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HomeMy WebLinkAboutStaff Report 321-10TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DATE: AUGUST 2, 2010 REPORT TYPE: CONSENT ITEM DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT CMR: 321:10 SUBJECT: Adoption of a Resolution Authorizing the City Manager to Submit a Grant Application to the State of California Department of Housing and Community Development from HOME Investment Partnerships Program (HOME) Funding for 801 Alma Family Housing Project for an Amount Up to $3 million EXECUTIVE SUMMARY The recommended action will enable the City of Palo to submit a grant application to obtain HOME funds for housing programs and activities, to provide additional funding to Eden Housing, Inc. and Community Housing Alliance to fill an existing funding gap for the development of a50-unit 100% affordable housing project for extremely-low and very-low income households at 801 Alma Street. In addition, if the application is successful, the additional funding for the project will allow the developers, Eden Housing and Community Housing Alliance, to submit a competitive application for the Low Income Housing Tax Credit Allocation earlier than anticipated. No monies from the General Fund will be committed and used. The HOME Investment Partnership Program is a type of federal assistance provided by the United States Housing and Urban Development Department to state and local governments to create and maintain affordable housing. RECOMMENDATION Staff recommends that the City Council adopt a resolution authorizing the City Manager to submit a grant application to the State for an amount up to $3 million from the State of California HOME Investment Partnerships Program, and to accept the grant and execute the grant agreement and any other documents required to implement the grant. BACKGROUND On June 1, 2010, the State of California Department of Housing and Community Development release a Notice of Funding Availability (NOFA) funded by HOME Investment Partnerships Program. Applications are due September 1, 2010, and grant awards will be announced by December 2010 or January 201 i. A total of $58 million is available, with $32 million for rental housing projects, $23 million for programs, and $3 million for First Time Homebuyer Program funds. Grant applications for rental projects using Low Income Housing Tax Credits may apply for CMR: 321:10 Page 1 of4 · up to $3 million. No matching funds from the applicant are required. The State grant funds must be used by the applicant( s) for the construction or rehabilitation of very low and low-income rental housing, with assisted units serving households with incomes not exceeding 60 percent ofthe area median income. The City will have 30 months to expend the funds following the award date. Applications for HOME funds are only accepted from cities and counties that have not been designated as participating jurisdictions by the United State Housing and Urban Department and are not participants in a HOME consortium, and certified Community Housing Development Organizations (CHDOs). The City of Palo Alto is one of the cities eligible to apply for HOME funds from the State of California Department of Housing and Community Development. Since neither Eden Housing nor Community Housing Alliance is a CHDO and eligible to directly apply for funding, the City will be applying for HOME funds for the construction of 80 1 Alma Street project. DISCUSSION Use of Grant Award Staff proposes that the City apply for an amount up to $3 million. Ifthe application is successful, the award will be provided to Eden Housing and Community Housing Alliance in the form of a loan for the construction ofthe 50-unit affordable family housing located at 801 Alma Street. The additional funding for the project will significantly reduce Eden Housing and Community Housing Alliance's need for a fundraising campaign, and will help them submit a competitive application for tax credits in 2011 rather than 2012. The loan to Eden Housing and Community Housing Alliance will have similar terms as the existing City loan, which is evidenced by a Note and Deed of Trust secured by the property. The Note will bear simple interest at 3% per annum, and no payments of principal or interest will be due until the fifty-fifth (55 th ) anniversary of the date ofthe Note. The loan will be forgiven in its entirety on the maturity date subject to and in accordance with Section 7.2.5 ofthe Acquisition and Development Agreement dated August 6, 2007 by and between the Eden Housing and Community Housing. In return, the proposed project will be affordable to extremely low and very low income households, and the affordability restrictions will be in place for a minimum of 55 years after the issuance of a certificate of occupancy. The loan terms are typical to this type of development and similar to other affordable housing properties and developments funded with City funds. Some of the City's standard loan terms described here may need to be modified to meet the requirements of other lenders or funding programs for construction or permanent sources of funds. Project Description On November 9, 2009, the City Council certified an Environmental Impact Report and approved Architectural Review for a proposed 50-unit family affordable housing project at 801 Alma Street, sponsored by Eden Housing and Community Housing Alliance. The 50 affordable units will be rented to low, very low and extremely low income households earning between 20% and 50% ofthe area median income in a mix of one, two, and three bedroom units. Eden Housing and Community CMR: 321:10 Page 2 of4 Housing Alliance estimate the overall development cost for the project to be approximately $29 million. As of this date, Eden Housing and Community Housing Alliance have received a funding commitment from the County in the amount of $1.6 million for construction and are pursuing additional funding from the County. For the last several months, Eden Housing and Community Housing Alliance have focused most of their efforts on raising additional funding for the project. The Community Working Group, the affiliate of Community Housing Alliance, is leading the efforts for a fundraising campaign that has been plauned and is just underway. RESOURCE IMPACT A $3 million grant award will significantly increase the City's resources for very low-income rental housing. With the lack of recent and projected new commercial development and the allocation of projected revenues from in-lieu fee payments for BMR requirements, available housing funds have been low. As applicant, the City may use up to $50,000 ofthe total grant award for administrative costs. POLICY IMPLICATIONS The actions recommended in this report implement the City's adopted Housing Element policies and programs supporting the development of very low and extremely low income housing. Acceptance of the grant will obligate the City to utilize the grant funds for rental housing projects that meet the HOME requirements, and use the funds for the construction of the 801 Alma Street project. The HOME grant application is consistent with adopted City housing policies as expressed in the Comprehensive Plan's Housing Element, the HUD Consolidated Plan, and past Council actions, which will help the City address State requirements for meeting housing needs of this population. These 50 units will be counted towards the City's housing production goals for the 2007 to 2014 Housing Element period. ENVIRONMENTAL REVIEW The grant application is not considered a project subject to the California Environmental Quality Act (CEQA). If grant funds are awarded for an affordable housing project, the designated project would be subject to CEQA. The CEQA compliance for 801 Alma St. Family Housing was completed last year. PREPARED BY: DEPARTMENT HEAD REVIEW: CJN\ 'JJ\~ CURTIS WILLIAMS Director ofPlauning and Community Environment CMR: 321:10 Page 3 of 4 CITY MANAGER APPROVAL: ATTACHMENT JA Cit Attachment A: Resolution of the Council of the City of Palo Alto Authorizing the City Manager to submit a grant application to the State of California Department of Housing and Community Development for the HOME Investment Partnerships Program ("HOME") Funding for 801 Alma Family Housing Project for an amount up to $3 million COURTESY COPIES Eden Housing, Inc. Community Housing Alliance, Inc. CMR: 321:10 Page 4 of4 ATTACHMENT A Not Yet Approved Resolution No. Resolution of the Council of the City of Palo Alto Authorizing the City Manager to Submit a Grant Application to the State of California Department of Housing and Community Development for the HOME Investment Partnerships Program ("HOME") Funding for 80 I Alma Family Housing Project for an Amount Up to $3 Million WHEREAS, The California Department of Housing and Community Development (the "Department") is authorized to allocate HOME Investment Partnerships Program ("HOME") funds made available from the U.S. Department of Housing and Urban Developme_nt ("HUD"). HOME funds are to be used for the purposes set forth in Title II of the Cranston-Gonzalez National Affordable Housing Act of 1990, in federal implementing regulations set forth in Title 24 of the Code of Federal Regulations, part 92, and in Title 25 of the California Code of Regnlations commencing with section 8200; and WHEREAS, on June 1, 2010 the Department issued a 2010 Notice of Funding Availability announcing the availability offunds under the HOME program (the "NOFA"); and WHEREAS, in response to the 2010 NOFA, the City of Palo Alto, a municipal corporation, (the "Applicant"), wishes to apply to the Department for, and receive an allocation of, HOME funds. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION 1. In response to the 2010 NOFA, the Applicant shall submit an application to the Department to participate in the HOME program and for an allocation of funds not to exceed Three Million Dollars ($3,000,000) for the following activities and/or programs: construction of 50-unit affordable family housing project located at 801 Alma St., Palo Alto, CA. SECTION 2. If the application for funding is approved, then the Applicant hereby agrees to use the HOME funds for eligible activities in the manner presented in its application as approved by the Department in accordance with the statutes and regulations cited above. SECTION 3. The City Manager is hereby authorized and empowered to execute in the name of the City of Palo Alto all necessary documents to effectuate the purpose of this resolution, including but not limited to: (1) Making application to State Department of Housing and Community Development HOME Investment Partnerships Program for an amount up to Three Million Dollars ($3,000,000). 1 100719 'yn 0120454 " Not Yet Approved (2) Executing a Standard Agreement with State Department of Housing and Community Development and any amendments thereof, and any related documents necessary to participate in the HOME Investment Partnerships Program. SECTION 4. The Council finds that the application for the HOME funds is not considered a project under the California Environmental Quality Act. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST: City Clerk APPROVED AS TO FORM: Assistant City Attorney 100719 syn 0120454 2 APPROVED: Mayor City Manager Director of Planning and Community Environment Director of Administrative Services