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City of Palo Alto (ID # 3176)
City Council Staff Report
Report Type: Action ItemsMeeting Date: 11/5/2012
Summary Title: Stevenson House Loan Commitment
Title: Adoption of Budget Amendment Ordinance to Provide Appropriation of
$1 Million for a Loan Commitment for the Rehabilitation of Stevenson House
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that the City Council approve the Palo Alto Senior Housing Project, Inc.
request to commit $1,000,000 for the rehabilitation of Stevenson House by adopting the
attached Budget Amendment Ordinance to allocate $1,000,000 from the Stanford University
Medical Center Project’s Infrastructure, Sustainable Neighborhoods and Communities, and
Affordable Housing community benefit payment for the rehabilitation.
Executive Summary
Palo Alto Senior Housing Project, Inc. (PASHPI) has requested $1,000,000 of City funds in order
to finance the complete rehabilitation of the Stevenson House facility, a 120-unit senior
affordable development that has served the City’s extremely low, very low and low income
senior population for forty-three years. Council approval of the recommended actions will
formalize the City’s commitment to provide financial assistance for the rehabilitation. A Budget
Amendment Ordinance (BAO) is attached. The formal loan documents will be brought forth for
Council consideration in April/May 2013.
Background
Stevenson House, located at 435 E. Charleston Road, has been serving extremely low, very low
and low income Palo Alto seniors for forty-three years. Built in 1968, Stevenson House consists
of 120 studio and one bedroom units. In addition to providing affordable housing, it offers
services, meals and social programs for its residents. Currently, more than 80% of the resident
population has incomes that qualify as extremely low income.
Palo Alto Senior Housing Project, Inc. (PASHPI) is the developer, owner and operator of
Stevenson House. Originally funded through HUD Section 202 funds, the building has been well
maintained over its lifespan. However, certain building system components have recently
begun to near the end of their useful lives. PASHPI has received Community Development
Block Grant (CDBG) funding to repair some of those systems but a more comprehensive
recapitalization is necessary to insure the long term viability of the facility.
Over the past 17 years, the City of Palo Alto has provided CDBG funds to assist in repairing
some of the older systems. Approximately $1.2 million has been allocated to the Stevenson
House since 1995. The breakdown of CDBG funding for Stevenson House is presented in the
table below:
Discussion
Project Site and Description
Stevenson House is comprised of three buildings which house 120 units, a commercial kitchen
and other support space, on a 2.32 acre site. Two buildings are three story structures and the
third building is two stories. Some of the amenities that are provided for the residents include
health, social, recreational and art programs. In addition, a nurse visits on a weekly basis to
provide simple tests, advice and referrals. Because of its location, the residents are within close
proximity to services offered in Mitchell Park and Cubberley Community Center.
Scope of Rehabilitation Project
The existing structures will be completely rehabilitated to insure their long term functionality.
The proposed rehabilitation work for Stevenson House includes:
Seismic Upgrades to the buildings
New Roof
Re-pipe Building Water Distribution Systems
Finalize Sewer Line Replacement
Fiscal Year Project Description Allocation Amount
1994/1995 Accessibility $21,000.00
1991/1992 &
1992/1993 Deck/Fire Alarms $55,000.00
1997/1998 Building A Reroof $48,000.00
2002/2003 Emergency Call System $50,000.00
2004/2005 Hot Water Piping & Freezer Project $83,260.00
2006/2007 Windows & Doors $370,000.00
2007/2008 Radiant Heating Project $144,259.00
2008/2009
(CDBG-R) Sewer Pipe System Repair & Renovation $34,100.00
2010/2011 Sewer Repair Project $478,808.00
TOTAL $1,208,427.00
Improve Accessibility to Apartments and Common Areas
Reconfigure Common Area Spaces.
New Finishes and Appliances to Apartment Units
Project Financing and Budget
PASHPI proposes to retain a fee interest in the land and enter into a ground lease with the new
Tax Credit Limited Partnership of which an affiliate of PASHPI will be the managing general
partner. Proceeds from the lease to the Limited Partnership to PASHPI will be used to help
finance the rehabilitation of the buildings in the form of a seller carryback loan.
The Project budget for the proposed rehabilitation is $40,549,000. The proposed funding
sources are as follows:
Low Income Tax Credit $10,522,000
Tax Exempt Bonds $11,900,000
County Loan $4,000,000
Seller Carryback Loan $13,200,000
Capitalized Soft Loan Interest $637,000
City of Palo Alto $1,000,000
Total Budget $40,549,000
The Uses of the funds include:
Prepaid Ground Lease $6,000,000
Acquisition of Improvements $13,200,000
Architect, Engineer & Other Consultants $1,836,000
Construction and Permits $11,262,000
Financing Costs $2,580,000
Contingencies & Reserves $1,557,000
Other Costs (Legal, Insurance, Relocation, etc.) $4,114,000
Total Use of Funds $40,549,000
Project Timeline
The rehabilitation work is projected to start in the Summer 2013. PASHPI is in the process of
securing other financing.
June 2012 County to approve funding application
July 2012 Submit HUD prepayment
October 2012 City to approve funding commitment
March 2013 Submit TCAC/CDLAC applications
May 2013 Close on City Loan
July 2013 Close on Construction Loan
Begin Construction
Loan Agreement
Staff anticipates that the City’s $1,000,000 Loan Agreement will be similar to other approved
loans. The loan will be evidenced by a Note and Deed of Trust secured by the property. The
Note will bear simple interest at 3% per annum, and payments will be made from residual
receipts over and above the project’s net operating income expenses and will be divided among
other funding agencies based on the City’s proportionate share of its funding to total
development costs. No interest will accrue and no payments will be required until after the
project is constructed and occupied. Due to the deep affordability of the rents, it is not
expected that cash flow will be sufficient to pay the annual interest in full. 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. 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.
The loan documents will be brought back to the Council for consideration in April/May 2013.
Resource Impacts
The proposed source of funding for the $1.0 million Stevenson loan is from monies targeted
under the Stanford University Medical Center (SUMC) Development Agreement (DA) for
“Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing.”
Although the balance for Infrastructure, Sustainable Neighborhoods and Communities and
Affordable Housing is $7.5 million, the DA stipulated that a minimum of $1.7 million must be
allocated for affordable housing.
Staff requests that Council indicate its firm intent to loan $1.0 million from these monies for the
Stevenson project by approving the attached Budget Amendment Ordinance. Since loans will
not be made from the SUMC Fund, the BAO requests a transfer of $1.0 million from the
Affordable Housing of the SUMC Fund to the Residential Housing In-Lieu Fund. It is anticipated
that the loan will be needed in April-May 2013. At that time, staff will bring loan documents for
the $1.0 million loan amount.
It is important to note that fund allocations from the SUMC will be discussed with Council on
November 13, 2012. Some SUMC funds have been allocated to Project Safety Net and to site
and circulation planning and design for the 27 University site.
Typically, the City would utilize funds from the Residential Housing and Commercial Housing
Funds for the Stevenson project. Currently, the fund balances in those funds are $4.7 million
and $1.6 million, respectively. Staff proposes, however, to allocate these funds to another
affordable housing development (Maybell Avenue Site Acquisition by the Palo Alto Housing
Corporation, Staff Report 3183). Council’s approval of the BAO will increase the Residential
Housing Fund by $1.0 million for a balance of $5.7 million.
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. Policy H-12 calls for encouraging, foster and preserve diverse housing opportunities
for very low-, low- and moderate-income households. In addition, Policy H-18 supports housing
that incorporates facilities and services to meet the health care, transit, or social service needs
of households with special needs, including seniors and persons with disabilities. The project is
a 100% affordable housing project and serves seniors who are earning 30 to 60 percent of the
area wide median income. A large percentage of Palo Alto’s seniors are in this targeted income
range. This population is underserved in the City and cannot afford to pay market rate rents.
Please note that because the Stevenson House units are already deed restricted, the City will
not receive any “credit” towards its 2007-2014 Regional Housing Needs Allocation (RHNA)
numbers.
Environmental Review
The work proposed is all in the nature of maintenance and rehabilitation of the existing facility,
which is exempt from review under the California Environmental Quality Act (“CEQA”) pursuant
to CEQA Guidelines section 15301.
Attachments:
Attachment A: Budget Amendment Ordinance (DOCX)
Prepared By: Tim Wong, Senior Planner
Department Head: Curtis Williams, Director
City Manager Approval: ____________________________________
James Keene, City Manager
ATTACHMENT A
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING THE BUDGET FOR FISCAL YEAR 2013 TO
PROVIDE ADDITIONAL APPROPRIATION OF $1,000,000
FROM THE STANFORD UNIVERSITY MEDICAL CENTER
(SUMC) INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS
AND COMMUNITIES, AND AFFORDABLE HOUSING FUND FOR
A LOAN COMMITMENT FOR STEVENSON HOUSE
REHABILITATION
The Council of the City of Palo Alto does ordain as
follows:
SECTION 1. The Council of the City of Palo Alto finds
and determines as follows:
A. Pursuant to the provisions of Section 12 of Article
III of the Charter of the City of Palo Alto, the Council on
June 18, 2012 did adopt a budget for Fiscal Year 2013; and
B. The 2011 Stanford University Medical Center (SUMC)
Development Agreement provided funds for use in connection
and with infrastructure, sustainable neighborhoods and
communities, and affordable housing; and
C. Available balance in the Infrastructure,
Sustainable Neighborhoods and Communities, and Affordable
Housing Fund is Seven Million Five Hundred Eighty-three
Thousand, Three Hundred Thirty-three Dollars ($7,583,333);
and
D. An amount of One Million Seven Hundred Twenty
Thousand Four Hundred Eighty-eight Dollars ($1,720,488) was
specifically identified in the agreement to be used in the
same manner as funds collected by the City pursuant to its
housing fee ordinance; and
E. An allocation in the amount of One Million Dollars
($1,000,000) is needed for a loan commitment to Palo Alto
Senior Housing Project, Inc. (PASHPI); and
F. Funding for the loan will be transferred to the
Residential Housing In-Lieu Fund; and
G. City Council authorization is needed to amend the
Fiscal Year 2013 Operating Budget as hereinafter set forth.
SECTION 2. The sum of One Million Dollars ($1,000,000)
is hereby appropriated to Grants and Subsidies in the
Residential Housing In-Lieu Fund and the Affordable Housing
portion of the SUMC Infrastructure, Sustainable
Neighborhoods and Communities, and Affordable Housing
balance is reduced by One Million Dollars ($1,000,000).
SECTION 3. The Affordable Housing portion of the SUMC
Development Agreement Fund is hereby reduced by One Million
Dollars ($1,000,000) to Seven Hundred Twenty Thousand Four
Hundred Eighty-eight Dollars ($720,488).
SECTION 4. The balance of the Infrastructure,
Sustainable Neighborhood and Communities, and Affordable
Housing portion of the SUMC Development Agreement Fund is
reduced to Six Million Five Hundred Eighty-three Thousand
Three Hundred Thirty-three Dollars ($6,583,333).
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. As provided in Section 2.04.330 of the Palo
Alto Municipal Code, this ordinance shall become effective
upon adoption.
SECTION 7. The proposed rehabilitation project is for
repair and maintenance of an existing structure and is
exempt from review under the California Environmental
Quality Act pursuant to CEQA Guidelines section 15301.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST: APPROVED:
__________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: ___________________________
City Manager
__________________________ ___________________________
Director of Public Works
___________________________
Director of Administrative
Services