HomeMy WebLinkAbout2002-07-22 City Council (5)City of Palo Alto
Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: PLANNING AND
COMMUNITY ENVIRONMENT
DATE:JULY 22, 2002 CMR:352:02
SUBJECT:COUNCIL APPROVAL OF AN AGREEMENT AMONG THE CITY
OF PALO ALTO, THE HOUSING AUTHORITY OF THE COUNTY
OF SANTA CLARA, AND THE COMMUNITY WORKING GROUP
PROVIDING $1,280,000 IN COMMUNITY DEVELOPMENT BLOCK
GRANT FUNDS FOR. PRE-DEVELOPMENT, SITE ACQUISITION,
AND PRE-CONSTRUCTION EXPENSES FOR THE OPPORTUNITY
CENTER FOR THE MID-PENNINSULA PROJECT ON ENCINA
AVENUE
REPORT IN BRIEF
In previous actions on May 7, 2001 and May 13, 2002, the Council approved a total
allocation of $1,280,000 in Community Development Block Grant (CDBG) funds for the
Opportunity Center project sponsored by the Community Working Group (CWG). Staff
recommends that Council approve the attached interim loan agreement providing the
previously allocated $1,280,000 in CDBG funds for pre-development, site acquisition and
pre-construction expenses. The Opportunity Center facility as now proposed would provide
about 9,000 square feet of space for a center for day use and the delivery of social services
for homeless adults and families; and 95-units of permanent and transitional housing. The
Opportunity Center would house existing homeless services presently located in inadequate
and scattered sites in Palo Alto and the mid-peninsula area. The facility would be located
on a 18,178 square foot site at what is presently known as 33, 39 and 45 Encina Avenue
between E1 Camino Real and the Urban Lane entrance .to the. Palo Alto Medical Clinic.
CWG has partnered with the Housing Authority of the County of Santa Clara (Housing
Authority) and Innvision to acquire the site, develop and construct the project and operate
the facility. CWG has purchased two of the three lots (33 and 39 Encina) needed for the
project with private foundation grants. The Housing Authority is in the process of acquiring
the third parcel at 45 Encina.
CMR:352:02 Page 1 of 10
Significant development funding of $3,880,000 has been committed by San Mateo County,
the County of Santa Clara, the federal government and private foundation donors.
However, major funding still needs to be obtained, primarily the competitive Low Income
Housing Tax Credits (over $9 million) and additional private fundraising and charitable
donations (about $4.7 million) as part:of the estimated $18.6 million development budget.
Innvision, an experienced provider of homeless services and transitional housing, would be
responsible for operations and ongoing operating costs.
CMR:352:02 Page 2 of 10
RECOMMENDATION
Staffrecommends that the City Council:
Approve the attached interim funding agreement, which provides a City loan of
$1,280,000 for pre-development, site acquisition and pre-construction expenses.
Authorize the Mayor to execute the attached agreement in substantially similar form;
direct the City Manager to execute any other documents required to complete the
transaction and to secure the City’s loan against the property and to administer the
provisions of the agreement.
BACKGROUND
The impetus for the formation of the Community Working Group (CWG) and the concept
of the Opportunity Center project was the flooding of February 1998 that temporarily shut
down the Urban Ministry’s drop-in facility located behind the Red Cross building. A
broad-based group of community members, service providers, business representatives,
local government and. religious organization representatives and persons who had
experienced homelessness was formed with the goal of developing a mixed use facility to
house multiple services for the homeless and those at risk of becoming homeless. From
mid-1998 to late 1999, CWG established itself as a non-profit organization, raised over
$1.25 million in foundation and individual grants and sought a site for the center.
After an extensive search, purchase contracts were entered into for the two parcels located
at 33 and 39 Encina Avenue, which total 13,260 square feet. In November 1999, CWG
took title to 33 Encina completing the $655,000 purchase using foundation grants. In
September 1999, a purchase contract for 39 Encina was executed by CWG. Escrow closed
and CWG became the legal owner on April 17, 2002. CWG paid the $396,000 purchase
price with foundation grant funds.. 39 Encina is also now owned free of liens, with the
exception of a claim by the former subleasee of a right to purchase.
Originally, CWG’s founders planned to construct a 7,800 square foot, one-story facility on
the two Encina Avenue lots. They planned a one-stop service facility for homeless persons,
including a day center and the provision of functions such as a clothes closet, showers,
laundry, meeting and classroom spaces, message center and space for social services
including case management and Urban Ministry staff. No overnight shelter beds or housing
units were planned initially. The original development budget was about $1.8 million plus
land costs. The City provided CWG with a $25,000 planning grant for design studies
funded from FY 2000 - 01 CDBG funds.
In response to the urgent need for housing affordable by the intended clients of the service
center, the site plan was revised by the end of 2000 to include 55-units of Single Room
Occupancy (SRO) housing in a four-story structure with two levels of underground parking.
Both single persons and families would be served with separate facilities. The total
CMR:352:02 Page 3 of 10
development budget expanded to approximately $13 million, to be funded with federal,
State; local and private grants and housing tax credits. CWG brought in the Housing
Authority of Santa Clara County as lead developer and selected Innvision, an experienced
operator of homeless service centers and transitional housing, as the operator. However,
this site plan had problems in its layout and cost efficiency. Also, a 55-unit SRO housing
development is not an optimum size from the standpoint of ongoing operating costs.
CWG made the decision in the fall of 2001 to pursue acquisition of the adjoining 6,060
square foot parcel at 45 Encina. The additional parcel increases the total site to 18,178
square feet. It allows the construction of 95-units of permanent and transitional housing, a
larger service center of 8,900 square feet and 53Parking spaces in two underground levels.
The May. 13, 2002 ~taff report [CMR:253:02] discussed CWG’s attempts to acquire 45
Encina and the claim by the former commercial tenant of 39 Encina of a purchase option.
The Housing Authority has agreed to utilize its powers of eminent domain, if necessary, to
resolve the site control obstacles. Council also,passed a resolution, on May 13, 2002,
consenting to the Housing Authority’s business operations within the City, including its use
of eminent domain powers to secure clear title to the entire project site. At this time it
seems that the proposed development plan is feasible and makes the best use of the
property. The site plan takes advantage of the sharing of certain spaces and functions
between the service center and the housing achieving efficiencies of space and cost - both
development costs and ongoing operating costs. .’
The project team includes Rob Wellington Quigley, an awarded winning architect who
specializes in community facilities and SRO affordable housing. Mr. Quigley designed the
Alma Place project. Periodic study sessions have been held with the Architectural Review
Board (ARB) to obtain early feedback as the project has evolved. Most recently, on June 6,
2002, the ARB held a pre-application study session on the latest design. The response from
the ARB has been constructive and favorable. Principal issues which require further study
and development include building height, accommodation for existing protected trees, the
design of the Encina elevation and the amount and location of the parking. A neighborhood
outreach meeting to discuss the preliminary design and the programmatic concept is also
being planned. Meetings have been initiated with the immediately adjoining property
owners and businesses including the Palo Alto Medical Clinic.
DISCUSSION
Council previously allocated CWG $480,000 in FY 2001 - 02 CDBG funds to be used for
predevelopment, relocation and land acquisition costs. Those funds have been combined
with the $800,000 allocated by Council on May 13, 2002 from the FY 2002 - 03 CDBG
budget so that a total of $1,280,000 in City CDBG funds are now available and being
obligated under the attached agreement. The City’s funds will be provided in the form of a
loan that will be administered by the Housing Authority as the contracting entity for all
consultants and studies and acting as the fiscal administrator for all contracts and funds.
CMR:352:02 Page 4 of 10
The City loan will be interest-free, with no payments required during th~ pre-development
period. It will be a joint obligation of both CWG and the Housing Authority, but will only
be secured by the land. ’ Prior to the start of construction, or earlier if necessary, the three
parties intend to enter into permanent agreements for financing, Construction and long-term
occupancy and operation of the facility. While the terms of the City’s permanent loan have
yet to be negotiated and are dependant upon the requirements of the other financing that is
obtained to build the project, it is not likely that the City’s funding will be repaid in the
foreseeable future. Unless a substantial amount of Section 8 rental assistance can be
provided for the housing units, it is unlikely that the housing component will produce
enough positive cash flow. to repay secondary debt. Also, if possible, cash flow from the
housing will likely be used to support the operations of the homeless service center.
Initially, a deed of trust recorded against 33 and 39 Encina will be the security for the City’s
$1.28 million note. The City’s loan amount exceeds the value of those two parcels both
using the combined purchase price ($1,051,000) or the current estimated market value for
commercial use of about $99 per square foot ($1,198,989). However, actual disbursements
to CWG and the Housing Authority will not exceed $350,000 until deposits are made for
the acquisition of 45 Encina. Upon acquisition of 45 Encina, that parcel will provide
further security for the City’s loan. The value of the entire site, based on a current appraisal
is between $1,450,000 (if used for housing) and $1,800,000 (for commercial use).
About $300,000 of City funds will be used for pre-development expenses related to the
design studies and the PC zone application. About $700,000 of the City loan is for
acquisition and related costs .for the 39 and 45 Encina parcels. The remaining $250,000 is
to be reserved as a contingency for unforeseen expenses connected with acquisition costs.
However, the agreement provides that after completion of the eminent domain proceedings,
the unexpended portion of the $250,000 can be transferred to other eligible costs such as
architecture and engineering without further Council action.The detailed budget is
attached as Exhibit E to the agreement.
Performance Measures .
This interim funding agreement is inteMed to provide City funding immediately to the
developers to allow acquisition of the 45 Encina parcel to proceed as quickly as possible
and to cover a portion of the costs of the architectural and other consultant studies needed
for the zoning entitlements. It is important to the project schedule that the developer secure
full control of the site because the City cannot accept the official submittal of PC zone
application without the consent of each of the owners Of the site. Major performance
measures for the developer during the pre-development and site control period are:
o Secure sign-off and closure of testing and clean-up, if necessary, on 33 and 39 Encina
and complete final environmental report on 45 Encina; summarize current status of
environmental studies, testing and resolution of any issues in a written document to the
satisfaction of the City Manager;
®Achieve control of entire site by September 30, 2002, which is defined as legal title, or a
CMR:352:02 Page 5 of 10
binding purchase contract in the name of CWG or the Housing Authi~rity, or the filing
of a request for "Order of Immediate Possession" with the Superior Court. (The
agreement allows the City Manager to approve an extension of this deadline to
November 30, 2002 providing significant progress has been made towards full site
control by September 30, 2002.) ;
Submit formal PC zone change application within 30-days of obtaining control of entire
site;
Finalize contracts for county CDBG and / or HOME funding (San Mateo County and
Santa Clara County) by December 31, 2002;
Submit applications for other development funding such as County Housing Trust Fund,
Sobrato Fund, additional McKinney Act funds, State homeless program funds, as
appropriate;
Continue analysis of financing alternatives and provide monthly updates to City on
revisions to development costs and sources, of funding;
Secure City Manager’s advance consent to the selected financing plan;
Complete formation of legal ownership, air rights and lease structures and shared use
arrangements (such as for the parking and common areas in the facility) prior to start of
construction;
Upon approval by Council of the PC zone:
Submit applications for principal construction financing including bank construction
loan, permanent bank loan, Low Income Housing Tax Credits, tax-exempt bond
allocation, as applicable based on final financing scheme;
Apply to City and complete merger of the three parcels and transfer ownership of the
land to one entity;
Initiate CWG-sponsored fundraising campaign for capital costs and operating fund
endowment.
Status of Site Environmental Conditions & Hazardous Material Issues
The developers have completed Phase I environmental studies on all three parcels. The
Phase I for 33 and 39 Encina did not find evidence_of any underground storage tanks nor
did it recommend any soil testing. The former tenant of 33 and 39 Encina is currently in the
process of completing Fire Department requirements for a closure plan related to its storage
on the site of typical hazardous materials used in auto repair businesses. As part of the
closure plan, testing of soil in areas where such materials were stored or used was recently
conducted. Preliminary results of the soil tests should be available prior to Council action
on this agreement. Any necessary clean-up of 33 and 39 Encina will be the responsibility of
CWG and the former tenant. The Phase I on 45 Encina recommends that testing.of soil
should be completed because the property was used for at least twenty years by a prior
tenant as a refrigerator and appliance repair business. The Housing Authority intends to
conduct soil testing as soon as it is able to get access to the site. The project development
budget includes a significant contingency amount for clean-up in case that is necessary.
The City funding agreement also provides that no disbursement of the City loan shall be
made until the City Manager is satisfied with the environmental condition of the site and the
CMR:352:02 Page 6 of 10
plans and resources for remediation, if any.
Termination of Agreement
The interim agreement terminates on December 31, 2003; the City Manager can approve a
one-year extension to the end of 2004. During this period, the developers intend to secure
clear ownership of the site, complete all zoning and planning entitlements, and apply for
and obtain all financing and donations necessary to construct the project. No compensation
for CWG or,the Housing Authority is to be made unless the project is actually constructed.
Compensation will be from a developer fee built into the project’s permanent funding
budget, with the amount and terms of payment subject to City approval as part of the final
funding agreements. The interim agreement contains protections for the interests of the
City should the developers not meet the performance measures by the termination deadline.
The City note becomes due in full or the City can elect to exercise a right to acquire the site
in return for forgiving the balance due on the note. In the event of default, interest on the
City note accrues at 10 percent per annum.
The agreement also provides guidance for the unlikely situation that the current
development team of CWG and the Housing Authority should dissolve and not be able to
pursue the project to completion. The City’s primary concern, should this occur, would be
to provide the opportunity for another developer to be selected to complete the project as
currently planned, or, if that was infeasible, then to. proceed with a modified or scaled down
project. In this case, the City must approve any substitute entity for either of the developers.
Both CWG and the Housing Authority agree to assign to the other party, or to such a
substitute developer, their rights to the land, grants and loans for the project, contracts,
consultant work and other assets necessary to complete the planned development. This
interim agreement does not attempt to describe in full how such a workout would be
accomplished. The settlement and disposition of the various assets, work products and
other matters would have to be negotiated and would depend, to a large extent, on the
circumstances prevailing at that time.
RESOURCE IMPACT
The project’s financing is complex as some sources can only pay for housing costs and
others can only pay for the service center. In general, greater resources are potentially
available for the housing component than the service center. The preliminary financing
plan attempts to utilize the various funding sources so that building the housing essentially
helps to support the service center part of the project. The following funding has been
committed for site acquisition, pre-development and capital development costs, as of July
2002:
$1,280,000
$1,250,000
$150,000
$300,000
City of Palo Alto CDBG (FY 01-02 and 02-03)
Foundation grants [$1,000,000 - Packard Foundation and $250,000 -
Peninsula Community Foundation]
San Mateo County CDBG (FY01-02)
San Mateo County HOME funds (FY 02-03)
CMR:352:02 Page 7 of 10
$500,000
$400,000
Santa Clara County HOME funds
HUD McKinney Act Supportive Housing Program (SHP) [plus
$122,200 for operating costs and administration]
$3,880,000 TOTAL COMMITTED DEVELOPMENT FUNDS
Possibility of Future Additional City Funding.
Previously, CWG applied for more City funding than has been recommended by staff and
approved by Council. In December 2001, for example, CWG applied for $2,215,000 in
City funds, of which $1,000,000 was requested as federal HOME funds from a City
application to the State. The HOME application cycle occurs once each year and the next
deadline is October 1, 2002. Because the project will not have the PC zone approved by
that date, it will not be a viable project for an October 2002 application.
All unexpended and projected City Housing Reserve Funds and the next three years CDBG
housing funds are either appropriated to the 53-unit Oak Court family housing or are being
held for City acquisition of land for a future multi-family rental project. At this point, the
Opportunity Center project has sufficient funding to proceed through the predevelopment
phase. After the developer has secured the planning entitlements, sought other funding
sources and finalized the financing plan, then, if there was a demonstrated funding gap, the
developer would probably return with a request for additional City subsidies.
While the project development budget is being continually refined and should still be
considered preliminary, the total cost of the development is estimated presently at
approximately $18.6 million. The development costs are allocated between the housing
component and the service center as follows:
[]$3,400,000 18% - Services Center
,$15,200,000 82% - 95-Housing Units
The following sources of financing are being considered at this time:
[]1st Mortgage
[]Investor equity (Low Income Housing Tax Credits)
[]City of Palo Alto CDBG loan
[]Housing Trust of Santa Clara County.
[]HUD - McKinney Supportive Housing Program
[]County of Santa Clara (CDBG & HOME)
[]County of San Mateo (CDBG & HOME)
[]Packard Foundation
[]Peninsula Community Foundation
[]Private Donations (for Service Center component)
[]General Partner Capital Contribution
TOTAL SOURCES OF FUNDS
$212,979
$9,328~621
$1,280,000
$500,000
$400,000
$500,000
$450,0O0
$1,000,000
$25O,0O0
$2,183,537
$2,534,220
$18,639,357
CMR:352:02 Page 8 of 10
POLICY IMPLICATIONS
The actions recommended in this report implement existing City policies including
furthering the Council’s "Top Five" priority of affordable housing..These actions also
implement the Council adopted tKJD Consolidated Plan and the 2002 - 03 Annual CDBG
Action Plan.
TIMELINE
Below is a tentative list of key milestones in the development process, assuming that the
formal PC zone process commences in August 2003 and that a tax credit award is received
by mid-2003.
[]Resolutions of Necessity Adopted t~y Housing
Authority Board (completed)
[]Council approves-interim funding agreement
[]Control of entire site achieved
[]PC Zone adoptedby Council
[]Submittal of tax credit application
[]Award of tax credits
[]Building Permit Submittal
[]Council action on permanent funding
& regulatory documents
[]Start construction
[]Completion and occupancy
July 16, 2O02
July 22, 2002
August 2002
By March 2003
March 2003
May 2003
June 2003
July 2003
August 2003
End of 2004
ENVIRONMENTAL REVIEW
A federal environmental review under the National Environmental Policy Act (NEPA) has
been completed covering the proposed development of 95-units of housing over the
homeless service center on the three parcels at 33, 39 and 45 Encina. The City did not
receive any comments from the public regarding the NEPA environmental document.
HUD’s approval of the release of CDBG funds completes the NEPA environmental review
process and allows the Council to obligate the CDBG funds for site acquisition and other
project costs under the attached agreement. Staff expects that HUE) will issue the release of
funds prior to the planned July 22, 2002 agenda date of this staff report.
ATTACHMENTS
A Agreement Between the City of Palo Alto, The Housing Authority of the County of
Santa Clara, and the Community Working Group to Fund Pre-Development, Site
Acquisition, and Pre-Construction Expenses for Opportunity Center, Inc. for the
Mid-Peninsula, a Housing and Homeless Service Center on Encina Avenue, Palo
Alto
CMR:352:02 Page 9 of 10
PREPARED BY:
CATHERINE SIEGEL
Housing Coordinator
REVIEWED BY:
A. EMSLJ~E
Director of Planning and Community Environment
CITY MANAGER APPROVAL:
EMILY HARRIS ON
Assistant City Manager
Community Working Group, Inc.
Housing Authority of the County of Santa Clara
Housing & Community Development, County of Santa Clara
Office of Housing, County of San Mateo
CMR:352:02 Page 10of 10
ATTACHMENT A
AGREEMENT BETWEEN THE CITY OF PALO ALTO, THE HOUSING
AUTHORITY OF THE COUNTY OF SANTA CLARA, AND COMMUNITY WORKING
GROUP, INC. TO FUND PRE-DEVELOPMENT, SITE ACQUISITION,
AND PRE-CONSTRUCTION EXPENSES FOR THE OPPORTUNITY CENTER
FOR THE MID-PENINSULA, A HOUSING AND HOMELESS SERVICES
CENTER ON ENCINA AVENUE, PALO ALTO
THIS AGREEMENT ("Agreement") is made and entered into on ,
2002, by and between the CITY OF PALO ALTO, a chartered city organized and existing under
the constitution and laws of the State of California ("City,") ThE HOUSING AUThORiTY OF
CO~JNTY OF SANTA CLARA, a public agency corporate and politic, with offices at 505 West
Julian Street, San Jose, California 95110-2300 ("Housing Authority") and
WORIONG GRO~JP, INC., a California non-profit public benefit corporation with offices at 948
Ramona Street, Palo Alto, California 94301 ("Working Group").
RECITALS:
A. On May 13, 2002, the City Council adopted Resolution No. 8162 approving the
use of Community Development Block Grant Funds ("CDBG Funds") for the fiscal year 2002-
2003 and the preliminary commitment of funds from fiscal years 2003-2004 and 2004-2005.
The resolution authorized Eight Hundred Thousand Dollars ($800,000) to the Housing Authority
and Working Group for predevelopment, relocation and acquisition costs for the Opportunity
Center for the Mid-Peninsula, a new facility to provide social services for homeless persons and
families and approximately ninety-five (95) units of housing affordable to extremely low income
persons ("the Project"). On May 7, 2001, the City Council had previously adopted Resolution
No. 8050 approving the use of $480,000 of CDBG Funds for the fiscal year 2001-2002 for the
Project;the total amount of CDBG Funds approved by the City Council for the Project is
$1,280,000.
B. On May 13, 2002, the City Council also, at the request of the Housing Authority,
adopted Resolution No. 8163, consenting to the Housi,ng Authority’s transaction of business,
including use of its powers of eminent domain, for the purpose of developing the Project at 33,
39 and 45 Encina Avenue ("the Site.") The Community Development Block Grant Funds
described above are contingent upon the Housing Authority and Community Working Group
(jointly, "the Project Developers") obtaining control of the Site by September 30, 2002. Legal
descriptions of the Site are attached to this Agreement as Exhibit A.
C. The Project Developers have entered into an agreement as to how they will jointly
develop the project, a copy of which is attached to this Agreement as Exhibit B for information
only.
D. The Proj ect Developers have incurred pre-development expenses in connection
with the Project and will incur additional site acquisition and pre-development costs. The
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Working Group has acquired title to 33 and 39 Encina Avenue. The Housing Authority has
made an offer to purchase 45 Encina Avenue; if the offer is not accepted the Housing Authority
will consider the adoption of a resolution of necessity and the acquisition of that parcel through
eminent domainl The Project Developers must secure control of the Site in order to apply for
and secure necessary land use approvals and financing. The Housing Authority has not yet
determined whether to proceed with an eminent domain action and nothing in this Agreement
requires that it do so.
E. As part of the application process, the Project Developers will merge the existing
parcels into a single parcel. Through the use of a condominium map, ground and space leases, or
other real property ownership forms, they will arrange ownership and management of both the
affordable housing and social services facilities, assuring that .the Site is dedicated to those
purposes. :
F. The Project will further the affordable housing goals of the City and provide
needed social services, primarily to homeless individuals and families, in accordance with the
City’s goals in these areas as set forth in the City’s Comprehensive Plan, Housing Element and
Consolidated Plan.
G. The Project Developers have applied to the City for financial assistance with the
pre-development expenses, pre-construction expenses, and site acquisition costs in connection
with the Project. The City is willing to make a secured loan to the Project Developers to cover
certain expenses necessary to obtain land use approvals, loans, grants and other housing
subsidies, and permanent financing for the development of the Project.
H. This Agreement sets the terms and conditions on which the City is willing to lend
funds to the Project Developers for pre-development and site acquisition expenses for the
Project.
I. The .granting of funds to the Project Developers for use in acquisition of land for a
housing project has beenreviewed under the National Environmental Protection Act. A notice
of a finding of no significant impact was published on June 14; 2002. The City has not yet
received an application for, and has made no commitment with respect to, and land use approvals
for the Project or the Site, and nothing contained in this Agreement is, or shall be deemed to be,
an application by Project Developers for, or a commitment by the City with respect to, anyland
use or other approval for the Project or the Site.
NOW, THEREFORE, in consideration of the following covenants, agreements, terms and
conditions, the parties hereto agree:
Section 1.Term of A~reement
1.1 Term and Extension. The term of this Agreement shall commence on the
date of its execution by the parties, and shall terminate on December 31, 2003, unless earlier
terminated in accordance with Section 5 hereof, or as otherwise provided herein. The term may
be extended by the parties for an additional period not to exceed one (1) year. The City Manager,
LA1 439252v5
2
or such other City official as City Manager shall have authorized in writing to serve as project
manager for the City with respect to the Project (the City Manager or such designee being
referred to herein as the "Project Manager"), is authorized to approve such an extension on
behalf of the City only if, upon the receipt of written evidence, acceptable to him or her, the
Project Manager determines that the development of the Project remains feasible, and that the
Project Developers have made, and can continue to make, reasonable progress in the
development of the Project. If the Project Manager determines that the development of the
Project has been unreasonably delayed for any reason, or that the Project Developers have failed
to perform any material provision of this Agreement, then the request for an extension of the
term shall be denied and the Note described in Section 2.2 below shall be due and payable on
December 31, 2003, without notice or demand by City.
Seetion 2.Loan and Disbursement of Funds
2.1 Loan Amount. The City agrees to make a loan to the Project Developers,
payable to the Housing Authority, in an aggregate principal amount up to, but not to exceed, One
Million Two Hundred Eighty Thousand Dollars ($1,280,000) (the "Maximum Loan Amount"),
subject to the terms and conditions set forth in this Agreement, including but not limited to
Sections 2.4, 2.5, 2.6 and 2.7 below.
2.2 Promissory Note. The obligation of Proj ect Developers to repay all
amounts advanced by the City pursuant to this Agreement shall be evidenced by a promissory
note ("Note") of Project Developers, in substantially the form set forth in Exhibit C, payable to
the City of Palo Alto, upon demand, in writing, and executed by duly authorized officers or
representatives of Project Developers. The Note shall bear no interest, with the exception of
default interest at the rate often percent per annum in event of default, and no periodic payments
shall be required during the term of this Agreement.
2.3 Deed of Trust; Title Insurance. It shall be a condition to the initial
disbursement of loan proceeds that the Working Group has executed a Deed of Trust against the
33 Encina Avenue lot and the 39 Encina Avenue lot (the "33/39 Deed of Trust") in substantially
the form set forth in Exhibit D, in favor of the City as beneficiary, securing the obligations of
Project Developers under this Agreement and the Note, and that the 33/39 Deed of Trust has
been recorded in the Official Records of Santa Clara County subject to no exceptions to title
other than a lien for property taxes not yet due and payable and such non-monetary exceptions as
do not materially adversely affect the use of the Site for the Project and have been approved in
writing by the Project Manager ("Permitted Exceptions"). Prior to disbursement of any funds
under this Agreement, Project Developers, at their own cost and expense, shall secure an ALTA
extended coverage lender’s policy of title insurance, or other form of title insurance acceptable to
the Project Manager, for an amount not less than the amount of $1,280,000, insuring City as the
holder of a first lien on the 33 and 39 Encina lots, subject to no exceptions to title other than the
Permitted Exceptions. Such policy will include a "contiguity" endorsement (CLTA Form 116.4)
insuring that the 33 Encina lot is contiguous to the 39 Encina lot. The policy will name the City
as beneficiary and insure Project Developers’ right, title, and interest in the Property and the ’
Project and the City’s lien therein, and, promptly after the close of escrow, Project Developers
shall provide a copy of the same to the Project Manager.
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2.4 Disbursement of Funds.
2.4.1 The City will disburse loan funds under this Agreement to Project
Developers on an expense-reimbursement basis only upon the receipt by the Project Manager of
written proof of actual costs incurred and paid for by Project Developers on or after July 1, 2001.
Before Project Developers may request the reimbursement of its costs, it shall submit to the
Project Manager one (1) legible copy each of any and all contracts and subcontracts for services
to be rendered or work to be performed, or both, in connection with the Project. All requests for
disbursements of loan funds shall be submitted to City by not later than December 31, 2002;
provided, however, that City will also disburse funds for costs incurred after December 31, 2002
provided that Project Developers identify those items with specificity (including copies of any
applicable contracts) prior to December 31, 2002 and submit the request for reimbursement by
not later than March 14, 2003.
2.4.2 Every contract shall clearly and fully describe the nature and scope
of services to be rendered or work to be performed, or both, and the basis of payment of
applicable costs. Any and all such costs shall be reasonable and necessary in order to conduct
feasibility studies, acquire the Site, and apply for and process development approvals for the
Project. The Project Manager may refuse to reimburse Project Developers for any costs not
approved, in advance, by Project Manager.
2.4.3 Any borrowing under this Agreement shall be made in accordance
with the City’s policies and procedures. Project Developers shall submit with each application
for borrowing a written certification that (1) the services or work, or both, has been satisfactorily
rendered or performed, (2) the costs have been paid in accordance with the applicable contracts
and subcontracts, and (3) all funds have been expended on the behalf of and exclusively for the
obligations of Project Developers under the Project.
2.4.4 Notwithstanding the provisions of paragraphs 2.4.1 through 2.4.3
above, upon request of the Project Developers upon the filing by Housing Authority of an action
in eminent domain to acquire, and seeking an order for immediate possession of, 45 Encina
Avenue, City will disburse an amount of loan proceeds not to exceed $600,000 to the State
Condemnation Deposit Fund of the California State Treasurer’s Office as depository, to be used
as payment to the owners of 45 Encina Avenue. Any request for funds pursuant to this Section
2.4.4 shall be submitted to City by not later than December 31, 2002. It shall be a condition to
City’s obligation to make such disbursement that the depository agrees in writing thatit will not
disburse the funds other than for payment of the value of the 45 Encina lot, as determined by the
final judgment of the court, to the person or persons determined by the court to be entitled
thereto at such time as fee simple ownership of the 45 Encina lot is awarded to Housing
Authority by final order of condemnation (with any excess amount to be returned to City), or, in
the event no such judgment has been issued by December 31, 2003, it will return the entire
amount deposited to City. Any interest earned on such funds shall belong to City. City will have
the right to have all funds deposited with the depository returned to it in the event of any breach
of this Agreement by Project Developers, upon written notice to depository. In the event that,
notwithstanding City’s instructions to depository, any funds are disbursed to Project Developers
by the depository, Project Developers will promptly remit to City the amount received. It shall
LA1 439252v5
be a condition to such disbursement that the Housing Authority has executed a Deed of Trust
against the 45 Encina Avenue lot (the °’45 Deed of Trust") in substantially the form set forth in
Exhibit D, in favor of the City as beneficiary, securing the obligations of Project Developers
under this Agreement and the Note, and that the 45 Deed of Trust has been recorded in the
Official Records of Santa Clara County. Immediately upon issuance of the final order of
condemnation, Project Developers, at their own cost and expense, shall cause the final order to
be recorded in the Official Records of Santa Clara County, re-record the 45 Deed of Trust in the
Official Records of Santa Clara County, and secure an ALTA extended coverage lender’s policy
of title insurance, or other form of title insurance acceptable to the Project Manager (including a
moditication or re-issue of the title policy described in Section 2.3 above), for an amount not less
than $1,280,000, insuring City as the holder of a first lien on the 33, 39 and 45 Encina lots,
subject to no exceptions to title other than the Permitted Exceptions. Such policy will include a
"contiguitj?’ endorsement (CLTA Form 116.4) insuring that the 33 Encina lot is contiguous to
the 39 Encina lot, and that the 39 Encina lot is contiguous to the 45 Encina lot. The policy will
name the City as beneficiary and insure Project Developers’ right, title, and interest in the
Property and the Project and the City’s lien therein, and Project Developers shall promptly
provide a copy of the same to the Project Manager. In the event Project Developers enter into an
agreement of purchase and sale for the 45 Encina lot, Project Developers and City will instruct
the depository to return all funds on deposit to City, and City will disburse such funds to a title
insurance company, with instructions that such funds may be disbursed to seller only upon
recordation of the 45 Deed of Trust and issuance of a policy of title insurance as described in this
Section 2.4.4.
2.5 Pre-Development and Pre-construction Expenses. Funds shall be loaned
to Project Developers under the terms of this Agreement for the payment of certain pre-
development and pre-construction expenses incurred on or after July 1, 2001, including, without
limitation, the acquisition costs of the Site; closing costs; site demolition, clearance and holding
costs; fees charged by attorneys, architects, engineers, and marketing and management
consultants; fees of a contract project manager; payment of relocation benefits, settlements and
consulting; costs of environmental studies, tests and remediation; permit application and the
City’s cost-recovery fees related to a zone change to PC Planned Community District; fees and
costs associated with the securing of financing, tax credits, and subsidies to make the Project
financially feasible, including construction and permanent loans and tax credits, and other
reasonable and necessary expenses, as generally described in the Budget, set forth in Exhibit E
(collectively, "Pre-Development Expenses"). In no event will any loan proceeds be used to pay
any developer fee or other compensation to Housing Authority, Working Group, or any affiliate
of either of them.
2.6 Contingency Funds. The Budget attached as Exhibit D budgets $729,000
in costs and expenses for the acquisition of fee title to the 45 Encina lot and obtaining the
unconditional release of the 39 Option Claim described in Section 4.3. It is understood and
agreed that $250,000 of the Maximum Loan Amount is a contingency for unanticipated expenses
that Project Developers may incur in the event the aggregate cost of acquiring fee title to the 45
Encina lot and obtaining the unconditional release of the 39 Option Claim exceeds $729,000, and
that such $250,000 (the "Contingency Funds") will only be disbursed by City in the event, and to
5
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the extent, that the aggregate cost of acquiring fee title to the 45 Encina lot and obtaining the
unconditional release of the 39 Option Claim in fact exceeds $729,000. All disbursements of the
Contingency Funds shall be subject to the terms and conditions of this Agreement, including but
not limited to Section 2.4.
Notwithstanding the foregoing, in the event the Proj ect Developers have acquired fee
simple title to the 45 Encina lot and have obtained the unconditional release of the 39 Option
Claim, and have caused the 45 Deed of Trust to be recorded in the Official Records of Santa
Clara County and the title policy described in Section 2.4.4 to be issued, and the final cost of
acquiring fee title to the 45 Encina lot and obtaining the unconditional release of the 39 Option
Claim did not exceed $979,000, and further provided that the Project Developers are not in
default of any of their obligations under this Agreement, the unused portion of the Contingency
Funds shall be available to be disbursed by the City for additional Pre-Development Expenses,
subject to the terms and conditions of this Agreement, including but not limited to Section 2.4.
2.7 Environmental Review. No disbursement shall be made by City unless the
Project Developers have provided evidence satisfactory to the Project Manager that the Site is
free from environmental contamination, or (at Project Manager’s election) that any
contamination of the Site is readily remediable and Project Developers have adequate resources
available to fund such remediation.
Section 3.Covenants and Conditions
3.1 Proiect Development. Project Developers covenant and agree to prepare,
or Cause to be prepare applications for the Project, generally consistent with the conceptual plans
presented to the Architectural Review Board on June 6, 2002 during a pre-application study
session. Without limiting the generality of the foregoing:
3.1.1 Project Developers covenant and agree to achieve control of the
entire Site by no later than September 30, 2002 or 30 days after the environmental review
condition of Section 2.7 has been satisfied, whichever occurs later; provided, however, to the
extent that Project Developers have not acquired fee simple title to the entire Site, they will be
deemed to have achieved control of a lot if Community Working Group or Housing Authority
entered into a binding agreement of purchase and sale pursuant to which it has the right to
purchase the lot, or Santa Clara County Superior Court has issued an order for immediate
possession for a lot; the Project Manager shall have the right to extend this deadline to not later
than November 30, 2002 provided that the Project Developers have demonstrated significant
progress toward achieving control of the entire Site by September 30, 2002.
3.1.2 Project Developers shall submit to City a formal application for a
PC Plarmed Community District zone change not later than 30 calendar days after achieving (or
being deemed to have achieved) control of the entire Site.
3.1.3 Project Developers shall finalize contracts for CDBG Funds and/or
HOME funding from San Mateo County and Santa Clara County by December 31, 2002.
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3.1.4 Project Developers shall submit applications for other pre-
development funds such as County Housing Trust Fund, Sobrato Fund, additional McKinney Act
Funds, State Homeless Program Funds, as appropriate.
3,1.5 In the event City elects to apply for federal HOME funds for the
Project, Project Developers shall execute all instruments and otherwise cooperate in all respects
with such application process as directed by the City.
3.1.6 Project Developers shall continue analysis of financing alternatives
and provide monthly updates to City on revisions to development costs and sources of funding.
3.1.7 Project Developers shall secureProject Manager’s consent in
advance to the financing plan finally selected by Project Developers.
3.1.8 As promptly as practicable following approval of a PC Planned
Community District application by the City, Project Developers covenant and agree to prepare,
or cause to be prepared, written plans, specifications, and necessary applications for building
permits for the Project as approved in the Planned Community ordinance, submit applications for
principal construction financing (including institutional construction loan, permanent loan, low
income housing tax credits, and/or tax-exempt bond allocation, as applicable, based on selected
financing plan), and initiate a fundraising campaign for capital development costs and an
operating fund endowment. Nothing contained herein is, or shall be deemed to be, an application
by Project Developers for, or a commitment by City with respect to, approval of a PC Planned
Community zoning designation for the Site, or any part thereof.
3.1.9 Project Developers shall complete formation of new limited
partnership with a non-profit corporation as general partner to develop the Project and complete
air rights, leasing and shared use arrangements (such as for parking and common areas of the
Project) prior to start of construction.
3.2 Project Funding. Project Developers covenant and agree to undertake all
actions necessary to secure an allocation of Federal low income housing tax credits, private
financing commitments for a construction loan and permanent loan and other public or private
funding programs, as appropriate, in addition to the funding provided by the City under this
Agreement. Project Developers shall seek aggregate funding from all available sources in order
that the Proj ect will be financially feasible and so that all units (with the exception of a
reasonable number of on-site resident manager units) will provide affordable rental housing for
very low-income households.
3.3 Insurance. Project Developers, at their sole cost and expense, shall obtain
and maintain during the term of this Agreement, insurance in responsible companies in such
amounts and against such risks as is satisfactory to the City’s risk manager, including, without
limitation, workers’ compensation, commercial general liability, comprehensive automobile
liability, personal injury and property damage insurance, as appropriate, insuring against all
liability of Project Developers and their authorized representatives arising out of or in connection
with the development of the Project, the development of the Site, or Project Developers’
LA1 439252v5
7
performance or nonperformance under this Agreement. Project Developers and general
contractors and subcontractors assigned to the performance of the terms and conditions of this
Agreement or to the development of the Project shall comply with the coverages described in the
Insurance Requirements, set forth in Exhibit C. Modifications of any insurance requirements set
forth in Exhibit C are subject to prior written approval by Project Manager. Proposed
modifications shall be submitted, in writing, to the Project Manager. Any such modification
shall require the concurrence of the Office of City Attorney.
3.4 Books and Records. Project Developers shall maintain in accordance ¯
with generally accepted accounting principles 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 recbrds to assure the
proper accounting of funds and the performance of this Agreement. Project Developers shall
furnish any and all information and reports whicl4_ may be required by the Project Manager or
other officer, employee, or representative of the City and any other entity that may provide funds
for the development of the Site.
Project Developers .shall permit access to its books, records and accounts by the
representatives and employees of the City and any other entity that may provide funds for the
development of the Site, 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 Project Developers’ compliance with the provisions of this ’
Agreement. All such records shall be retained by Project Developers and shall be made available
to the City, its officers, employees, and representatives, and any other entity that may provide
funds for the development of the Site, upon request, for review or audit for a period of at least
three (3) years following the expiration or termination of this Agreement.
3.5 Conflict of Interest. Project Developers, and. each of them, covenant that,
in the performance of this Agreement, no person having a financial interest therein shall be
employed by Project Developers in connection with the performance of the provisions of this
Agreement or in the development of the Project, except as the City may approve, in advance,
waive, or ratify such conflict of interest in writing.
3.6 Assignment. Neither this Agreement nor, to the extent permitted by
applicable law, the rights and obligations of Project Developers hereunder shall be assigned
without the prior written approval of the City, acting through the Project Manager. Any
attempted assignment shall be void and, at the sole discretion of the City, shall be deemed a
default under this Agreement and a breach of this Agreement. Notwithstanding the foregoing,
City acknowledges that it is the intention of Project Developers to transfer all or part of the Site
to a limited partnership having a non-profit corporation as its general partner formed to develop
and own the Project, and City will not unreasonably withhold its consent to such a transfer, or to
the assignment of this Agreement to, and the assumption of the obligations of Project Developers
by, such a limited partnership.
3.7 Oak Court. Project Developers acknowledge that City has previously
agreed to provide financial assistance to the Oak Court Family Apartments project ("Oak Court")
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and that the developer of Oak Court is expected to apply to the California Tax Allocation
Committee ("TCAC") for an allocation of 9% tax credits for Oak Court. Project Developers
agree that they will not submit an application to TCAC for tax credits for the Project for
consideration during the sameallocation cycle as Oak Court without first obtaining the written
consent of Project Manager, which Project Manager may grant or withhold in Project Manager’s
sole and absolute discretion. City agrees that it will advise Project Developers of the status of
the Oak Court project from time to time, including the allocation cycle in which the application
for tax credits for the Oak Court project is expected to be submitted to TCAC. In the event that
Project Developers have submitted an application to TCAC that would be considered during the
same cycle as Oak Court’s application for tax credits, Project Developers will, upon request by
City, immediately withdraw such application at no cost or expense to City and at Project
Developers’ sole cost and expense.
3.8 Assignment of Plans, Studies and Reports. Project Developers hereby.
assign to City as additional collateral for repayment of the Note all environmental studies and
reports, architectural plans, engineering plans and studies, consultants reports and studies,
funding commitments and other work product, contracts, rights developed by, or at the request
of, Housing Authority, Working Group, or either of them, in connection with the Project
(collectively, "Project Work Product"). In addition, in the event the Project Developers
determine that they are unable to complete the Project, or in the event of a foreclosure by City or
the exercise by City of its option to purchase the Site pursuant to Section 3.9, upon request of
City, the Project Developers will assign all Project Work Product to the City, at no cost to Cityl
Project Developers will cause their architects, engineers and other consultants to agree in
advance to such assignment and to allow the City, and/or any successor developer of the Project,
or a similar project, on the site, to use and rely on such plans, studies and reports at no cost or
expense to City or to such successor developer.
3.9 Option to Purchase. Project Developers hereby grant to City the right to
purchase the Site for an amount equal to the lesser of (a) the total amount disbursed to Project
Deve!opers pursuant to this Agreement, and (b) $1,280,000 (the "Option Consideration").
Project Developers acknowledge that City shall have the fight to decline to accept repayment of
the Note and may instead elect to exercise its right to purchase the Site. City may exercise its
right to purchase the Site at such time as the Project Developers tender repayment of the Note by
giving notice to Project Developers, not more than thirty calendar days after such tender, that
City declines such tender and elects to purchase the Site. In such event, Project Developers will
convey the Site to City free and clear of liens and encumbrances (with the exception of the
Permitted Exceptions) at such time as is designated by the City, and Project Developers will
execute an agreement in form and substance satisfactory to City pursuant to which they will
jointly and severally indemnify City from and against any loss or damage arising from any
release of hazardous substances occurring at any time after the first to occur of (a) acquisition of
title to a portion of the Site by one of the Project Developers, or (b) issuance of an order for
immediate possession in favor of one of the Project Developers. City will satisfy its obligation
to pay the Option Consideration by cancelling and returning to Project Developers the Note.
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Section 4.Representations
4.1 Financial Interest. The Project Developers, severally, represent that they
presently have no interest, and shall not acquire any interest, direct or indirect, financial or
otherwise, which would conflict in any manner or degree with the rendering of services or the
performance of work, or both, under this Agreement or substituted agreement for the Project.
Project Developers, severally, further represent that no person who has or will have any financial
interest in the Project or the Site is an officer, employee, or official representative of the City.
4.2 Legal Authoritsr. The making and performance by Project Developers of
this Agreement; the Note, and the Deeds of Trust have been duly authorized by all necessary
action and will not violate any provision of law or of the Housing Authority or Working Group’s
regulations or bylaws, or result in the breach of or constitute a default or require any consent
under any lien, charge, or encumbrance upon any property or assets o.f Project Developers
pursuant to any indenture or other agreement to which Project Developers is a party or by which
Project Developers or its property may be bound. The persons executing this Agreement on the
behalf of Project Developers have been duly authorized to execute the same, and each such
person represents that the entity on behalf of whicla he or she is executing this .Agreement is duly
organized and validly existing under the laws of the State of California.
4.3 Litigation. Project Developers represent that there are no suits or
proceedings pending or, to the knowledge of Project Developers, threatened against or affecting
Project Developers which, if adversely determined, would have a material adverse effect on the
financial condition or business of Project Developers, and there are no proceedings pending or,
to the knowledge of Project Developers, threatened, against Project Developers which would
have a material adverse effect on the performance of this Agreement by Project Developers.
Project Developers acknowledge and disclose that there is a cloud on the title of 39 Encina
Avenue arising out of a claim of an option to purchase that property asserted by Michael Douglas
more particularly described in Santa Clara County Superior Court Case No. CV803215 (the "39
Option Claim").
Section 5. Conversion to Lon~-Term Financing. Provided that, at or prior to the
maturity of the Note, the Project Developers have acquired the entire right, title and interest to
the Site (including obtaining the unconditional release of the 39 Option Claim, and acquiring fee
simple title to the 45 Encina lot), and have obtained construction financing, and commitments for
permanent financing, the issuance of tax credits, and all other subsidies in aggregate amounts
which, together with the amounts disbursed by City pursuant to this Agreement, will be
sufficient for the construction and operation of the Project, and provided that City and Project
Developers have reached agreement on the terms of a regulatory agreement and an agreement
pursuant to which the City would continue to provide financing during the construction and
operation of the Project, the aggregate amount of funds disbursed by the City will be converted
to a long-term loan secured by a Deed of Trust on the Site. The terms of such long-term
financing shall be negotiated by the City and the Project Developers. In the event City and
Project Developers have failed to reach agreement on the terms of a regulatory agreement and/or
the terms of such long term financing, the Note shall be due at maturity without notice or
demand by City.
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Section 6. Application of Federal Regulations. Project Developers agrees to perform
their obligations under this Agreement in a manner that will not jeopardize or interfere or
conflict with, or otherwise prevent, the obtaining of future federal funding. Project Developers
shall comply with all applicable federal CDBG, McKinney Act, and HOME and other
governmental rules and regulations, including but not limited to tl~e Federal Assurances with
respect to CDBG Funds attached hereto as Exhibit G (for purposes of which each i~f Working
Group and Housing Authority shall be deemed a "Contractor").
Section 7. Indemnity. Project Developers agrees to protect, indemnify, defend and
hold harmless City, its Council members, officers, agents and employees, from any and all
demands, claims, or liability of any nature, including death or injury to any person, property
damage or any other loss, caused by or arising out of Project Developers~, its officers’, agents;,
subcontractors’ or employees~ negligent acts, errors or omissions, or willful misconduct, or
conduct for which Project Developers may be strictly liable in the performance of or failure to
perform its obligations under this Agreement.
Section 8. Defaults. The City shall be permitted, upon written notice, to (1)
immediately terminate its commitment to loan .funds hereunder, and (2) declare the principal of
the loan or the Note to be immediately due and payable, whereupon the same shall become
immediately due and payable, if any of the following events of default have occurred and have
not been remedied:
8.1 Project DevelOpers makes arepresentation in this Agreement which shall
prove to have been false in any material respect when made; or
8.2 Project Developers shall default in the payment, when due, of any
principal of the loan or the Note or any other sums payable by Project Developers under this
Agreement; or
8.3 Project Developers shall default for a period of thirty (30) days in the
performance of any other non-financial obligation to be performed by Project Developers under
this Agreement; or
8.4 Project Developers shall apply for or consent to the appointment of a
receiver, trustee, or liquidator, or is unable, or admits in writing its inability to pay its debts as
they fall due, or makes a general assignment for the benefit of its creditors, or is adjudicated a
bankrupt or insolvent, or files a voluntary petition in bankruptcy; or
8.5 Project Developers is subjected to the entry of an order, decree, or
judgment approving the reorganization of Project Developers, and such order, decree, or
judgment is unstayed for a period of more than thirty (30) days, or such period as may be
permitted by law.
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Section 9. Notices. Any notice which may be or is required to be given under this
Agreement shall be deemed given on the second day following the date on which the same has
been mailed by first class mail, postage prepaid, addressed as follows:
City:City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Attn: City Clerk
With a copy to:Director of Planning & Community Environment
City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Project Developers:Housing Authority of the County of Santa Clara
505 West Julian Street
San Jose, CA 95110-2300
Attn: Executive Director
With a copy to:Community Working Group, Inc.
948 Ramona Street
Palo Alto, CA 94301
Attn: Donald Barr
Section 10. Miscellaneous
10.1 Neither the failure nor the delay on the part of the 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 containedin 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. Each of the Project Developers shall at all times remain an independent contractor
with respect to .the services to be rendered or work to be performed, or both, under this
Agreement.
10.3 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.
10.4 Any amendment to this Agreement shall be binding upon the parties,
provided such amendment is set forth in a writing signed by the party to be charged. The Project
Manager is authorized on behalf of the City to approve any number of minor modifications to the
LA1 439252v5
12
Budget without obtaining the consent of the City Council, provided the aggregate amount of
such budgetary modifications shall not exceed ten percent (10%) of the Budget.
10.5 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.
10.6 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.
10.7 ’ Project Developers shall lack any authority or power to pledge the credit
of the City or incur any obligation in the name of the City.
10.8 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.
10.9 The Agreement and the Note shall be deemed to be a contract 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.
10.10 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, with the exception of Exhibit B.
10.11 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.
10.12 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement in Palo Alto,
California on the date first above written.
CITY OF PALO ALTO,
a chartered city organized and existing under
the constitution and laws of the State of
California
By:
Mayor
COMMUNITY WORKING GRoUP~ INC.,
a California non-profit public benefit corporation
By:
Name:
Title:
ATTEST:
By:
City Clerk
By:
Name:
Title:
APPROVED AS TO FORM:
HOUSING AUTHORITY OF THE COUNTY OF
SANTA CLARA,
a public agency corporate and politic
Senior Assistant City Attorney By:
Name:
Title:
APPROVED:
City Manager
Director of Planning and
Community Environment
Director of Administrative Services
Insurance Review
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14
Attachments:
Exhibit A:
Exhibit B:
Exhibit C:
Exhibit D:
Exhibit E:
Exhibit F:
Exhibit G:
Legal Description of Site
Development Agreement Between Housing Authority and Community Working
Group
Form of Promissory Note
Form of Deed of Trust
Budget
Insurance Requirements
Federal Assurances With Respect to CDBG Funds
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15
EXHIBIT A
LEGAL DESCRIPTION
The land referred to is situated in the State of California, County of Santa Clara, City of Palo
Alto, and is described as follows:
33 Encina Avenue:
The Northeastern 40 feet, front and rear measurements, of Lot 7, as shown upon that certain Map
entitled "Map of that part of the Greer Homestead in the Rancho Rinconada de Arroyo San
Francisquito", which Map was filed for Record in the Office of the Recorder of the County of
Santa Clm:a, State of California, on May 6th, 1907 in Book L of Maps, at Page 79.
APN: 120-33-008
ARB: 120-33-008
39 Encina Avenue:
Lot 6 and Southwesterly 10 feet, front and rear measurements, of Lot 7,’as shown upon that
certain Map entitled "Map of Greer Homestead in the Rancho Rinconada de Arroyo San
Francisquito", which Map was filed for Record in the Office of the Recorder of the County of
Santa Clara, State of California, on May 6th, 1907 in Book L of Maps, at Page 79.
APN: 120-33-009
ARB: 120-33-009
45 Encina Avenue:
Lot 8, as delineated upon that certain Map entitled "Map of that part of the Greer Homestead in
the Rancho Rinconada de Arroyo San Francisquito", filed for record in the Office of the
Recorder. of the County of Santa Clara, State of California, on May 6th, t 907 in Book L of Maps,
at Page 79
APN: 120-33-007
EXHIBIT B
Development Agreement. between the Community Worki.ng Group and the Housing
Authority of the Count), of Santa Clara
Regarding the Proposed Opportuni%. Center for the Mid Peninsula
This Agreement, dated ~, 2.002, is made by and among the Community Workinc,
Group, a Califon~ia non-t~rofh cot oratiol~ "CWG’", t e ’ ’ ’ ~ " =p rp (). and h ¯ Housing Authority of the County
of Santa Clara, a public agency corporate mad politic (the "Housing Authority’.’), (collectively,
"the Parties"), regarding the proposed development, fundil?g, operatio]], and ownership of the
0pportunjty Center for the Mid Pe~?.jJ~suIa (the "Project") al~td land on which the Project shall be
si.ted on.Enci.n.a Way in Palo Alto. The Parties aekn.owledge the withdrawal of the Palo Alto
Housing Corporatj.on from co-sponsorship of the Project as had origi.~ally been contemplated ij].
the Memorandum of Urtderstandir~g among the Parties and the PalQ Alto Housing Corporation
dated attached as E_~,~hi.bit A.
Scope and Definition of the Project
The Parties agree that the Project will be located on Parcels #33, #39 an.d #45 on Encina Wav if
Parcels #39 and #45 are acquired for the Project.
Th.e Project shall consist of a non-residen.tjal multi-se~Mce center (the "Opportunity Center") tbr
homeless indixiiduals including, but ].?.ot limited to, h?djviduals desiri~.~.g to participate i~
transitional a~.d permanent housi~.g programs offered at the Project as part of an estimated 95
units of tra.nsitjonal and perma.~ent housing to be located above the Opportunity Center, (the
"Housing Developme~.t").
Purchase of the Project Site Parcels
CWG currently holds title to Parcel #33 and #39. Par.ee! #39 is currently the subject of a legal
dispute relative to an alleged right of a previous sub lessee to purchase Parcel #39. Provided
relevant Resolutions of Necessity are adopted by its Board of Commissioners, Housing
Authority sM]! con.demn or pu.rcl~ase through negotiated sale the alleged option to purchase by
the sub lessee on pa’ce] #39 and shall acqmre parcel #45 either tl?rough a negotiated sale with its
owners or pursuant to the powers of eminent domain possessed by the Housing Authority to
facilitate the objectives of the Housing Authority with respect to the Project.
Ownership of the Project Site Parcels, Air Rights Estate and Project Improvements
Subject to the completion of the condemnation a~.d purchase actions by the Housing Authority,
the following ownershJ.p a.nd lease arrangements shall be established, not prior to t.be
commitmem of all funding necessary for the Project to be fi.n.ancially feasible to develop and not
later than the close of construction financing for the Project:
l..~. CWG and the Housing Authority shall merge all three parcels into one parcel.
,¸
o
Ownership of Parcels. CWG shall, not later than the close of construction financing for
the Project, hold title to Parcels #33, #39 and #45.
Ownership of the Opportunity Center. CWG shall hold title to the Opportunity Center
improvement and personal property.
Ownership of the Housing Development Improvements and Air Rights Estate Over the
Opportunity Center. A limited partnership (the "Limited Partnership") having a non-
profit corporation as its general partner (the "General Partner"), a majority of whose
Board of Directors shall be appointed by the Housing Authority Board of
Commissioners, shall hold title to the Housing Development Improvements. The General
Partner shall hold an interest in the limited partnership but in no event greater than .01%
of ,that limited partnership. The initial limited partner of the Limited Partnership at the
time of its formation shall be the Housing Authority. The Housing Authority shall be
responsible for selecting the investor limited partner (the "Investor LP") and shall sell its
limited partnership interest in the Limited Partnership Owning the Housing Deve!opment
to the Investor LP just prior to the close of all construction financing for the Housing
Development improvements to generate equity to be used to fund permanent
development costs of the Housing Development.
Ownership of the Under~round Parking Improvements. The underground parking
improvements shall be owned either by the CWG or the Limited Partnership owning the
Housing Development as determined by the Housing Authority based upon the dual
objectives of maximizing the equity to be paid by the Investor LP and to maintain
positive capital account balances during the anticipated fifteen year investment period of
the Investor LP.
Subdivision. To facilitate the different ownership interests, CWG and the Housing
Authority shall process a subdivision with the City of Palo Alto to "condominiumize" the
Project. Appropriate Covenants, Conditions and Restrictions ("CC&R’s") shall be
entered into to establish cross easements and maintenance responsibilities.
Purchase of the Air Rights Estate by the Limited Partnership from CWG and
Establishment and Control of the Eminent Domain Reserve Account
The Parties agree that CWG shall sell the air rights over the merged parcel comprised of the
former parcels #33, #39 and #45 to the Limited Partnership not later than the date of any
construction on the merged parcel. The Parties agree that the price for the sale shall be a figure
to be mutually agreed to by the parties ranging between $1 and the fair market value of the air
rights estate as will be determined by the shared objective of facilitating the financial feasibility
of both the Opportunity Center and the Housing Development. CWG agrees that 100% of the
proceeds from the sale of the air rights estate, if any, shall be used by CWG to pay for the
construction period and permanent costs of developing the OpportunitY Center.
City of Palo Alto CDBG Funding of Project Pre-development Expenditures Incurred
2
Through April 30th, 2002 and the Creation of the Eminent Domain and Project Costs
Reserve Account ,
The Parties have agreed ttiat $1,030,000 in City of Palo Alto CDBG funds originally applied for
by CWG shall now be made available to the Housing Authority by the City to fund Project costs.
Among these costs are $113,863 in pre-development Project costs originally incurred by CWG
through April 30th, 2002 pursuant to agreements to be assigned in whole or in part to the Housing
Authority to permit the City to recognize the obligations being funded as having been incurred
by the Housing Authority. The- Parties agree that these $113,863 in funds shall be the property
of CWG but contributed by CWG towards the funding of an Eminent Domain and Project Costs.
Reserve Account to be maintained by CWG. The Parties agree that the Housing Authority shall
draw upon that account to first fund all costs of i~ny kind associated with payments by the
Housing Authority in conjunction with the use of its powers of eminent domain to clear title to
parcel #39 and to acquire parcel #45. Upon the payment in full of all eminent domain related
costs, CWG shall be required to contribute any such balance towards the payment of costs
associated with developing the Opportunity Center or towards an "endowment" in the form of
either (a) a capitalized operating deficit reserve account to be owned by the Limited Partnership,
or (b) a capitalized operating deficit reserve account to fund.any costs related~to the operation of
the Opportunity Center, as shall be decided by CWG.
All costs funded by CWG other than the Eminent Domain and Project Costs Reserve Account on
an interim basis which are subject to later reimbursement to the Housing Authority by the City of
Palo Alto out of disbursements of City of Palo Alto CDBG loan proceeds shall be required to be
refunded to CWG by the Housing Authority within ten (10) working days of the receipt of such
reimbursements.
The Parties agree that security for the Palo Alto CDBG loan or loans to the Housing Authority
prior to lot merger shall be a deed or deeds of trust against parcels #33, #39, and/or parcel #45, as
shall be determined by the City of Palo Alto based upon its review of the value and probable
environmental condition of these properties at the time the CDBG loan or loans are to close and
deeds of trust must be recorded. The Parties agree that should the City reject parcel #45 as
suitable collateral unti! Phase Two testing is and environmental remediation, if any, is
completed, the Housing Authority shall perform such remediation as soon as is practicable and,
if requested by CWG,immediately offer the City a deed of trust against parcel #45 as a substitute
collateral for parcels #33 and/or #39, as shall be determined by the City.
Should the Project prove infeasible to develop prior to lot merger under circumstances in which
the City of Palo Alto has funded acquisition by the Housing Authority of lot #45 with its CDBG
Funds and the City. has secured its CDBG~ 10an(s) to the Housing Authority only against parcels
#33 and #39 owned by CWG, should the City foreclose against title to parcels #33 and #39,
Housing Authority agrees that it shall sell parcel #45 as soon as is reasonably possible and that
any net proceeds from the sale not required by the City to complete.repayment of its CDBG loan
to the Housing Authority shall be paid by the Housing Authority to CWG.
Control of the General Partner of the Limited Partnership
3
The general partner of the Limited Partnership to own the Housing Development will either be
(i) an existing corporation affiliated with the Housing Authority which already has a 501(c)(3)
determination letter based upon an application to the IRS indicating its intended.purpose was to
manage a limited partnership to own a low. income housing tax credit assisted apartment
development or (ii) a new corporation to be formed by the Housing Authority for this purpose.
In either case the Corporation shall have a five member Board of Directors, the President of
which shall be appointed by the Board of Commissioners of the Housing Authority which is’
anticipated to name the Executive Director of the Housing Authority to serve in this capacity.
Three of the members of the Board of Directors, including the President, shall be appointed by
the Housing Authority’s Board of Commissioners. The Board of CWG shall have ongoing
responsibility to name one member of the Board of Directors of the corporation. The Board of
Directors .of InnVision, The Way Home ("InnVision"), or any successor organization should
InnVision leave or be replaced as the provider of Opportunity Center services, shall have
responsibility under the corporation’s bylaws to name the final member of the Board.
Assigned Functions and Responsibilities of the Parties
1. Project Design and Entitlement Processing
The Parties shall have equal rights in determining all aspects of the design of the Project. Should
the Parties disagree on the design of the Project, such disagreements shall be resolved first by
mediation and then, if necessary, .by binding arbitration~ under the rules of the American
Arbitration Association. The contract with the Project’s architect, however, shall run with the
Housing Authority but be formatted to permit the assignment of costs and services associated
with the Housing Development and, should it be later deemed appropriate by the Parties, the
underground parking, to the limited partnership to own the Housing Development. The Parties
agree to confer on all design questions of aesthetic and programmatic significance before giving
the Project architect direction on outstanding questions. Direction to the Architect, ~civil
engineer, and other Project consultants on required studies and specifications not reasonably
considered to have significant aesthetic or programmatic significance shall be provided by the
Housing Authority. The assignment of. those portions of the services and costs associated
therewith to the limited partnership shall occur at such a time as deemed appropriate by the
Housing Authority to facilitate the efficient sale of the limited partner’s interest in the Limited
Partnership.
2. Financing Project Development Costs
CWG shall be responsible for the preparation of all subsidy loan and grant applications as well as
the conduct of the capital campaign to raise equity to fund Project development costs from
charitable foundations and donations from individuals. The Housing Authority shall be
responsible for arranging for all conventional debt financing, if any, and all tax-exempt
financing, if any, for the Housing Development. The Housing Authority shall also be
responsible for engaging real estate and tax counsel to the limited partnership and for forming
the limited partnership and general partner to the limited p.artnership. The Housing Authority
shall also be responsible for submitting all applications for low income housing tax credit to the
California Tax Credit Allocation Committee and for any applications, if appropriaie, to the
California Debt Limit Allocation Committee on behalf of any local issuer of tax-exempt private
activity bonds.
3. Project ConstruCtion and Construction Administration
The Parties agree that it is desirable to enter into an exclusive negotiating.relationship with a
general construction contractor as early as is practicable and enter into a written agreement with
any such general construction contractor regarding the terms and conditions governing such an
exclusive negotiating relationship up until the time that a final construction contract shall be
executed. To permit this objective to be realized the Parties recognize and agree that no federal
funds shall be made available for the payment of any portion of the costs of construction for the
Housing Development or any of the improvements in the legal estate of the Housing
Development, except to the extent to which it may be confirmed that regulations governing any
such source of federal funds do not require the formal competitive bidding of the general
construction contract for the improvements to be so financed.
The form of agreement memorializing the exclusive negotiating agreement and the form of
construction contracts shall be as subsequently agreed to among the Parties. The construction
contract for the Opportunity Center, the Housing Development and related parking shall run
between the general contractor and the limited partnership/owner of the Housing Development.
However, CWG shall provide all funding for the cost of construction of the Opportunity Center
and its related parking and shall own and maintain the Opportunity Center and its related
parking, after the project is subdivided in accordance with this Agreement.
The Housing Authority shall be responsible for the administration of the construction agreement
during the course of construction.
Distribution of Developer Fees Earned in Conjunction with the Housing Development
The Developer Fee, if any, to be paid by the limited partnership in conjunction with the
development of the Housing Development shall be paid to the Housing Authority and, within 5
(five) working days of the receipt of any such Development Fee by the Housing Authority, to th~
Parties according to the percentages outlined below:
CWG 50%
Housing Authority 5O%
Operation and Management of the Opportunity Center and Transitional Housing Program
.Opportunity Center. CWG shall enter into a Lease or Operating Agreement with InnVision to
operate the Opportunity Center. Pursuant to such an agreement, InnVision shall manage services
to be offered to homeless individuals and operate, a transitional housing program for a portion of
the units in the Residential Development as shall be subsequently agreed Upon by the Parties.
5
Inn Vision shall be responsible for raising all funds required for the operation of its programs
including the funding of its staff. Basic maintenance services shall be provided to InnVision for
the Opportunity Center by Property Management Inc., a corporate affiliate of the Housing
Authority, at no cost to InnVision. CWG shall pay for all utility expenditures in conjunction with
the O)portunity Center. Rental income received by the limited partnership/owner of the Housing
Development shall be used by the limited partnership to pay for basic maintenance of the
Opportunity Center and for utility expenditures incurred by CWG in conjunction with the
operation of the Opportunity Center.
Transitional Housing Programs. All units in the transitional housing programs operated by
InnVision shall be required to be leased and occupied tO low and very low income households
according to procedures reviewed and approved by tax counsel to the limited partnership for
purposes ,of confirming that they are not operated on a "transient basis" as refen’ed to in Section
42 of the IRS and associated federal regulations as disqualifying an owner from claiming federal
low income housing tax credits on such units. These standards shall be set forth in the Lease or
Operating Agreement with InnVision and strict adherence to these standards shall bea Condition
of continuing operational rights by InnVision. The Limited Partnership ownin~ the Housing
Development shall be a party to the Lease or Operating Agreement or otherwise be permitted to
enforce this provision of the Agreement against the operator of the Opportunity Center.
InnVision shall be required to cooperate in full with the property management agent of the
Limited Partnership in all material regards required to assure compliance with all federal and
California requirements relevant to the low income housing tax credit program including, but not
limited to, income verification standardslprocedures; data collection/reporting, and Cooperation
with compliance inspectors acting as agents of the limited partner and/or the California Tax
Credit Allocation Committee.
The Parties agree that vacancies in the Housing Development units targeted for occupancy by
transitional housing program residents shall be made available for a period not to exceed two
weeks for occupancy by Opportunity Center clients who otherwise are eligible for occupancy
under all recorded regulatory agreements and use restriction documents. Occupancy in the
Housing Development for units to be occupied both by Opportunity Center clients and,
subsequent to this two week prioritization period, tenants selected from waiting lists and the
general community, shall be based upon a system recognizing geographically based priorities
associated with Project funding sources, except as may otherwise be limited by law.
Should the Opportunity Center be unable to successfully raise funds to operate a transitional
housing program all units shall be leased as permanent housing unless and until a substitute
transitional housing program operator deemed suitable to both CWG and the Housing Authority
is identified and appropriate contractual arrangements developed and executed permitting
resumption of a transitional housing program.
Operation and Management of the Housing Development
During a period lasting not less than the first fifteen years of operation, the managing general
partner of the Limited Partnership shall be responsible for making all asset management
decisions regarding the housing estate, subject to the. terms and conditions of the Lease or
6
decisions regarding the housing estate, subject to the terms a~d conditiol.~s of the Lease or
Operating Agreement with respect to transitional hou.ning unit.~ and as further limited by the final
limited partnership agreemer~.t developed as part of the sale of the limited partnership interest’.
The pl:operty management agent of the Limited Partnership shall be Property Management Inc.
( MI ) and shall perform such services pursuant to a Prope.rb, Managetuent Agreemen.t deemed
acceptable to the limited partnership/owner includi.ng both the general partner and the limited
partner. ’ ’ . ¯
~.e.nt Housi.~ Pro rams All units in the permanent housing managed by PMI shall be
required to be leased and occupied to low a~.d very low i.ncome households according to
procedures reviewed and approved by tax counsel to the Limited Partnership for purposes of
confirming that they are ~.ot operated, on a "transient basis" as referred to in Sectior~. 42 of the
IRS m.~d associated federal regu.lations as disqualifying an owner from claiming federal low
income housing tax credits on. such units. ’ ’
The Parties agree that vacancies in the Housing Development units designated as pen-nanent
housing shall be made available for a period not to exceed two weeks for occupancy by
Opportunity Centar clients who otherwise are eligible for occupm:~cy u~.der all recorded
regulatory agreements and use restriction documents. Occupancy in the Housing Development
for units to be occupied both by Opportun.ity Center click.its and, subsequent to this two week
prioritization period, tenants selec’ced from waiting lists and the general community, shall be
based upon a system recognizing geographically based priorities associated with P~:o.iect funding
sources, except as may otherwise be limited by law.
The Option to Acquire the Housing Development from the Limited Partnership at The End
of the 15 Year Recapture Period
The Option to Purchase and Right of First Refusal to aequi.re the Housing Development at the
end of the 15 year recapture period shall run with CWG or be assigned to CWO cor~currem with
execution by the non-profit corporation acting a.s the general partr~er of the limited partnership
should these agreements run with the general part~.er. Should either corporation acquire the
Housing Developme~.~t through the exercise of this Option to Purchase or Right of First Refusal
alternatives, that corporation shall be required to continue to operate the Housi~g’Developn~ent
according to the terms of this agreement and, in perpetuity, all oth.er subsequent agreements
running between CWG and the Limited Pam~ership.
IN WITNESS.WHEREOF, the parties hereto have executed this Agreement
COMMUNIT5~ WORKING GROUP,
Califo~. ~-profit corporatiot~
7
2002
THE HOUSING AUTHORITY OF THE
COUNTY OF SANTA CLARA, a public
agency corporate and politic
By:’(~~
Its:’~
EXHIBIT C
FORM OF NOTE
PROMIS SORY NOTE
(COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS)
SECURED BY DEED OF TRUST AND ASSIGNMENT OF RENTS
$1,280,000.00 Date:,2002
Palo Alto, California
FOR VALUE RECEIVED, the undersigned, COMMUNITY WORKING GROUP, INC., a
corporation organized under the Nonprofit Public Benefit Corporation Law of the State of
California, and THE HOUSING AUTHORITY OF THE COUNTY OF SANTA CLARA, a public agency
corporate and politic (collectively "Maker"), hereby jointly and severally promise to pay to the
CITY OF PALO ALTO ("Holder"), or order, at its Office of Revenue Collections, 250 Hamilton
Avenue, Palo Alto, California, or at such other place as may be designated, in writing, by the
Holder, the principal sum of One Million, Two Hundred Eighty Thousand and 00/100 Dollars
($1,280,000.00), or the total amount disbursed to or on behalf of Maker from time to time
pursuant to that certain Predevelopment Funding Agreement more particularly described in
Section 1 below, whichever is less (the "Loan Amount") together with accrued, unpaid interest
thereon, on or before December 31, 2003, or sooner as herein provided; provided, however, the
principal amount of this Note shall not bear interest, except as otherwise provided in Section 11
below.
ADDITIONAL TERMS AND CONDITIONS
1. This Note is made in connection with the agreement between Holder and Maker
entitled "Agreement between the City of Palo Alto, The Housing Authority of The County of
Santa Clara, and Community Working Group, Inc. to Fund Pre-Development, Site Acquisition,
and Pre-Construction Expenses for the Opportunity Center for the Mid-Peninsula, a Housing and
Homeless Services Center on Encina Avenue, Palo Alto" dated as of ,2002
("Predevelopment Funding Agreement"), pursuant to which Holder has agreed to provide to
Maker a portion of the funds to be used by Maker for predevelopment and site acquisition costs
for the Opportunity Center for the Mid-Peninsula, a new facility to provide social services for
homeless persons and families and approximately ninety-five (95) units of housing affordable to
extremely low income persons (the "Project") to be developed at 33-49 Encina Avenue, Palo
Alto, California (the "Property"). Maker will conduct predevelopment activities and site
acquisition for the Project in accordance with the terms and conditions of the Predevelopment
Funding Agreement. All terms, conditions, agreements and provisions, including the covenants,
representations, and terms of default and remedies for default set forth in the Predevelopment
Funding Agreement are incorporated herein by reference, and made a part hereof.
LA1 440193v3
2. This Note evidences the obligation of the Maker to make full payment of the Loan
Amount to the Holder, in accordance with the provisions of this Note and the Predevelopment
Funding Agreement. Such funds are to be used solely by the Maker, together with funds
obtained by Maker from other sources, to provide funding for predevelopment work and site
acquisition, as more fully described in the Predevelopment Funding Agreement.
3. This Note is secured by Deeds of Trust and Assignments of Rents recorded
against the Property (collectively, the "Deeds of Trust")..
4. At any time, and from time to time, the Maker may prepay to the Holder the
principal sum of this Note, or any part thereof, without penalty.
5. The Note ’shall become due and payable immediately, without notice or demand,
in the event all or any part of the Property, or all or any part of Maker’s interest in the Project, (a)
is sold, transferred, assigned or otherwise conveyed without the prior written consent of Holder,
or (b) is further encumbered without the prior written consent of Holder; provided, however,
Holder will not unreasonably withhold its consent to a transfer of the Property to a limited
partnership having a non-profit corporation as its general partner that is formed to develop and
own the Project, provided that such limited partnership assumes all of the obligations of Maker
hereunder and under the Predevelopment Funding Agreement.
6. The Maker and any other maker, co-maker, endorser, guarantor, and any other
party to this Note (collectively, "Obligors"), and each of them: (i) waive notice of default (except
as provided in Section 12), notice of acceleration, notice of nonpayment, presentment for
payment, demand, protest, notice of demand, notice of protest, notice of nonpayment, and any
other notice required to be given under the law to the Obligors; (ii) consent to any and all delays,
extensions, renewals, or other modifications of this Note or waivers of any term hereof or release
or discharge by the Holder of any of the Obligors or release, substitution, or failure to act by the
Holder, from time to time, and agree that no such action, failure to act, or failure to exercise any
right or remedy on the part of the Holder shall in any manner affect or impair the obligations of
any Obligor or be construed as a waiver by the Holder of, or otherwise affect, any of the Holder’s
rights under this Note or the Predevelopment Funding Agreement, under any endorsement or
guaranty of this Note; and (iii)jointly and severally agree to pay, on demand, any and all costs
and expenses of collection of this Note or of any endorsement or any guaranty hereof, including
attorney’s fees.
No extension of time for payment of this Note or any portion thereof made by agreement
of Holder with any person now or hereafter liable for the payment of this Note shall operate to
release or discharge liability of Maker under this Note, either in whole or in part.
7. The pleading of any statute of limitations as a defense to any demand against the
Maker is expressly waived by the Maker.
8. If any default is made hereunder, the Maker promises to pay the Holder’s
reasonable attorneys’ fees and other related costs and expenses incurred by the Holder in
2
LAI 440193v3
connection with the enforcement of any rights of the Holder. The Holder’s right to such fees shall
include, but not be limited to, its representation by staff attorneys of the HOlder’s Office of the
City Attorney, and such representation shall be valued at the customary and reasonable rates for
private sector legal services.
9. The occurrence of any of the following shall constitute an event of default under
this Note (an "Event of Default"): (i) the failure of Maker to pay any amount due hereunder
within fifteen (15) days of its due date; or (ii) any default by the Maker under the
Predevelopment Funding Agreement; or (iii) any default by Maker under the Deeds of Trust, or
either of them.
10: Upon the occurrence of any Event of Default, or at any time thereafter, at the
option of the Holder hereof, the entire unpaid principal and inte.rest owing on this Note shall
become immediately due and payable. This option may be exercised at any time following any
such Event of Default, and the acceptance of one or more installments thereafter shall not
constitute a waiver of such option with respect to any subsequent Event of Default. The Holder’s
failure to exercise any other right or remedy hereunder or under any agreement which secures the
indebtedness or is related thereto shall not affect any right or remedy and no single or partial
exercise of any such right to remedy shall preclude any further exercise thereof.
11. Provided that no Event of Default occurs prior to the time when the principal
amount of this Note has been paid in full, the principal hereunder shall not bear interest;
provided, however, in the event of any Event of Default, interest shall accrue on all amounts
advanced to or on behalf of Maker (or either of them) pursuant to the Predevelopment Funding
Agreement from the date disbursed until repaid at the rate often percent (10%) perannum. If
this Note be reduced to judgment, such judgment shall bear the statutory interest rate on
judgments.
12. The Holder shall not exercise any right or remedy provided for herein because of
~any default of the Maker unless, in the event of a monetary.default, the Maker shall have failed
to pay the outstanding sums within a period of thirty (30) calendar days after notice that payment
was due. In the event of an uncured nonmonetary default, the Holder shall have first given
written notice thereof to the Maker, and the Maker shall have failed to cure the nonmonetary
default within a period of thirty (30) days after the giving of such notice of such default;
provided that if the nonmonetary default cannot be cured within thirty (30) days and the Maker
proceeds diligently and uses best efforts to cure such default until it shall be fully cured within
no more than ninety (90) days after the giving of such notice, then the Holder shall not exercise
any right or remedy provided for herein until such 90-day period shall expire; provided,
however, the Holder shall not be required to give any such notice or allow any part of the grace
period if the Maker (or either of them) shall have filed a petition in bankruptcy or for
reorganization or a bill in equity or otherwise initiated proceedings for the appointment of a
receiver of its assets, or if the Maker (or either of them) shall have made an assignment for the
benefit of creditors, or if a receiver or truste.e is appointed for the Maker (or either of them) and
such appointment or such receivership is not terminated within forty-five (45) days of such
3
LA1 440193v3
appointment. Nothing in this Section 12 shall affect the provisions of Section 11 providing for
the accrual of interest in the event of an Event of Default.
13. Any notice, demand, or other communication required hereunder shall not be
deemed sufficiently given, unless sent by certified mail, postage prepaid, return receipt
requested, or by express delivery service or overnight courier service, to the principal office of
the addressee, or at such other address as may be designated, in writing, from time to time:
Holder:City of Palo Alto
250 Hamilton Avenue
Palo Alto, California 94301
Attn: City Clerk
Maker:Housing Authority of the County of Santa Clara
505 West Julian Street
San Jose, CA 95110-2300
Attn: Executive Director
With a copy to:Community Working Group, Inc.
948 Ramona Street
Palo Alto, CA 94301
Attn: Donald Barr
The delivery shall be effective on the date shown on the delivery receipt or the date on which the
delivery was refused.
14. No judgment, or execution thereof, entered in any action, legal or equitable, on
this Note shall be enforced directly against the Maker or any officer, director or employee of the
Maker, but shall be-enforced only against the collateral described in the Deeds 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 the Maker or any material
misrepresentation made by the Maker to the Holder in the Predevelopment Funding Agreement,
this Note, the Deeds of Trust, or any other document or instrument delivered in connection with
the Loan, or (b) the sale or transfer or other conveyance or encumbrance of the Property, or any
interest therein, other than a sale or transfer, without the Holder’s prior written consent, or (c) the
sale or transfer or other conveyance or encumbrance of all or any part of Maker’s interest in the
Project without the Holder’s prior written consent. Furthermore, the foregoing limitation shall
not be applicable to the extent of any loss incurred by the Holder due to (a) misappropriation by
the Maker of any rents (including, without limitation, the application of rents to otherthan
operating expenses and debt service), security deposits, insurance or condemnation proceedings,
(b) the diversion or other misappropriation by Maker of any funds from any reserve account
maintained in connection with the Project, or (c) the failure of Maker to comply with Maker’s
obligations under the Predevelopment Funding Agreement. The Holder shall not in any way be
prohibited from naming the Obligors, or any of them, or any person holding under or through
them as parties to any actions, suit or other proceedings initiated by the Holder to foreclose or
LA1 440193v3
otherwise realize upon any other lien or security interest created under the Deeds of Trust, and
further provided, however, that nothing in this Section 14 shall be deemed to prejudice the rights
of the Holder to recover any funds or payments which were diverted or misappropriated by the
Obligors, or any of them.
15. The covenants, agreements, terms, and conditions of this Note shall inure to, and
shall be binding on, the successors and assigns of the Obligors.
EXECUTED BY MAKER by their duly authorized representatives in Palo Alto, County
of Santa Clara, State of California, on the date first above written.
COMMUNITY WORKING GROUP~ INC.,
a California non-profit public benefit corporation
By:
Name:
Title:
By:
Name:
Title:
Taxpayer Identification No.
HOUSING AUTHORITY OF THE COUNTY OF
SANTA CLARA,
a public agency corporate and politic
By:
Name:
Title:
Taxpayer Identification No.
LA1 440193v3
EXHIBIT D
FORM OF DEED OF TRUST
RECORDING REQUESTED BY AND
WHEN RECORDED, MAIL TO:
City of Palo Alto
Office of City Attorney
250 Hamilton Avenue
Palo Alto,, CA 94301
SPACE ABOVE THIS LINE FOR RECORDER’S USE
DEED OF TRUST, ASSIGNMENT OF RENTS
AND MEMORANDUM OF OPTION
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND MEMORANDUM OF
OPTION, made on ,2002, between
("Trustor"), whose address is..,
FIRST AMERICAN TITLE GUARANTY COMPANY, a California corporation ("Trustee"),
whose address is 1737 North First Street, San Jose, California 95112, and THE CITY OF
PALO ALTO, a municipal corporation of the State of California ("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
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FOR THE PURPOSE OF SECURING payment of the indebtedness evidenced by that
Promissory Note ("Note"), and any extensions or renewals thereof, in the principal amount of
$1,280,000 executed by Trustor and ("Co-Borrower")
in favor of Beneficiary, and the performance of the obligations of Trust0r and Co-Borrower
contained in that certain Agreement Between the City of Palo Alto, the Housing Authority of the
County of Santa Clara, and Community Working Group, Inc. to Fund Pre-Development, Site
Acquisition, and Pre-Construction Expenses for the Opportunity Center for the Mid-Peninsula, a
Housing and Homeless Services Center on Encina Avenue, Palo Alto dated as of
_, 2002 (the "Agreement").
TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES:
1. Fictitious Deed of Trust. By the execution and delivery of this Deed of Trust anal
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, iobligations, 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, at its option, declare the
indebtedness secured hereby immediately due and payable, without notice to Trustor or any other
person or entity, 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, the Note, and/or the Agreement. As used in this Sectidn 2, the term
"transfer" includes, without limitation, the following transactions:
a.Any total or partial sale, assignment or conveyance, or creation of any
tiust 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 capital
stock, partnership profit and loss interest, or other form of interest in Trustor; and
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2
assets of Trustor.
Any merger, consolidation, sale or lease of all or substantially all of the
Trustor acknowledges that it is the intention of Trustor to transfer all or part of the Property to a
limited partnership having a non-profit corporation as its general partner formed to develop and
own the Project (as that term is used in the Agreement), and Beneficiary will not unreasonably
withhold its consent to such a transfer, as set forth in Section 3.6 of the Agreement.
3. Due on Sale, In the event of default by Trustor under the Note or 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, all obligations secured by this instrument, irrespective of the
maturity dates expressed therein, at the option of Beneficiary hereofand without.demand ~r
notice shall immediately become due and payable.
4. Waivers. The obligations of Trustor under this instrument shall be performed
without demand by Beneficiary and shall be unconditional without regard to any circumstance
which might otherwise constitute a legal or equitable discharge of a surety or a guarantor.
Trustor hereby waives the benefit of all principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this instrument and agrees that Trustor’s
obligations shall not be affected by any circumstances, whether or not referred to in this
instrument, which might otherwise constitute a legal or equitable discharge of a surety or a
guarantor, including any right of discharge under any and all statutes or other laws relating to
guarantors or sureties and any other rights of suretiesand guarantors thereundei. Trustor also
waives, to the fullest extent permitted by law, all rights to require Beneficiary to (a) proceed
against Co-Borrower, (b) if Co-Borrower is a partnership, proceed against any general partner of
Co-Borrower, (c) proceed against or exhaust any other collateral held by Beneficiary to secure
the payment and performance of the obligations secured by this Deed of Trust, or (d) pursue any
other remedy it may now or hereafter have against Co-Borrower, or (if Co-Borrower is a
partnership) any general partner of Co-Borrower, including any and all benefits under California
Civil Code Sections 2845, 2849 and 2850.
Trustor understands that the exercise by Beneficiary of certain rights and remedies
contained in this Deed of Trust (such as a nonjudicial foreclosure sale) may affect or elimifiate
Trustor’s right of subrogation against Co-Borrower and that Trustor may therefore incur a
partially or totally nonreimbursable liability under this Deed of Trust. Nevertheless, Trustor
hereby authorizes and empowers Beneficiary to exercise, in its sole and absolute discretion, any
right or remedy, or any combination thereof, which may then be available~ In accordance with
Section 2856 of the California Civil Code, Trustor waives any right or defense based upon an
election of remedies by Beneficiary, even though such election (e.g., nonjudicial foreclosure with
respect to any collateral held by Beneficiary to secure performance of the obligations secured by
this Deed of Trust) destroys or otherwise impairs the subrogation rights of Trustor or the right of
Trustor (after payment of the obligations secured by Trustor under this Deed of Trust) to proceed
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against Co-Borrower for reimbursement, or both, by operation of Section 580d of the Code of
Civil Procedure or otherwise.
In accordance with Section 2856 of the California Civil Code, Trustor waives any and all
other rights and defenses available, to Trustor by reason of Sections 2787 through 2855,
inclusive, 2899, and 3433 of the California Civil Code.
5. Memorandum of Option. Trustor hereby grants to Beneficiary the right to
purchase the Property on the terms and conditions set forth in Section 3.9 of the Agreement, the
terms and conditions of which are incor ~orated herein by this reference as if fully set forth
herein.
COMMUNITY WORKING GROUP~ INC.,
a California non-profit public benefit corporation
By:
Name:
Title:
By:
Name:.
Title:
Taxpayer Identification No. ’
HOUSING AUTHORITY OF THE COUNTY OF
SANTA CLARA,
a public agency corporate and politic
By:
Name:
Title:
Taxpayer Identification No.
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4
STATE OF CALIFORNIA
COUNTY OF
)
)
)
On the __ day of , in the year 2002, before me,.,
personally appeared , personally known to me or
proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon [behalf of] which the person(s) acted, executed the instrument.
Witness my hand and official seal.
Notary Public
STATE OF CALIFORNIA
COUNTY OF
)
)
)
On the __ day of , in the year 2002, before me,.,
personally appeared , personally known to me or
proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon [behalf of] which the pers0n(s) acted, executed the instrument.
¯Witness my hand and official seal.
Notary Public
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STATE OF CALIFORNIA
COUNTY OF
)
)
)
On the __ day of ., in the year 2002, before me,.,
personally appeared ., personally known to me or
proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the .same
in his/her/their authorized capacity(ies), and that.by his/her/their signature(s) on the instrument
the person(s), or the entity upon [behalf of] which the person(s) acted, executed the instrument.
Witness my hand and official seal.
Notary Public
6
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EXHIBIT E
OPPORTUNITY CENTER
BUDGET FOR CITY LOAN FUNDS
Expenses Related to Project As a Whole:
Architecture, Engineering & Other Consultant Expenses
(Necessary for Project Design and Entitlement Applications)
Other Predevelopment Costs iLegal, Financial Consultant)
Sub-Totah
Expenses Related to Specific Parcels:
39 Encina Avenue:
Purchase of alleged option to purchase, Goodwill
Appraisal & Legal
45 Encina Avenue:
Acquisition, Appraisals, Relocation, Goodwill & Related Legal Services
Appraised value of 45 Encina
Appraisals
Legal services related to eminent domain:
Goodwill
Closing Costs & Relocation
Sub-Total:
TOTAL EXPENSES TO BE REIMBURSED BY CITY
Contingency for Unforeseen Expenses Connected with Eminent Domain
Actions to Acquire 45 Encina Avenue and Clear Title to 39 Encina Avenue
TOTAL
$297,000
$4,000
$20,000
$18,000
$600,000
$6,500
$35,000
$36,000
$13,500
$301,000
$38,000
$691,000
$729,000
$1,030,000
$250,000
$1,280,000
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EXHIBIT F
INSURANCE REQUIREMENTS
POLICY MINIMUM LIMITS OF LIABILITY
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 ~he Property, shall
be obtained. Such policy shall include water damage and debris cleanup provisions.
WORKERS’ COMPENSATION Statutory
COMPREHENSIVE AUTOMOBILE
LIABILITY, including owned, hired,
and nonowned automobiles
Bodily Injury: $1,000,000 ea. person & $1,000,000 ea.
occurrence
Property Damage: $1,000,000 ea. occurrence
COMMERCIAL GENERAL
LIABILITY, including completed
operations, broad form contractual,
and personal injury.
Bodily Injury: $1,000,000 ea. person & $1,000,000 ea.
occurrence; $1,000,000 aggregate
Property Damage: $1,000,000 ea. products and
occurrence
Each insurance policy required by this Agreement shall contain the following clauses:
1. "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.. O. Box 10250, Palo Alt0,. CA 94303."
2. "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."
3. "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."
4. "The City of Palo Alto is added as an additional insured as respects operations of
the named insured, but only as to work performed under this Agreement?’
5. "The City of Palo Alto is named as a loss payee on the property insurance policy
described above." .
All insurance coverage required shall be provided through carriers with a BEST KEY RATING
GUIDE rating of A:VII 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 the City.
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EXHIBIT G
FEDERAL ASSURANCES WITH RESPECT TO CDBG FUNDS
In providing the services and work set forth in the attached Agreement, Contractor agrees
to comply with, adhere to, and take all necessary measures to effectuate, the following covenants
and CDGB assurances:
1.Civil rights and non-discrimination laws.
a.Title VI of the Civil Rights Act of 1964, as amended, and regulations
issued pursuant to 24 CFR Part 1, which provides that no person in the United States shall on the
ground of race, color, or national origin, be excluded from participation in, be denied the benefits
of, or be otherwise subjected to discrimination under any program or activity funded, in whole or
in part, with federal financial assistance.
b.Title VIII of the Civil Rights Act of 1968, as amended, and implementing
regulations when published, which provides for the administration of all programs and activities
relating to housing and community development in a manner to affirmatively further fair
housing.
c.Section 109 of the Housingand Community Development Act of 1974, as
amended, and regulations issued pursuant to 24 CFR Part 570, which provides that no person in
the United States shall on the ground of race, col0r; national origin or sex, be excluded from
participation in, be denied the benefits of, or be subjected to discrimination under, any program
or activity funded, in whole or in part, with federal financial assistance.
d.Section 3 of the Housing and Urban Development Act of 1968, as
amended, and regulations issued pursuant to 24 CFR Part 35, which requires that to the greatest
extent feasible opportunities for training and emi~10yment be given tO persons with low and
moderate incomes residing in the Project area benefited by federal financial assistance, and
contracts for work in connection with the Project shall be awarded to eligible business concerns
which are located in, or owned in substantial part by persons residing in, the vicinity of the
Project.
e. Section 504 of the Rehabilitation Act of 1973, as amended, and
implementing regulations when published.
f. The Age Discrimination Act of 1975, as amended, and implementing
regulations when published.
g. The Americans with Disabilities Act of 1990, as amended, and
implementing regulations when published.
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h.The "American Standard Specifications for Making Buildings and
Facilities Accessible to and Usable by, the Physically Handicapped," Number A-117.1-R 1971,
subject to the exceptions contained in 41 CFR § 101-19.604, which requires every building or
facility (other than a privately owned residential structural) designed, constructed, or altered with
funds provided under 24 CFR 570 to be accessible to persons with physical disabilities.
i.The Housing and Community Development Act of 1977, as amended, and
the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as
amended, and the implementing regulations when published.
j.Theuniform administrative requirements (including the cost and
procurement principles) set forth in 24 CFR Part 85 and OMB Circulars A-87, A-110, A-122,
and A-133, which relate to the acceptance and use of federal funds by non-profit organizations,
and which, require an agency receiving in excess of $300,000 in federal financial assistance to
obtain at its own expense an audit that complies with the requirements of OMB Circular A-133.
k.Executive Order 11063 and regulations issued pursuant to 24 CFR Part
107, which provides for equal opportunity in housing and non-discrimination in the sale, leasing,
rental or other disposition of housing built with federal financial assistance.
1.Executive Order 11246, as amended by Executive Order 11375 and
Executive Order 12086, and regulations issued pursuant to 24 CFR Part 130 and 41 CFR Part 60,
which provide that no person shall be discriminated against on the basis of race, color, religion,
sex, or national origin in all phases of employment during the performance of federally-assisted
construction contracts.
Contractor further ~ovenants with respect to the foregoing assurances that:
A. In the sale, lease, rental, transfer or other disposition of any real property on
which the Facility is located, Contractor shall include or cause to be included in any deed of
trust, mortgage, indenture, or other instrument of.legal encumbrance ("Encumbrance") a
covenant running with the land, prohibiting discrimination upon the basis of race, color, religion,
sex, or national origin, in the sale, lease, rental, transfer or other disposition of such land or any
improvements erected or to be erected thereon, and providing that Contractor and the United
States of America (HUD) are beneficiaries of and entitled to enforce such covenant.
B. Contractor shall take action to affirmatively further fair housing in the sale, lease,
rental, transfer or other disposition of housing, the financing of housing, and the provision of
brokerage services.
(1) Contractor shall certify and agree that Contractor is under no contractual
or other disability that would prevent Contractor from complying with these requirements.
(2) Contractor shall send to each labor organization or workers’ representative
with which Contractor has a collective bargaining agreement or other similar contract, if any, a
notice advising such organization or representative of Contractor’s commitment under Section 3
of the Housing and Urban Development Act of 1968, as amended, and shall post copies of the
notice in conspicuous places available to employees and applicants for employment or training.
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C.Contractor covenants to take affirmative action to ensure fair treatment in all
phases of employment, training, apprenticeships, promotion, demotion, and tran,sfer, and
recruitment or recruitment advertising..
2.Federal political and conflict of interest laws.
a.The Anti-Racketeering Act (also known as the Copeland Anti-
Racketeering Act), as amended, and regulations issued under 29 CFR Part 3, which prohibits
kick-backs in construction work funded with federal financial assistance.
b. The Hatch Political Activity Act, as amended, and implementing
regulations when published, which prohibits the use of federal funds for lobbying activities.
Contractor further covenants that:
A. Contractor will establish safeguards to prohibit employees from using their
positions for a purpose that is or gives the appearance of being motivated by a desire for private
gain for themselves or others, particularly those with whom they have family, business, or other
ties.
B. Contractor will not use the assistance provided under the Agreement in the
payment of any bonus or commission for the purposes of obtaining HUD approval of the
application for such assistance, or HUD approval of applications for additional assistance, or any
other approval or concurrence of HUD required under this Agreement, Title 1 of the Housing
and Community Development Act of 1974, as amended, or applicable HUD regulations.
Reasonable fees or bona fide technical, consultant, managerial or other such services, other than
actual solicitation, are not hereby prohibited if their costs are otherwise eligible as a CDGB
Program cost.
C. Contractor will not admit any member of or delegate to the Congress of the
United States or any Resident Commissioner to any share or part of this Agreement or to allow
any benefit to arise from the same.
3.Federal labor and employment laws.
Contractor covenants that:
A. Contractor will comply with all applicable federal labor laws, regulations, and
standards which require contractors engaged under contracts for the construction, completion, or
repair of any building or work financed, in whole or in part, with assistance provided under this
Agreement, including all HUD requirements pertaining to such contracts and the applicable
requirements of the regulations of the United States Department o~" Labor under 29 CFR Part 3,
29 CFR Part 5, and 29 CFR Part 5a, governing the payment of wages and the ratio of apprentices
and trainees to journeymen. If state or local law wage rates are higher than those required under
the federal regulations, nothing hereunder is intended to relieve Contractor of its obligation, if
any, to require payment of the higher rates. Contractor shall cause or require to be inserted in
full, in all such contracts subject to such regulations, provisions meeting the requirements of 29
CFR Part 5.5 and, for such contracts in excess of $10,000, 29 CFR Part 5a.3. No award of
LA1 439252v5
contract covered under the Agreement shall be made to any contractor who is itt the time
ineligible to receive an award of contract under the applicable regulations of the United States
Department of Labor.
4.Environmental and energy laws.
a.Section 104(h) of the Housing and Community Development Actof 1974,
which prohibits the release or commitment of funds to any person, unless an appropriate
environmental review has been conducted for the activity or program being funded, all other
environmental requirements for the conduct of such activity or program have been satisfied, and
all proper authorizations to proceed with such activity or program have been received from
HUD.
b.Section 106 of the National Historic Preservation Act, as amended,
Executive ’Order 1 ! 593, and implementing regulations when published, and the provisions of 16
U.S.C. § 469a-1, relating to the threat to pre-historical, historical, or archeological data by
federal construction projects, when performing environmental assessments under the National
Environmental Policy Act of 1969, as amended, and implementing regulations when published.
c. Section 114 of the Clean Air Act, as amended, and implementing
regulations when published.
d. Section 308 of the Water Pollution Control Act, as amended, and
implementing regulations when published.
e.The provisions of 24 CFR Part 35, as amended, which provides that no
lead-based paints shall be used in construction or rehabilitation work performed under projects
funded with federal financial assistance.
f.The provisions of 24 CFR Part 39, as amended, which provides that the
performance of rehabilitation work shall conform to HUD energy standards for cost-
effectiveness.
g. Executive Order 11296, as amended, and implementing regulations when
published, which relates to the evaluation of flood hazards.
h. Executive Order 11288, as amended, and implementing regulations when
published, which relates to the prevention, control, and abatement of water pollution.
Contractor further covenants that:
A. Contractor’s Facility will not be included on the "List of Violating Facilities"
issued by the United States Environmental Protection Agency (EPA) pursuant to 40 CFR §
15.20.
B. Contractor will give prompt notice of any notification received from the Director,
Office of Federal Activities, EPA, that the Facility is under consideration to be listed on the "List
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of Violating Facilities." All nonexempt subcontracts concerning the Facility shall include the
provisions of this paragraph.
C. Contractor will cooperate fully in any federal enforcement actions instituted
pursuant to applicable statutes or regulations.
5.Miscellaneous provisions.
a.Contractor will give HUD and the United States Controller General
through any authorized representatives access to and the right to examine all records, books,
papers, or documents related to the receipt and use of CDGB grant funds under this Agreement.
b.No officer, employee or agent of City who exercises any functions or
responsibilities with respect to the services and work to be provided by Contractor pursuant to
this Agreement during his or her tenure or for one (1) year thereafter, shall have any interest,
direct or indirect, in this Agreement or the proceeds thereof.
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