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Home My WebLink About2003-11-24 City Council (12)City of Palo Alto City Manager’s Report TO: FROM: HONORABLE CITY COUNCIL CITY MANAGER 10 DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE: SUBJECT: NOVEMBER 24, 2003 CMR:522:03 ADOPTION OF A RESOLUTION AUTHORIZING THE HOUSING AUTHORITY OF THE COUNTY OF SANTA CLARA TO ISSUE BONDS AND ACQUIRE MORTGAGE LOANS TO FINANCE THE ACQUISITION AND CONSTRUCTION OF A MULTIFAMILY RENTAL HOUSING PROJECT IN THE CITY OF PALO ALTO RECOMMENDATION Staff recommends that the City Council adopt the attached resolution that authorizes the Housing Authority of the County of Santa Clara to issue tax-exempt bonds to finance a portion of the development costs of the Opportunity Center housing and homeless services center project. BACKGROUND On March 3, 2003, Council approved a Planned Community Zone for the development of the Opportunity Center project located at 33, 39 and 45 Encina Avenue. The facility will include an 8,100 square foot day use and service center serving homeless adults and families and 89-units of permanent and transitional housing. The project is jointly sponsored by the Community Working Group, Inc. and the Housing Authority of Santa Clara County. The total development budget for the project is approximately $21.3 million. The City has provided $1,280,000 in Community Development Block Grant (CDBG) funds for site acquisition and predevelopment costs under an interim funding agreement approved by Council on July 22, 2002. Council also committed an additional $750,000 from the Residential Housing Fund for construction costs of the 89-units with its adoption of Budget Amendment Ordinance 4780 on March 3, 2003. DISCUSSION The Opportunity Center will be financed with a complex mix of public and private sources from federal, State and locals levels. The major sources of permanent funding, other than the City, will be the State’s Supportive Housing component of its Multifamily CMR:522:03 Page 1 of 3 Housing Program (MI-[P) ($7.5 million), the sale of non-competitive, four percent Low Income Housing Tax Credits (estimated at about $5.84 million), and the Santa Clara County Office of Affordable Housing ($2 million). Other sources of funding for the remainder of the $21.3 million development budget include grants from the Packard and Peninsula Community Foundations, the federal Department of Housing and Urban Development, the Housing Trust of Santa Clara County, and San Mateo and Santa Clara Counties. Recent progress has been made by the developer in securing key funding approval actions, including passing threshold review on the $7.5 million in State MHP funds and obtaining the $2 million award from the County Board of Supervisors. The Housing Authority will issue the tax-exempt bonds to fund a $9 million construction period loan. After completion of construction and occupancy of the housing units, these bonds are planned to be retired. The bonds will be repaid, at that time, with the permanent funding sources discussed above, specifically the State MHP funds and the proceeds of the housing tax credits. The Housing Authority intends to submit an application to the State for a tax-exempt bond allocation in mid-January. Under State law, the City must consent to the proposed provision of bond financing by the Housing Authority for a housing project located within Palo Alto’s city limits. Council approval of the attached resolution will satisfy that legal requirement. Staff will return to Council next spring, after all project funding is fully committed, for Council review and action on the final City loan documents and the City regulatory agreement covering the project. RESOURCE IMPACT The City does not assume any financial obligation or liability in connection with the bond issuance or by adoption of the attached resolution consenting to the Housing Authority’s issuance of the bonds. The City’s consent does not obligate it legally or financially or expose the City to a credit risk or to recourse for repayment of the bonds. The Housing Authority, in its role as the bond issuer, will bear all such risks. The use of tax-exempt bond financing is beneficial because it lowers the overall cost of developing the Opportunity Center. Other possible construction financing sources would result in higher interest costs. All costs of the bond issuance will be paid out of the bond proceeds. POLICY IMPLICATIONS The adoption of the resolution as recommended by staff will implement existing City policies particularly furthering the Council’s "Top Five" priority for the development of affordable housing. TIMELINE Below is an updated list of key milestones in the Opportunity Center project development schedule from the present to occupancy. CMR:522:03 Page 2 of 3 ¯City Council action authorizing the Housing Authority to issue tax-exempt bonds ¯Building permit submittal ¯Action by State to approve MHP funding ¯Application to State for tax-exempt bond allocation ¯Application for 4% Low Income Housing Tax Credits ¯City Council action on final financing agreements ¯Closing of construction funding and bond issuance ¯Project under construction ¯Occupancy November 24, 2003 Early December 2003 December 2003 Mid-January 2004 Late March 2004 April or May 2004 June 2004 June 2004 - May 2005 June 2005 ENVIRONMENTAL REVIEW Adoption of the resolution is categorically exempt under Section 15267 of the California Environmental Quality Act (CEQA) Guidelines. ATTACHMENTS A: Resolution of the City Council of the City of Palo Alto Authorizing the Housing Authority of the County of Santa Clara to Issue Bonds and Acquire Mortgage Loans to Finance the Acquisition and Construction of a Multifamily Rental Housing Project in the City of Palo Alto PREPARED BY: Catherine Si%el, HousingCoOrdinator DEPARTMENT HEAD REVIEW: ¯ STEPHEN A. Director of Planning and Community Environment CITY MANAGER APPROVAL: Assistant City Manager CMR:522:03 Page 3 of 3 ATTACHMENT A RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO AUTHORIZING THE HOUSING AUTHORITY OF THE COUNTY OF SANTA CLARA TO ISSUE BONDS AND ACQUIRE MORTGAGE LOANS TO FINANCE THE ACQUISITION AND CONSTRUCTION OF A MULTIFAMILY RENTAL HOUSING PROJECT IN THE CITY OF PALO ALTO WHEREAS, the Housing Authority of the County of Santa Clara (the "Authority") desires to engage in a multifamily rental housing finance program pursuant to Chapter 1 of Part 2 of Division 24 of the Health and Safety Code of the State of California (the "Act"), and to issue revenue bonds to finance the acquisition, construction, rehabilitation and development of multifamily rental housing in the County of Santa Clara, all as provided for in the Act (the "Program"); WHEREAS, the Authority intends, in the exercise of its powers under the Act and the Program, to issue bonds and make or acquire mortgage loans to finance the acquisition, construction and development of an 89-unit multifamily rental housing development located at 33, 39 and 45 Encina Way in the City of Palo Alto, which will be owned by Opportunity Center Associates L.P., a California limited partnership (or an affiliate or assign) (the "Project"); and WHEREAS, under Section 34209 of the California Health and Safety Code, the Authority may not take such actions with respect to the Project unless the consent of the City Council of the City of Palo Alto has been obtained; and WHEREAS, the City is willing to consent to authorize the Authority, in the exercise of its powers under the Act and the Program, to issue bonds and make or acquire mortgage loans to finance the acquisition and construction of the Project; NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION I. The City hereby consents to the Authority’s issuing bonds and making or acquiring mortgage loans under the Program, all as more specifically set forth in the Act, with respect to the Project, and further consents to the Authority’s exercising any or all of its powers for the purpose of financing mortgage loans pursuant to the Act and the Program with respect 031119 syn 0091398 1 to the Project. This Resolution is adopted solely for the purpose of satisfying Section 34209 of the California Health and Safety Code. The City will have no responsibilities relating to the Program. This Resolution shall not bind the City to any financial obligation or credit risk or allow any repayment recourse to the City and nothing herein shall be deemed to bind the City to make any expenditure or to incur indebtedness in relation to the Program or the revenue bonds referred to above. This Resolution shall not alter any term or condition of any agreements entered into by the City with the developer of the Project. SECTION 2. The Council finds that the adoption of this resolution is not a project under the CEQA Guidelines and, therefore, no environmental review is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST:APPROVED: City Clerk APPROVED AS TO FORM: Senior Asst. City Attorney Mayor City Manager Director of Planning and Community Environment 031119 syn 0091398