchase the 0.75 acre, County-owned property at Page Mill Road and Ash Street. In October 1995, MPHC received a funding reservation of HUD Section 811 funds for development of a 24-unit rental apartment complex with community room at that site. In January 1996, MPHC submitted a Planned Community zone application for the project. The PC zone was adopted unanimously by Council on July 8, 1996. The proposed loan agreement provides a total of $756,000 in City funding ($431,000 in CDBG funds from the "new housing development fund" and $325,000 in Commercial Housing In-Lieu Funds). This agreement supersedes the earlier predevelopment funding agreement, dated June 28, 1993, which provided $20,000 in CDBG funds for predevelopment expenses and the December 18, 1995 amendment, which provided $25,000 in Commercial Housing In-Lieu funds for the cost of the site option deposit. The new loan cancels the previous $45,000 note and incorporates the entire amount of City funding, $756,000, into a new note secured by a deed of trust on the property. All of Palo Alto’s funding will-be loaned at 3 percent simple interest for a 40-year term that coincides with the 40-year HUD regulatory and use agreement. Payments of principal and interest are deferred for the entire term of the .loan. After 40 years, MPHC must either repay the loan and interest, convey the property to the City in exchange for the outstanding debt, or they may extend the loan, if they continue the use of property as affordable, low-income housing. FISCAL IMPACT Total development costs are estimated at about $3.2 million including the $1.1 million land price. About two-thirds of the total cost is expected to be covered by the HUD Section 811 funds. Federal funds will also subsidize ongoing operating expenses, so that rents can be limited to 30 percent of the tenant’s income. The federal rental assistance contract has a five- year term. MPHC should be able to renew the contract, provided that Congress appropriates sufficient funds for that purpose..About one-third ($1.1 million) of the development costs will need to be funded from local sources. Due to the methodology used by HUD to CMR:389:96 Page 2 of 5 calculate the exact amount of their project funding, MPHC needs about 25 to 30 percent of the local subsidy to be from non-federal sources, such as the City’s Housing Reserve Fund. Last December, MPHC applied to the City for $711,000 in subsidy funds as part of the City’s annual CDBG funding cycle for FY 1996-97. MPHC requested $411,000 in CDBG funds and $300,000 in City Housing Reserve Funds. The CDBG Citizen Advisory Committee and staff strongly supported funding for the project and, on May 6, 1996, recommended to Council that the project be funded with unspent carryover CDBG funds from the new housing development fund. Since carryover funds will be used, the project was not included in the 1996-1997 budget and a budget amendment ordinance is now necessary. After allocating the additional $711,000 to this project, the remaining balance in the CDBG new housing development will be approximately $577,500 and the remaining balance in the Commercial Housing In-Lieu fund will be $227,275. Because the project will serve persons with developmental disabilities from northern Santa Clara County, MPHC applied for, and was awarded, CDBG funds from the County of Santa Clara ($188,000), City of Los Altos ($50,000) and City of Sunnyvale ($50,000). An application for $50,000 of urban county CDBG funds from the Town of Los Altos Hills is still pending. The estimated development budget and sources of funds are as follows: Land Hard Construction Costs Architecture & Engineering Other Soft Costs Contingency Developer Fee TOTAL ESTIMATED DEVELOPMENT COSTS $1,100,000 1,726,000 180,000 118,500 50,000 60,000 $3,234,500 SOURCES OF DEVELOPMENT FUNDS: HUD Section 811 Capital Grant City of Palo Alto ($45,000 under contract; $711,000 requested) County of Santa Clara (CDBG - approved) City of Sunnyvale (CDBG - approved) City of Los Altos (CDBG - approved) City of Los Altos Hills (CDBG-pending) Peninsula West Valley Realtors Grant TOTAL SOURCES OF FUNDS $2,139,500 756,000 188,000 50,000 50,000 50,000 1,000 $3,234,500 CMR:389:96 Page 3 of 5 ENVIRONMENTAL ASSESSMENT Because federal funds are proposed to be provided for this project, an environmental assessment under the National Environmental Policy Act (NEPA) was completed by staff on July 11, 1996. A notice of finding of no significant impact on the environment and notice of intention to request the release of federal funds from HUD was published on August 7, 1996. HUD has confirmed that they will issue the release of CDBG funds on September 12, 1996. A negative declaration under the California Environmental Quality Act (CEQA) was completed on April 10, 1996 and certified by the City Council on June 24, 1996. STEPS FOLLOWING APPROVAL The major milestones in the development schedule are: o Close escrow and acquire site ....................by September 30, 1996 o Submittal to ARB for review of final design details ........November, 1996 ~ Submittal of building permit application ....................January, 1997 ¯ Initial closing of HUD Section 811 Capital Advance .........February, 1997 ¯Start of construction .....................................March, 1997 ¯ Completion of construction ...........................November, 1997 o Complete rent-up ....................................December, 1997 ¯ Complete HUD audit and close HUD financing .............February, 1998 ATTACHMENTS 1. Budget Amendment Ordinance 2. Agreement Between the City of Palo Alto and Mid-Peninsula Housing Coalition 3. Letter 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: FLEMING City Manager CMR:389:96 Page 4 of 5 CC w/attach: Mid-Peninsula Housing Coalition City of Sunnyvale, Housing Division County of Santa Clara, Housing & Community Development Program CC w/o attach:CDBG Citizens Advisory Committee Human Relations Commission Disability Awareness Task Force Office of Human Services Palo Alto Parent Support Group, c/o Stan Parry CMR:389:96 Page 5 of 5 ORDINANCE NO. Attachment I 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 SITE ACQUISITION AND DEVELOPMENT OF HOUSING FOR PERSONS WITH DEVELOPMENTAL DISABILITIES 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 December 18, 1995, Council approved a $25,000 reimbursement to the Mid-Peninsula Housing Coalition for an option to purchase property located at Page Mill Road and Ash Street for the Mid-Peninsula Housing Coalition to develop the site as housing for persons with developmental disabilities per an existing contract between the City and Mid-Peninsula Housing Coalition; and WHEREAS, on May 6, 1996, Council authorized that this housing project be included, without a specific amount of funding, in its ~Annual Action Plan" to be submitted to HUD; and WHEREAS, the Mid-Peninsula Housing Coalition has received a reservation of Federal HUD funds for the construction of 24 units of permanent housing on the above site, and will also require funds from local sources; and WHEREAS, the Mid-Peninsula Housing Coalition has requested $711,000 in funds from the City; and WHEREAS, funding for this project will come from two separate sources: a Community Development Block Grant (CDBG) allocation and the City’s Commercial Housing In-Lieu Fund; 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 Four Hundred Eleven Thousand Dollars ($411,000) in CDBG Funds is hereby transferred from CDBG Project Number 01053, "New Housing Development Program" to the Mid-Peninsula Housing Coalition project, within the CDBG Fund. SECTION 2. This transaction will reduce the CDBG Project 01053, "New Housing Development Program" balance from $988,739 to $577,739. SECTION 3. The sum of Three Hundred Thousand Dollars ($300,000) 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 4. This transaction will reduce the Commercial Housing In-Lieu Fund Reserve balance from $527,275 to $227,275. SECTION 5. 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 6. An environmental assessment under the National Environmental Policy Act (NEPA) was completed by staff on July ii, 1996. A notice of finding of 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 7. 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: City Clerk APPROVED AS TO FORM: Senior Asst. City Attorney APPROVED: Mayor City Manager Deputy City Administrative Department Manager, Services Director of Planning Community Environment and Attachment 2 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 THIS AGREEMENT is made and entered into on , 1996, by and between the CITY OF PALO ALTO, a California municipal corporation ("CITY"), and the MID-PENINSULA HOUSING COALITION, a California non-profit public benefit corporation, with offices at 658 Bair Island Road, Suite 300, Redwood City, CA 94063 ("MPHC"). This Agreements is made in reference to the following facts and circumstances: I. CITY provided financial assistance to MPHC in connection with pre-development expenses associated with a proposed multifamily residential housing building consisting of up to twenty-four (24) units ("Project"), for occupancy by very-low income persons with developmental disabilities. The Project is to be constructed at the southwest corner of Page Mill Road and Ash Street in the city of Palo Alto, the legal description of which is more specifically described in Exhibit "A". The pre-development loan in the amount of $45,000 was made with CITY funds from the Community Development Block Grant ("CDBG") Program ($20,000) and the Commercial Housing In-lieu Fund .($25,000), and is evidenced by that "Agreement between the City of Palo Alto and the Mid-Peninsula Housing Coalition to Assist with Pre-Development Expenses for a Permanent Housing Complex for Individuals with Developmental Disabilities", dated June 28, 1993, as amended by that "Amendment No. One to Agreement", dated December 18, 1995 (collectively, the "1995 Agreements") and that "Promissory Note", dated December 18, 1995, in the original principal amount of $45,000 executed by MPHC (the "$45,000 Note"). 2. P~rsuant to the provisions of Title I of the Housing and Community Development Act of 1974, as amended, CITY appropriated CDBG funds under its fiscal years 1994-1995 and 1995- 1996 budgets in the CDBG new housing development fund for the purpose of preserving, rehabilitating and constructing affordable rental housing in Palo Alto that meets the requirements of the CDBG program. 3o There is a severe shortage of affordable housing suitable for persons with developmental disabilities in Palo Alto and nearby areas. The Project, as more fully described in Planned Community (PC) Zone Ordinance Number 4354, adopted on June 24, 1996, and made effective on July 8, 1996, will result in the creation of new housing units, made available at affordable rents, specifically designed to meet the housing needs of very-low income persons with developmental disabilities. 960910 syn 0071034 1 4. The expenditure of funds for site acquisition costs fo~ lower income housing is an eligible activity under the CDBG Program, and site acquisition and development costs are eligible for reimbursement under CITY’s Housing Reserve Guidelines. The Project is consistent with CITY’s affordable housing goals as outlined in CITY’s United States Department of Housing and Urban Development ("HUD") Consolidated Plan; and 5. MPHC and CITY desire under this Agreement to arrange for a loan from CITY to MPHC to cover a portion of the construction and development expenses that MPHC will incur in purchasing the Project site and in developing the Project. IN CONSIDERATION OF the mutual covenants and agreements specified herein, and subject to its terms and provisions, the parties to this Agreement hereby agree as follows: ARTICLE 1 AGREEMENT COORDINATION i.i CITY CITY’s city manager shall represent CITY for all purposes under this Agreement. CITY’s director of planning and community environment is designated by the city manager as the project manager, and his designee shall supervise the progress and execution of this Agreement. 1.2 MPHC The executive director of MPHC shall represent MPHC for all purposes under this Agreement and, as the project director for MPHC, shall supervise the progress and execution of this Agreement. ARTICLE 2 - PURPOSE OF AGREEMENT The purpose of this Agreement is, to set forth the respective duties and responsibilities of CITY and MPHC regarding the CDBG Program and Commercial Housing In-lieu funds to be provided by CITY to MPHC hereunder for MPHC’s development activities related to the Project. ARTICLE 3 -PROVISION OF FUNDS 3.1 Payment of funds for construction and development expenses 3.1.1 CITY shall pay to MPHC the sum of seven hundred eleven thousand dollars ($711,000), to be used in accordance with the terms, covenants, provisions and conditions of this Agreement, the CDBG Program, and CITY’s Housing Reserve Guidelines. MPHC shall execute and deliver a promissory note in favor of CITY (the "Note"), as set forth in Exhibit "B", in the amount of seven hundred fifty-sixty thousand dollars ($756,000), to secure the performance of all terms, covenants, provisions and conditions of this Agreement. The Note includes the $45,000 previously disbursed to 960910 syn 0071034 2 MPHC under the 1995 Agreements and the additional $711,000 to be disbursed under this Agreement. The $45,000 Note shall be canceled by CITY upon the execution of the Note. Execution thereof shall occur prior to any disbursementof funds under this Agreement. The Note shall bear interest, and periodic payments shall be due as provided in the Note. The Note shall be secured by a deed of trust ("Deed of Trust") on the Project for the benefit of CITY, as set forth in Exhibit "C". CITY shall execute and record such subordination agreements with respect to the deed of trust as may be required by HUD and other funding sources. 3.1.2 If the initial closing of the Section 811 Capital Advance Grant does not occur on or before December 31, 1998, including any extension thereof approved by the project manager, this Note shall be immediately due and payable. Notwithstanding the foregoing, if MPHC at any time fails to comply with the terms, covenants, provisions and conditions of this Agreement or the Note, the Note shall be immediately due and payable. 3.2 Additional construction and development expenses The maximum amount payable under this Agreement and the 1995 Agreements for construction and development expenses shall be seven hundred fifty-six thousand dollars ($756,000). In the event, for any reason, the amount payable by MPHC to any and all sources for development expenses for the Project exceeds seven hundred fifty-six thousand dollars ($756,000), MPHC shall be solely responsible to pay all such excess expenses. 3.3 Disbursement of funds MPHC shall open an escrow, and all loan proceeds to be disbursed for the purchase price of the Property and necessary closing costs shall be placed in escrow with the Chicago Title Insurance Company ("CTI"), 437 Lytton Avenue, Palo Alto, CA 94301 under escrow number 000749253 BR, together with all necessary documents of title, written escrow instructions, and other pertinent information. CITY will deposit the sum of seven hundred eleven thousand .dollars ($711,000), by negotiable instrument payable to CTI, into escrow, for a portion of the approximately one million one hundred thousand dollars ($i,I00,000) purchase price of the Property. MPHC will deposit funds from other sources for the balance of the purchase price and closing costs as an express condition hereof, and MPHC’s failure to do so shall render this Agreement null and void. 3.4. Title insurance At the close of escrow, MPHC, at its own cost and expense, shall secure an ALTA extended coverage lender’s policy of title insurance, or other form of title insurance acceptable to CITY, for an amount not less than the amount of the actual purchase price of the Property, and insuring against any title defects as would prevent the construction and development of the Project. The policy will name CITY as insured and insure MPHC’s right, title, 960910 syn 0071034 and interest in the Property and the Project and CITY’s lien therein, and, promptly after the close of escrow, MPHC shall provide the original of the same to the project manager or his designee. ARTICLE 4 - MPHC’s STATEMENT OF WORK 4.1 General As express conditions of acceptance of payment of $431,000 in CDBG funds from CITY under this Agreement and the 1995 Agreements (collectively, the "City Agreements"), MPHC agrees to acquire, in fee simple, that certain real property !ocated at 2700 Ash Street, Palo Alto, County of Santa Clara, State of California (APN 132-36-83) ("Property") as more fully described in Exhibit "A", and constrUct or cause to be constructed the Project on the Property, in accordance with all applicable requirements and regulations of HUD and the CDBG Program, including those HUD regulations set forth in Part 570 of Title 24 of the Code of Federal Regulations ("CFR"), as amended. .As express conditions of acceptance of payment of $325,000 in Commercial Housing In-lieu funds from CITY under the City Agreements, MPHC agrees to acquire the Property and construct or cause to be constructed the Project on the Property, in accordance with CITY’s Housing Reserve Guidelines. 4.2. Project budget, uses of CITY funds and final accounting The funds provided under this Agreement and the Note are being advanced by CITY to pay a portion of the actual purchase price of the Property. CITY and MPHC anticipate that a portion of the Section 811 Capita~ Advance Grant will be allocated for site acquisition costs and other pre-development expenses paid by MPHC~ and reimbursed by CITY under the 1995 Agreements. A projected development budget and sources of funds is attached as Exhibit "D". After the completion of the Project, and the performance of the HUD-required audit of the Project’s development costs, the funds provided by CITY will be allocated to the reasonable and necessary construction and development expenses not covered by the Section 811 Capital Advance Grant or funding from other sources obtained by MPHC. The final allocation of CITY funds will be approved bY CITY based on information regarding actual development costs as certified in the HUD-required audit. 4.2.1 Eligible uses of CDBG Program funds are the costs of site acquisition, site clearance, site improvements, public utility and street improvements required to construct the Project and other necessary and reasonable pre-construction costs eligible under CDBG regulations and not covered by the Section 811 Capital Advance Grant funds or other sources. 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 960910 syn 0071034 4 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 and monitoring, 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. 4.2.3 If CITY determines that the entire $756,000 of funding advanced by CITY to MPHC under this Agreement and the 1995 Agreements is not necessary to pay for reasonable, necessary and eligible Project development costs as described herein and.as approved in advance by CITY, then MPHC shal! refund the excess amount of funds, as determined by CITY, promptly upon the demand of CITY and the principal balance of the Note shall be reduced, accordingly. 4.3 Use, occupancy and rent restrictions MPHC shall operate and maintain the Project as a permanent rental housing complex for occupancy by very-low income households at affordable rents as defined by HUD regulations for the Section 811 Program. Occupancy shall be limited to households of which at least one (i) member is developmentally disabled according to HUD regulations for the Section 811 program. MPHC’s compliance with this Section 4.3 is of particular importance to CITY and the main purpose for which CITY is making the Loan to MPHC. In the event of any breach of this Section 4.3 or of any other covenant or restriction set forth in this Agreement, CITY shall have the right to exercise all of the right and remedies, and to maintain any action at law or suits in equity or other real property proceedings, including, without limitation, specific performance, to enforce the covenants and restrictions and the curing of any breach or violation hereof. 4.4 Records and reports MPHC shall maintain 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 proper accounting of funds and performance of the terms of this Agreement. MPHC shall furnish any and all information and reports which may be required by CITY and HUD in connection with this Agreement. MPHC shall further permit access to its books, records and accounts by the representatives and employees of 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 MPHC’s compliance with the provisions of this Agreement. All such records shall be retained by MPHC and made available to CITY and HUD upon request for review or audit for a period of at least three (3) years following the expiration or 960910 syn 0071034 5 termination of this Agreement. 4.5 Program income - CDBG funds Program income is defined under the laws and regulations governing the CDBG Program, including the provisions set forth in 24 CFR 570.500(a). MPHC shall maintain separate accounting records and bank accounts for any CDBG Program income generated under this Agreement or from the Project. MPHC shall report and return all CDBG Program income generated under this Agreement or from the Project to CITY in accordance with all CDBG and HUD laws and regulations, including but not limited to those set forth in 24 CFR 570.504, as amended. This Section 4.5 shall apply only to CDBG funds. 4.6 Uniform administrative requirements - CDBG funds MPHC, as a private non-profit organization receiving CDBG Program funds as a subrecipient, shall comply with the Uniform Administrative Requirements as set forth in 24 CFR 570.502(b). This Section 4.6 shall apply only to CDBG funds. 4.7 Additional requirements ~and federal assurances - CDBG funds MPHC shall comply with the additional terms and conditions of this Agreement and the federal assurances as set forth in Exhibit "E". This Section 4.7 shall apply only to CDBG funds. 4.8 Insurance MPHC, at its sole cost and expense, shall obtain and maintain during the term of this 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 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 "F’J, as appropriate, insuring against all liability of MPHC and its directors, officers, employees, agents, and representatives arising out of or in connection with the acquisition, construction and development of the Project or MPHC’s performanceor nonperformance under this Agreement. ARTICLE 5 ~ TERM AND TERMINATION OF AGREEMENT This Agreement shall commence and be effective on the date of its execution by CITY, 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 HUD, unless earlier terminated as provided in this Agreement or the Use Agreement. If the initial closing of the Section 811 Capital Advance Grant does not occur on or before December 31, 1998, 960910 syn 0071034 including any extension thereof approved by the project manager, then this Agreement may be terminated by CITY and this Note shall be immediately due and payable. Time is of the essence of this Agreement. Prior to the effective date of the Use Agreement, either party may terminate this Agreement for convenience with respect to the CDBG funds only, in accordance with 24 CFR 85.44, as amended. CITY may immediately suspend or terminate this Agreement, in whole or in part, if CONTRACTOR materially fails to comply with any term, provision, covenant or condition of this Agreement, or with any of the rules or regulations referred to herein. In such event, CITY may also pursue any other remedies provided by law, including those specified under 24 CFR 85.43, as amended. Should this Agreement be terminated for convenience or cause, all funds provided to MPHC, at the sole option of the project manager and notwithstanding any other provisions of this Agreement, the Note or Deed of Trust, shall become due and payable to CITY upon demand of CITY. ARTICLE 6 - SUBORDINATION CITY covenants and agrees that all of its rights and powers under the City Agreements are subordinate and subject to the rights of HUD under that certain "Deed of Trust with Assignment of Rents" (the "First Deed of Trust") for the benefit of the United States of America acting by and through the Secretary of HUD ("Secretary"), and to the rights of the Secretary under that certain "Capital Advance Program Regulatory Agreement" (the "HUD Regulatory Agreement") and that certain "Capital Advance Program Use Agreement" (the "Use Agreement"), to be recorded in the future in the Official Records of Santa Clara County, California (the First Deed of Trust, the HUD Regulatory Agreement and the Use Agreement, collectively, are the "HUD Documents"). The City Agreements are subject to and subordinate to the HUD Documents, the provisions of Section 811 of the National Affordable Housing Act, and the HUD regulations, during the term of the HUD Documents or during the period that title to the land is held by HUD. During such period: a.. The HUD Documents may be amended, extended, renewed, assigned, or superseded without CITY’s consent; b. CITY shall not declare a default under the City Agreements without the prior written approval of HUD; c. The Project will be constructed and operated in conformance with the provisions of the Section 811 Program and all HUD regulations and administrative requirements relating to such statute. In the event of any conflict between the City Agreements and the provisions of any HUD regulations, related administrative requirements or capital advance documents (including but not limited to the HUD Documents), the HUD regulations, related administrative requirements or capital advance documents shall control; d. HUD approval of a transfer of the Project, as defined in Section 4 of the Use Agreement, shall be deemed to constitute approval of CITY to such transfer; 960910 syn 0071034 7 e. The City Agreements shall not be amended in a manner which will have a substantive impact on HUD’s rights under the Section 811 Program, or assigned, without the prior written approval of HUD; f. Enforcement of the provisions of the City Agreements shall not result in any claim against the Project, the capital advance proceeds, any reserve or deposit required by HUD in connection with the capital advance, or the rents or other income from the Project other than residual receipts authorized for release by HUD; g. In the event that any restrictions on occupancy, use and rents at any time exceeds HUD’s restrictions on occupancy or rents or otherwise affects the financial viability of the Project (i.e.,. impairs MPHC’s ability to sustain a level of income sufficient to meet all financial obligations of the Project, including HUD-required escrows and operating expenses), HUD reserves the right to void such restrictions for as long as it deemed reasonably.necessary; h. Nothing in the City Agreements shall be construed to interfere with or conflict with HUD requirements concerning the construction, development or operation of the Project; and i. Notwithstanding any other terms of the City Agreements, so long as the Property is subject to the First Deed of Trust, the HUD Regulatory Agreement, the provisions of Section 811 of the National Affordable Housing Act, and HUD regulations, the approval by HUD of an assignment within the meaning of Section 8 of this Agreement shall constitute approval by CITY. ARTICLE 7 -CONFLICT OF INTEREST MPHC 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 MPHC 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 any 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. MPHC 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. MPHC also covenants that, in the performance of this Agreement, no subcontractor or person having such interest shall be employed by MPHC. In addition, MPHC 960910 syn 0071034 8 certifies that no one who has or will have any financial interest under this Agreement is an officer or employee of CITY. ARTICLE 8 ASSIGNMENT PROHIBITED This Agreement is for the personal services of MPHC and shall not be assigned without the express prior written consent of CITY. Any attempt to do so otherwise shall be void and, at the sole discretion of CITY, a default of this Agreement and the Note may be declared by CITY. The City Agreements and the Note may be assigned to and assumed by 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 the Agreement by Page Mill Court, Inc., MPHC shall be released from all obligations hereunder. ARTICLE 9 - NOTICES 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 of Palo 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 Road, Suite 300 Redwood City, CA 94063 Attention: Executive Director ARTICLE 10 MISCELLANEOUS i0.i Neither the failure nor the delay on the part of 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. MPHC shall at all times remain an independent contractor 960910 syn 0071034 9 with respect to the services to be rendered or work to be performed, or both, under this Agreement. The terms of this Agreement shall in no way be construed to create a partnership, joint venture or any other joint relationship between CITY and MPHC. MPHC lacks any authority or power to pledge the credit of CITY or incur any obligation in the name of CITY. 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. 10.3 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. Any amendment to this Agreement shall be binding upon the parties, provided such amendment is set forth in. a writing signed by the parties. The city manager is authorized to execute any amendments to this Agreement, including any amendments which may be required of MPHC or CITY by HUD, and confer any consents that must be provided by CITY. 10.4 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. 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. 10.5 This Agreement, the Note and the Deed of Trust shall be deemed contracts 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. 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. 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. 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. 10.6 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 court 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. 960910 syn 0071034 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. ATTEST:CITY OF PALO ALTO City Clerk Mayor APPROVED AS TO FORM: Senior Asst. City Attorney APPROVED: ~a-t~hew C. S6h~a~, Acting Executive Director and Assistant Secretary City Manager Deputy City Manager, Administrative Services Director of Planning and Community Environment Risk Manager Attachments : EXHIBIT "A" : EXHIBIT "B" : EXHIBIT "C" : EXHIBIT "D" : EXHIBIT "E" : EXHIBIT "F" : LEGAL DESCRIPTION OF PROPERTY PROMISSORY NOTE SECURED BY SHORT FORM DEED OF TRUST AND ASSIGNMENT OF RENTS SHORT FORM DEED OF TRUST AND ASSIGNMENT OF RENTS STATED USES OF CDBGAND COMMERCIAL HOUSING IN- LIEU FUNDS FEDERAL ASSURANCES WITH RESPECT TO CDBG FUNDS INSURANCE REQUIREMENTS 960910 syn 0071034 11 STATE OF CALIFORNIA ) ) ss. COUNTY OF SANTA CLARA ) On , 1996, before me, a Notary Public in and for said County and State, personally appeared HELENE WHEELER, personally known to me to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity as Mayor of the City of Palo Alto, a municipal corporation, and that by his signature on the instrument acknowledged that said municipal corporation executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. Notary Public in and for said County and State 960910 syn 0071034 12 STATE OF CALIFORNIA ) ~ ~ ~qo_~o ) ss. COUNTY OF ~99A~q~-~) , 1996, before me, a Notary Public in and for said County and State, personally appeared MATTHEW C. SCHWARTZ, personally known to me to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity as Acting Executive Director and Assistant Secretary, Board of Directors of Mid- Peninsula Housing Coalition, a %~lifornia non-profit public benefitcorporation, and that by ~ signature on the instrument acknowledged that said nonprofit corporation executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. Notary Public in and for said COMM. # 10101~zz County and StateNotary Public -- California SAN FRANCISCO COUNTY Property Description for 2700 Ash Street Palo Alto, California Exhibit "A" Order No. 749253 LM All that certain Real Property in the City cf Palo Alto, County of Santa Clara, State of California~, ’described as follows: Being all of Lot 6 and a portion of Lots 7 and 8 of Block 5 as said Lots and Block are shown on that certain Map entitled "Map of the Addition of the Town of Mayfield by W. Hawxhurst Esqre." as said Map is filed in Book B of Miscellaneous Records, Page 642, Records of Santa Clara County, California, and more particularly, described as follows: Beginning at the most Northerly corner of Lot 6 of Block 5, said Point of Beginning also being on the Southwesterly line of Ash Street (20.00 foot half s~reet) as said Lot, Block, and Street are shown on said Map filed in Book B of Miscellaneous Records, thence Southeasterly along said Southwesterly line of Ash Street South 56 deg 39’ 15" East 235.00 feet to the Beginning of a curve concave Westerly with a radius of 20.00 feet; thence leaving Said Southwesterly line of Ash Street Southerly along said curve (with radius 20.00 feet) through a central angle of 90 deg 00’ 00" and an arc length of 31.42 feet; thence South 33 deg 20’ 45" West 145.63 feet to the Southwesterly line of Lot 8 as said Lot is shown on said Map; thence Northwesterly along said Southwesterly line of Lot 8 North 56 deg 39’ 16" West 112.50 feet to the Northwesterly llne of said Lot 8; thence Northeasterly "a!ong said Northwesterly line of said Lot 8; North 33 deg 20’ 45" East 65.63 feet to the Southwesterly line of said Lot 6; thence Northwesterly along said Southwesterly line of Lot 6 North 56 deg 39’ 15" West 142.50 feet to the Northwesterly line of said Lot 6; thence Northeasterly along said Northwesterly line of Lot 6 North 33 deg 20’ 45" East i00.00 feet to the Point of Beginning. Exhibit "B" PROMISSORY NOTE Secured by Short Form Deed of Trust and Assignment of Rents $756,000 Palo Alto, California September __, 1996 FOR VALUE RECEIVED, the undersigned, Mid-Peninsula Housing Coalition, a California nonprofit public benefit corporation ("MPHC"), hereby promises to pay to the order of the City of Palo Alto, a California municipal corporation ("CITY"), the principal sum of seven hundred fifty-six thousand dollars ($ 756,000). i. MPHC’s Obligations. This promissory note ("Note") evidences the obligation of MPHC to pay. to CITY all sums due hereunder. MPHC agrees to 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 this 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 in Planned Community (PC) Zone Ordinance Number 4354, adopted on June 24, 1996, and made 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 legal description of which is more specifically described in Exhibit "A" to the Deed of Trust securing this Note. 2. Interest. The outstanding principal b~lance shall bear interest at the simple rate of three percent (3%) per year until the Loan is ~aid in full. Notwithstanding any other provisions of this Note, or any instrument securing the obligations of MPHC under this 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. 3. Term. The term of this Note shall commence on the date that the Deed of Trust securing this Note is 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. 960910 syn 0071035 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 consideration 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), 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 rental assistance payments continued, renewed or maintained, and the rental assistance payments or operating subsidies are not funded by some other federa!, state or local program or entity, CITY acknowledges that it may no longer be economically feasible for MPHC to rent the Project 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 otherwise imposed 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 on loans secured by the Property, reasonable management fees and reasonable reserve requirements, and is 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° 960910 syn ~071035 If, in the event CITY and MPHC cannot agree upon the terms of the waiver(s), CITY and MPHC agree that MPHC shall have the right to exerdise the following options before CITY can declare an Event of Default: (i) MPHC shall have an 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 shal! not be deemed to be a deed in lieu of foreclosure. In the event MPHC does not convey the Project or the Property to CITY as set forth above and is unable to operate the Project in accordance with the Agreement referred to in Section 1 hereof, CITY may declare an Event of Default hereunder. (c) The payments due under this 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 Note shall be made or given to CITY in care of the Revenue Collection Office, City of Palo Alto, 250 Hamilton Avenue, Palo Alto, California 94301, or to such other place as CITY may from time to time designate. (e) This 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). Prepayment(s) made from Residual Receipts may be made only after 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 960910 syn 0071035 3 Property, the proceeds of 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 Note shall be secured by a deed of trust on the Property ("Deed of Trust") executed by MPHC in favor of CITY as the beneficiary. 6.Default. (a) Subject to Section 4, any of the following shall constitute an Event of Default under this ~Note, following any applicable notice and cure periods: (i) Any failure to pay in full any payment required under this Note when due; (ii) Any failure in the performance by MPHC of any material term, condition, provision or covenant set forth in this Note, the Deed of Trust or the Agreement; or (iii) The occurrence of any material default under any other instrument securing the obligations of MPHC under this Note or under any other promissory notes hereafter issued by MPHC to CITY. (b) Upon the occurrence of such an Event of Default, CITY shall provide to MPHC written 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 HUD. (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 960910 syn 0071035 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 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 Note, all without in any way affecting the liability of MPHC. (b) No extension of time for payment of this Note or any installment hereof made by agreement by CITY with any person now or hereafter liable for the payment of this Note shall operate to release or discharge any liability of the person liable under this Note, either in whole or in part. (c) The obligations of MPHC under this Note shall be absolute and MPHC waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reason whatsoever. (d) Any failure of CITY or other holder to exercise any rights under this Note shall not constitute a waiver of such rights or of any other rights under this Note. 8.Nonrecourse note This 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 Makerto 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 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 960910 syn 0071035 5 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 of Palo 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 Road, Suite 300 Redwood City, CA 94063 Attention: Executive Director (b) This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. (c) This 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. (f) This Note may be assigned to and assumed by 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 the Note by Page Mill Court, Inc., MPHC shall be released from liability hereunder. 960910 syn 0071035 i0. Replacement Note. This Note incorporates and replaces that Promissory Note, dated December 18, 1995, in the original principal amount of $45,000 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, is hereby canceled and shall have no force or effect. Mid-Peninsula Housing Coalition, a California nonprofit public benefit corporation By : Matthew C. Schwartz Acting Executive Director and Assistant Secretary. The undersigned CITY acting through its City Manager acknowledges that the $45,000 Promissory Note, dated December 18, 1995, and referred to in Section i0 above is hereby canceled. City of Palo Alto By: City Manager 960910 syn 0071035 7 RECORDING REQUESTED BY AND WHEN RECORDED, MAIL TO: City of Palo Alto Office of City Attomey 250 Hamilton Avenue Palo Alto, CA 94301 RECORDED WITHOUT CHARGE. GOVERNMENT CODE SECTIONS 6103, 27383 Exhibit "C" SPACE ABOVE THIS LINE FOR RECORDER’S USE SHORT FORM DEED OF TRUST AND ASSIGNMENT OF RENTS (WITH DUE ON SALE CLAUSE) THIS DEED OF TRUST is made on , 1996, between Mid-Peninsula Housing Coalition, a California nonprofit public benefit corporation ("Trustor"), whose address is 658 Bair Island Road, Suite 300, Redwood City, California 94063, Chicago Title Insurance Company, a California corporation ("Trustee"), whose address is 437 Lytton Avenue, Palo Alto, California 94301, and the City of Palo Alto, a California municipal corporation ("Beneficiary"), whose address is 250 Hamilton Avenue, Palo Alto, California 94301, WITNESSETH: That Trustor IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE IN TRUST, WITH POWER OF SALE, that real property and improvements in the City of Palo Alto, County of Santa Clara, State of California, described in Exhibit "A", attached hereto and made a part hereof by reference ("Security" or "Property"), TOGETHER WITH the rents, issues and profits thereof, SUBJECT, HOWEVER, to the right, power, and authority given to and conferred upon Beneficiary, .by subdivision B of the fictitious deed of trust recorded in the office of the Recorder of the County of Santa Clara, in Book 5336 of Official Records, at Page 341, adopted and incorporated herein by reference and made a part hereof as if fully set forth herein, to collect and apply such rents, issues and profits. 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" ("Agreement"), incorporated herein by reference. 2. Payment of the indebtedness evidenced by that Promissory Note ("Note"), and any extensions or renewals thereof, in the principal amount of $ 756,000 executed by Trustor in favor of Beneficiary or order. 1 960910 syn 0071036 TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: i. Fictitious Deed of Trust. By the execution and delivery of this Deed of Trust and the Note secured hereby, that the provisions of subdivisions A and B inclusive, of the fictitious deed of trust recorded in the office of the Recorder of the County of Santa Clara in Book 5336 of Official Records, at Page 341, hereby are adopted and incorporated herein and made a part hereof as fully as though set forth herein at length; that it will observe and perform said provisions; and that the references to property, obligations, and parties in said provisions shall be construed to refer to the property, obligations, and parties set forth in this Deed of Trust. 2. Prohibited Transfers. Trustor shall not, voluntarily or involuntarily or by operation of law, sell, transfer, lease, pledge, encumber, create a security interest in, or otherwise hypothecate or alienate all or any part of the Security, without Beneficiary’s prior written consent. The consent by Beneficiary to any sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation of the Security shall not be deemed to constitute a novation or a consent to any further sale, transfer, lease, pledge, encumbrance, creation of a security interest in or other hypothecation. Beneficiary may, subject to the prior written approval of the United States Department of Housing and Urban Development ("HUD"), at its option, declare the indebtedness secured hereby immediately due and payable, without notice to Trustor or any other person or entity (except as provided herein), upon any such sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation or alienation in violation hereof. Without the written consent of Beneficiary, no sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation of the Security shall relieve or release Trustor from primary liability under this Deed of Trust or the Note, as the case may be. As used in this Section 2, the term "transfer" includes, without limitation, the fol!owing transactions: a. Any.total or partial sale, assignment or conveyance, or creation of any trust or power, or any transfer in any other mode or form with respect to the Security or any part hereof or any interest herein, or any contract or agreement to do the same; b. The cumulative transfer of more than ten percent (10%) of the capita! stock, partnership profit and loss interest, or other form of interest in Trustor; and c. Any merger, consolidation, sale or lease of all or substantially all of the assets of Trustor, provided that this provision shall not be interpreted to prohibit the leasing of the Property to tenants leasing the individual units comprising the Project, as such term is described in the Agreement, located upon the Property. 960910 syn 0071036 2 3. Due on Sale. In the event of default by Trustor under this Deed of Trust, or if the Property or any part thereof or any interest therein is sold, agreed to be sold, conveyed, alienated or refinanced by Trustor, or by the operation of law or otherwise, without the written consent of Beneficiary, al! obligations secured by this instrument irrespective of the maturity dates expressed therein, at the option of Beneficiary hereof and without demand or notice shall immediately become due and payable." 4. Subordination. Beneficiary, for itself and its successors and assigns, covenants and agrees that all of its rights and powers under this Deed of Trust, the Note, and the Agreement (collectively, the "City Documents") are subordinate and subject to" the rights of HUD under that certain Deed of Trust with Assignment of Rents ("First Deed of Trust") for the benefit of the United States of America acting by and through the Secretary of Housing and Urban Development ("Secretary"), and to the rights of the Secretary under that certain Capital Advance Program Regulatory Agreement ("HUD Regulatory Agreement") and that certain Capital Advance Program Use Agreement ("Use Agreement"), both recorded concurrently herewith or to be recorded in the future in the Officia! Records of Santa Clara County, California (the First Deed of Trust, the HUD Regulatory Agreement and Use Agreement are ¯ referred to, collectively, herein as the "HUD Documents"). The City Documents are subject and subordinate to the HUD Documents, the provisions of Section 811 of the National Affordable Housing Act, and the HUD regulations, du~ing the term of the HUD Documents or during the period that title to the land is held by HUD. During such period: a. The HUD Documents may be amended, extended, renewed, assigned, or superseded without Beneficiary’s consent; b. Beneficiary shall not declare a default under this Deed of Trust or foreclose without the prior written approval of HUD; c. The Project will be constructed and operated in conformance with the provisions of the Section 811 Program and all HUD regulations and administrative requirements relating to such statute. In the event of any.conflict between this Deed of Trust and the provisions of any HUD regulations, related administrative requirements or capital advance documents (including but not limited to the HUD Documents), the HUD regulations, related administrative requirements or capital advance documents shall control; do HUD approval of a transfer of the Project as defined in Section 4 of the Use Agreement shall be deemed to constitute approval of the Beneficiary to such transfer; e. This Deed of Trust shall not be amended in a manner which has a substantive impact on HUD’s rights under the Section 811 Program, or assigned, without the prior written approval of HUD; 960910 syn 0071036 3 f. Enforcement of the provisions of this Deed of Trust shall not result in any claim against the Project, the capital advance proceeds, any reserve or deposit required by HUD in connection with the capital advance, or the rents or other income from the Project other than Residual Receipts, as such term is defined in the Regulatory Agreement, authorized for release by HUD; g. In the event that any restrictions on occupancy, use and rents at any time exceeds HUD’s restrictions on occupancy or rents or otherwise affects the financial viability of the Project (i.e., impairs Trustor’s ability to sustain a level of income sufficient to meet all financial obligations of the Project, including HUD-required escrows and operating expenses), HUD reserves the right to void such restrictions for as long as it deems necessary; h. Compliance by Trustor with the HUD requirements shall constitute compliance with this Deed of Trust; and i. Nothing in this Deed of Trust shall be construed to interfere with or conflict with the HUD requirements concerning the construction, development or operation of the Project. Notwithstanding any other terms of this Deed of Trust, so long as the Property is subject to the HUD Documents, the provisions of Section 811 of the National Affordable Housing Act, and the HUD regulations, approval by HUD of a transfer within the meaning of Section 2 of this Deed of Trust shall constitute approval by Beneficiary. 5. Rights to Rents Collected. Beneficiary, for itself and its successor and assigns, further covenants and agrees that in the event of the appointment of a receiver or of the appointment of Beneficiary as mortgagee-in-possession, in any action by Beneficiary, its successors and assigns, to foreclose the mortgage, no rents, revenue or other income of the Project collected by the receiver or by the mortgagee-in-possession shall be utilized for the payment of interest, principal, or any other charges due and payable under this Deed of Trust, except from Residual Receipts; and, further, the receiver or mortgagee-in-possession shall operate the Project in accordance with all the provisions of the HUD Documents. 6. Deed in Lieu of Foreclosure. In the event the Secretary acquires title to the Project by a deed in lieu of foreclosure, the lien of this Deed of Trust will automatically terminate. Beneficiary may cure a default under the First Deed of Trust prior to a conveyance by a deed in lieu of foreclosure. The Secretary may give written notice to Beneficiary of a proposed tender of title in the event the Secretary decides to accept a deed in lieu of foreclosure. The Secretary will only give such written notice if, at the time of the placing of the subordinate lien against the Project, the Secretary receives a copy of an endorsement to the title insurance policy of Trustor or Beneficiary which indicates that (i) this Deed of Trust has been recorded, and (2) the 960910 syn 0071036 4 Secretary is required to give notice of any proposed election to or tender a deed in lieu of foreclosure but without any duty or obligation to do so. Such notice shall be~given at the address stated herein or such other address as may be subsequently, upon written notice to the Secretary, designated by Beneficiary. Beneficiary shall have thirty (30) days to cure the default after the notice of intent to accept a deed in lieu of foreclosure is mailed, or such longer period of time as may be reasonably necessary to cure the default subject to the approval of the Secretary. 7. Trustor’s Notice to Beneficiary. Notwithstanding the above requirements, in the event that Trustor contemplates executing a deed in lieu of foreclosure, Trustor shall first give Beneficiary sixty (60) days’ prior written notice; provided, however, that the failure of Trustor to give said notice shall have no effect on the right of the Secretary to accept a deed in lieu of foreclosure or render invalid the automatic termination of the lien of this Deed of Trust upon the Secretary’s acquisition thereof. 8. No Amendments. No amendments which have a substantive impact on HUD’s rights as senior lender shall be made to this Deed of Trust, and in particular Section 4 through 8, inclusive, without the prior written approval of the Secretary. 9. Restrictions. Recordation of this Deed of Trust provides constructive notice of certain occupancy and affordability restrictions applicable to the Property, as required by Beneficiary. i0. Request for Notice of Default. The undersigned Trustor requests that a copy of any Notice of Default and of any Notice of Sale hereunder be mailed to its address and the address of CITY hereinbefore set forth. ii. Assignment. This Deed of Trust may be assigned to and assumed by Mid-Peninsula Page Mill Court, Inc., a Section 501(c) (3) corporation, only with the written consent of CITY, which shall not be unreasonably withheld. Upon the assumptioh of the Note by Page Mill Court, Inc., MPHC shall be released from liability hereunder. Mid-Peninsula Housing Coalition, a California nonprofit public benefit corporation By : Matthew C. Schwartz Acting Executive Director and Assistant Secretary 960910 syn 0071036 Exhibit "D" Mid-Peninsula Housing Coalition Palo Alto Developmentally Disabled Housing Project 8/96 Development Bud,qet Proiected Sources and Uses of Funds Uses: Land Taxes Construction Engineering, other consultants Legal fees Architectural fees Local fees Insurance Title and recording Organization Consultant Audit Contingency Developer fee Sub-total TOTAL USES Sources: Allocation ofHUD 811 Capital Advance City of Palo Alto Housing Development Fund City of Palo Alto Housing Development Fund City of Palo Alto (CDBG, housing fund, etc.) Sunnyvale CDBG funds Los Altos CDBG funds Los Altos Hills CDBG funds County of Santa Clara CDBG funds Addition to Capital Advance Peninsula West Valley REALTORS Charitable Grant Sub-total (Status) committed committed committed requested committed committed requested committed anticipated committed FY 1995/96 1,100,000 1,500 10,000 7,000 120,000 30,000 10,000 5OO 15,000 2,500 30~00 1,326,500 Available 1,944,600 20,000 25,000 FY 1996/97 3,500 1,726,062 20,000 6,500 30,000 30,000 4,000 500 5,000 2,500 50,000 30,000 1,908,062 $3,234,562 Available 711,000 50,000 50,000 50,000 188,000 194,962 1,990,600 1,243,962 TOTAL SOURCES $3,234,562 e\jes~pa\devlbgt EXHIBIT "E" FEDERAL ASSURANCES WITH RESPECT TO CDBG FUNDS MPHC agrees to comply with the requirements of 24 CFR Part 570 (the Housing and Urban Development regulations concerning Community Development Block Grants). MPHC also agrees to comply with all other applicable federal, state and local laws, regulations, and policies governing the funds provided under this Agreement. MPHC further agrees to utilize funds available under this Agreement to supplement rather than supplant funds otherwise available. A.MPHC hereby assures and certifies that: (2) (3) 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 MPHC 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. (4)The proposed program(s) has been developed so as to give maximum feasible priority to activities which will benefit low and moderate income persons. (5) (6) The receipt of any program income, as definedin 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. MPHC will allow City and the U.So Department of Housing and Urban Development, through any authorized representatives, access to such documents, papers and records. (8)If MPHC is a primarily religious entity, in connection with the provision of services required under this Agreement, MPHC agrees to comply with federal regulations specified in 24 CFR 570.200(j). MPHC further: 960910 syn 0071037 1 (1) (2) (3) (4) (5)’ (6) (7) (a) (b) 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; (c)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 (d)will ensure that the portion of MPHC’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. MPHC 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 equal employment opportunities and affirmative action relative to employees and applicants and nonexempt contracts and subcontracts. 960910 syn 0071037 2 (8)Comply with 42 USC 4831(b), and 24 CFR 570.608and 24 CFR Part 35 of the HOD 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-f10, 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-II0 with respect to conflict of interest, and as otherwise may be required under 24 CFR 570.611, as amended. (12)Comply with the provisions of the Hatch Act which prohibit the use of federal funds for lobbying activities. (13)Comply with Section 319 of public law 101-121, which generally prohibits recipients of federal c6ntracts, 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, MPHC 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 MPHC, 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, MPHC shall complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying" in accordance with its instructions. 960910 syn 0071037 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. ~n addition, MPHC shall ensure that any real property under MPHC’s control that was acquired or improved in whole or in party 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. 960910 syn 0071037 4 EXHIBIT "F" INSURANCE REQUIREMENTS COURSE OF CONSTRUCTION Insurance, .to cover the Project’s construction, with coverage limits in the total amount of all construction contracts covering the Project in connection with this Agreement. Such coverage shall remain in effect until the completion of the Project. FIRE AND EXTENDED COVERAGE Insurance, to cover not less than One Hundred Percent (100%) of the replacement cost of all insurable improvements within or upon the Property, shall be obtained upon completion of the Property’s construction. Such policies shall include water damage and debris cleanup provisions. POLICY MINIMUM LIMITS OF LIABILITY WORKERS’ COMPENSATION Statutory COMPREHENSIVE Bodily Injury AUTOMOBILE LIABILITY,Property Damage including owned, hired, and nonowned automobiles $5,000,000 ea. person $5,000,000 eao occurrence $5,000,000 ea. occurrence COMMERCIAL Bodily Injury GENERAL LIABILITY, including Property Damage products and completed operations, broad form contractual, and personal, injury. $5,000,000 ea. person $5,000,000 ea. occurrence $5,000,000 aggregate $5,000,000 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. Oo Box 10250, Palo Alto, CA 94303." o "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." 960910 syn 0070727 "The CITY OF PALO ALTO is named as a loss payee on the property insurance policy described above." "The CITY OF PALO ALTO is added as an additional insured as respects operations of the named insured at or from the Property." o "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. 2 960910 syn 0070727 Attachment 3 September 6, 1996 City Council of the City of Palo Alto 250 Hamilton Ave. P. O. Box 10250 Palo Alto, CA 94303 Mid-Peninsula Housing Coalition 658 Bair Island Road, Suite 300 Redwood City, California 94063 Tel. [415] 299-8000 Fax [415] 299-8010 Dear Councilmembers: Mid-Peninsula Housing Coalition wishes to thank you for considering our funding request in support of Page Mill Court, which will provide housing and supportive living services for low-income developmentally disabled persons. We were extremely grateful that both staff and the Citizen’s Advisory Committee recommended funding for this project, in the amount of $711,000, to be allocated from the CDBG housing development fund and the Industrial Commercial Housing In-Lieu Fund. Our project has received enthusiastic support from Palo Alto parents of developmentally disabled young people, from service providers, school officials, public agencies, merchants, and members of the community. We appreciate all of this support, and are particularly thankful for the support Council has already given for the early, predevelopment phase of this project. We plan to acquire the site at 2700 Ash Street at the end of September. Acquisition will be made possible with the funds already approved by Sunnyvale, Los Altos, and the County of Santa Clara, along with those anticipated from the City of Palo Alto. An additional $50,000 that we have requested from Los Altos Hills, if approved, would be allocated for predevelopment expenses. We have asked our architiect to begin preparing working drawings, and plan to submit for plan check.in December. We anticipate receiving our building permit by February or March, and to close our initial HUD advance at that time as well. Construction would start in late February or March of 1997, and be compieted by the end of the year. Thank you again for your support of this wonderful project. Very sincerely, J ~t~e t Stone Project Coordinator cc: Catherine Siegel, Housing Coordinator