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HomeMy WebLinkAbout2001-08-06 City Council (10)TO: FROM: City of Palo Alto City Manager’s Report HONORABLE CITY COUNCIL CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE: SUBJECT: AUGUST 6, 2001 CMR:336:01 APPROVAL OF A LOAN OF $69,300 FROM COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) FUNDS TO THE PALO ALTO HOUSING CORPORATION FOR REHABILITATION COSTS OF THE EMERSON NORTH APARTMENTS AT 3051-3061 EMERSON STREET RECOMMENDATION Staff recommends that the City Council: Approve the attached Amendment Number One to the November 1, 1994 Funding and Regulatory Agreement (with attached form of promissory note and modification of deed of trust) with Palo Alto Housing Corporation (PAHC) to provide a loan of $69,300 for the rehabilitation of the Emerson North Apartments at 3051-3061 Emerson Street; and Authorize the Mayor to execute the amendment, in substantially similar form, and direct the City Manager to administer the provisions of the amended agreement and to execute any other documents required to complete the transaction. BACKGROUND In November 1994, the Palo Alto Housing Corporation (PAHC) acquired the Emerson North Apartments with a $80,000 loan from a local bank and a City of Palo Alto $375,000 deferred payment acquisition loan from the Residential Housing In-lieu Fund. PAHC has operated the property (which includes six studio units) under the terms of the Funding and Regulatory Agreement (Funding Agreement) with the City since 1994. The Funding Agreement specifies maximum rents and tenant incomes so that the units serve very low-income and low-income households. Immediately after acquisition, PAHC completed about $20,000 of priority repairs with funds available from a seller credit through escrow. Over time, PAHC has also done some interior renovation, as units have become vacant. However, the City and ClVIR:336:01 Page 1 of 3 PAHC recognized that a major rehabilitation of this 46-year old property was necessary and should be undertaken when funding was secured. To accomplish the rehabilitation, PAHC applied for $69,300 of fiscal year 1996-97 CDBG funds. PAHC’s application was approved by the City Council in May 1996. Council action is requested at this time to amend the original Funding Agreement to make the loan for the rehabilitation of the apartment building. DISCUSSION Due to staffing limitations, initiation of the Emerson North rehabilitation project was delayed pending the completion of other, larger acquisition and rehabilitation projects PAHC, including the Arastradero Park Apartments water system and the Sheridan Apartments. PAHC has recently reevaluated the property’s condition and updated the description of the proposed rehabilitation .work. The planned work now includes kitchen remodeling, new appliances, dry rot repair, electrical system replacements, new flooring, new fences, a new irrigation system and landscaping. PAHC expects that the work can be completed with the tenants in place. However if any temporary relocation is necessary, PAHC will be responsible for those costs. PAHC will not use a general contractor, but will have its property management staff overseeing the rehabilitation work. The budget includes an allowance of $3,300 (five percent of the estimated $66,000 cost of the work) for PAHC’s project management services. RESOURCE IMPACT The source of the funding for the rehabilitation loan is Community Development Block Grant (CDBG) funds from the City’s 1996-97 grant allocation. The rehabilitation loan will be a deferred payment loan with the same terms as the City’s acquisition loan. Both the acquisition and the purchase notes will become due in full in 2034, which is 40 years from the date PAHC acquired the property, or upon an earlier sale or transfer of the property. The property’s $80,000 bank loan has a 15-year amortization schedule and will be paid off in December 2009. At that time, the Agreement with the City requires that the property’s operating budget be evaluated and that regular payments on the City notes be established if there is sufficient cash flow. POLICY IMPLICATIONS This action does not represent any change to existing City policies. TIMELINE After approval of the loan by Council, PAHC will finalize the specifications and solicit bids for the work. Federal procurement procedures for the bidding and contractor selection process must be followed due to the use of CDBG funds. However, federal prevailing wages requirements do not apply to the construction work because the project’s size is below the threshold for those regulations. PAHC plans to complete the rehabilitation within six months. CMR:336:01 Page 2 of 3 ENVIRONMENTAL REVIEW The provision of City funds to rehabilitate a six-unit apartment building as affordable housing is categorically exempt under Section 15326 of the California Environmental Quality Act. The rehabilitation project was also determined to be exempt under Section 58.34 (a) of HUD’s environmental regulations for the National Environmental Policy Act (NEPA). ATTACHlVIENTS Attachment A: Amendment Number One To Funding and Regulatory Ageement Between City of Palo Alto and Palo Alto Housing Corporation Concerning Acquisition of Apartment Complex Located At 3051-3061 Emerson Street Attachment B: Proposed Rehabilitation Work and Estimated Costs PREPARED BY: Catherine Siegel, Housing C " DEPARTMENT HEAD REVIEW S~~~ G. EDWARD GAWF ~ Director of Planning and Community Environment CITY MANAGER APPROVAL: EMIL~?~HARRIS ON Assistant City Manager cc:-Palo Alto Housing Corporation CMR:336:01 Page 3 of 3 Attachment A This document is recorded for the benefit of the City of Palo Alto and is entitled to be recorded free of charge in accordance with Section 6103 of the Government Code. After Recordation, mail to: OFFICE OF THE CITY ATTORNEY 250 Hamilton Avenue Palo Alto, CA 94301 AMENDMENT NO. 1 TO FUNDING AND REGULATORY AGREEMENT. BETWEEN CITY OF PALO ALTO AND PALO ALTO HOUSING CORPORATION CONCERNING ACQUISITION OF APARTMENT COMPLEX LOCATED AT 3051-3061 EMERSON STREET THIS AMENDMENT NO.-ONE TO AGREEMENT is made and entered into on the day of , 2001, by and between the CITY OF PALO ALTO, a municipa! corporation of the State of California ("CITY"), and the PALO ALTO HOUSING CORPORATION, a California nonprofit corporation ("CONTRACTOR"). RECITALS WHEREAS, CONTRACTOR has applied to CITY " for assistance with the cost of CONTRACTOR’s acquisition of the real property and improvements located at 3051-3061 Emerson Street in the City of Palo Alto, A.P.N. 132-48- 19, consisting of a six-unit apartment complex (the "Project" or the "Property," including as hereinafter more particularly described); and WHEREAS, the Project will provide rental housing affordable to !ow and very !ow income households; and WHEREAS, after the acquisition of the Property CONTRACTOR anticipates applying for funds to renovate the Project, under the HOME investment Partnerships Program established by the National Affordable Housing Act of 1990, or under the federa! Community Deve!opment B!ock Grant program, a~ministered by the United States Department of Housing and Urban Deve!opment; and WHEREAS, the acquisition and preservation of affordable rental housing fulfills one of the purposes of the City’s Housing Reserve Fund and is also consistent with the affordable housing goals of CITY as outlined in CITY’s Comprehensive Housing Affordability Strategy; 010802 sm 0052791 NOW, THEREFORE, in consideration of the mutual covenants and agreements specified herein, and subject to its terms and provisions, the parties to this Agreement agree as follows: PART I: FUNDING A.DEFINITIONS I. "Assisted Unit" means one of the six (6) residential dwelling units that will be available for renta! in the Project as of the date of "Project Completion," as that term is defined under Section (I)(A) (12) hereof. 2. "CONTRACTOR" means the Palo Alto Housing Corporation,a California nonprofit public benefit corporation. 3. "CDBG" or "CDBG program" means the Community Development B!ock Grant program, established pursuant to the Housing and Community Deve!opment Act of 1974, and the funds al!ocated to CITY pursuant to that program, by HUD: 4."CITY" means the City of Palo Alto, a chartered municipal corporation of the State of California.CITY is a "Qualified State Recipient" for purposes of the HOME Investment Partnerships Program. 5. "HOME" means the HOME Investment Partnerships Program established by the National Affordable Housing Act of 1990, which is administered by HUD pursuant to the regulations published at 24 CFR Part 92, as amended (the "Regulations"). 6. "Household" means the total number of persons residing in a single residential unit (Assisted Unit) of the Project.- Those persons may also be referred to, individually or collectively, as "occupants" or "tenants" Household income is the combined income of the Household and is used to determine income eligibility, in accordance with the Regulations and with this Agreement. 7. "HUD" means the United States Department of Housing and Urban Deve!opment, and its successors. 8. "Income Certification" means a certification as to income executed by members of a Household in the Project, in substantially the form attached hereto as Exhibit "A,"which is incorporated herein by this reference. // 010802 srn 0052791 2 9. "Low Income Household" means a household with adjusted income, adjusted for household size, as computed pursuant to the Income Certification, which does not exceed sixty percent (60%) of the Median Gross Income for the Area, as hereinafter defined. Determination of the status of a Household as a Low Income Household shall be made upon initial occupancy of an Assisted Unit by each occupant, and recertified annually. I0. "Median Gross Income for the Area" means the median income for the San Jose, California Primary Metropolitan Statistical Area, as determined by the Secretary of HUD under Section 8(f) (3) of the United States Housing Act of 1937, as amended. In the event that programs under Section 8(f) are terminated, the median incomeshall be determined in accordance with the written direction of CITY in a manner similar to CITY’s then-current income formula determination. ii. "Project" or "Property"means the real property and improvements !ocated at 3051-3061 Emerson Street, Palo Alto, California, and more particularly described in Exhibit "B" to this Agreement, which is attached hereto and incorporated herein by this reference. The Project is more fully described in Section (I) (C) hereof. 12. "Project Completion", for purposes of this Agreement, means the date of the close of escrow for CONTRACTOR’s purchase of the Property. 13. "Very Low Income Household" means a household with adjusted income, adjusted for household size, as computed pursuant to the Income Certification, which does not exceed fifty percent (50%) of the Median Gross Income for the Area. Determination of the status of a Household as a "Very Low Income Household" shal! be made upon initia! occupancy of an Assisted Unit by each occupant, and recertified annually. B. PURPOSE OF AGREEMENT The purpose of this Agreement is to Set forth the respective duties and responsibilities of CITY and CONTRACTOR with respect to CITY’s !oan of funds for CONTRACTOR’s acquisition of the Property and with respect to CITY’s loan for rehabilitation costs. C.DESCRIPTION OF THE PROJECT The Project shal! activities of CONTRACTOR: consist of the following I. Acquisition. Property in fee simple. CONTRACTOR shall acquire the As of the date of execution of 010802 sm 0052791 this Agreement, the Property apartment dwelling units. consists of six (6) 2. Rehabilitation. CONTRACTOR and CITY agreed that certain rehabilitation and renovation work would be necessary following CONTRACTOR’s acquisition of the Property. CONTRACTOR has completed health and safety related repairs using funds from its acquisition loans and has also completed certain renovations using the Property’s operating funds. CONTRACTOR applied for, and was awarded by CITY, $69,300 in federal CDBG funds in the fiscal year 1996-97 budget to complete a comprehensive rehabilitation and renovation of the Property. CONTRACTOR shal! complete the rehabilitation and renovation work described in Exhibit "E" within two (2) years of the date of this Amendment No. I. CITY agrees to make an additional !oan to CONTRACTOR of the principal amount of Sixty Nine Thousand, Three Hundred Dollars ($69,300), to be used for CDBG eligible rehabilitation construction costs as described in Exhibit "E". In the event that the amounts payable by CONTRACTOR to any and all sources for the rehabilitation of the Property shall exceed the sum of $69,300, then CONTRACTOR shal! be solely responsible for paying any and all amounts in excess of $69,300. 3. Relocation During Rehabilitation. During the renovation or rehabilitation of the Property, CONTRACTOR shall temporarily relocate existing residential tenants as may be necessary and as required under the Regulations or the CDBG program requirements, depending on the source or sources of funds for. the rehabilitation. 4. Operation.From and after Project Completion, for a period of forty (40)years therefrom, except during any relocation period to accomplish the rehabilitation, CONTRACTOR shall operate the Project as rental housing at affordable rents for Low Income Households and Very Low Income Households, according to the terms of this Agreement. D. PROJECT COSTS AND FINANCING SOURCES The total cost of acquiring the Property, including closing costs and funding of reserves, is Four Hundred Fifty Five Thousand Dollars ($455,000.00). Projected sources of funds are as follows: Private bank !oan City Housing Reserve Fund -- Residential Account TOTAL SOURCES OF FUNDS $ 80,000.00 375,000.00 $455,000.00 /! 010802 sm 0052791 CITY shall contribute a maximum of Three Hundred Seventy Five Thousand Do!lars ($375,000.00) in Property acquisition costs under this Agreement, as set forth under Section (I) (E) hereof. CONTRACTOR shall be solely responsible for obtaining all other financing necessary for acquisition of the Project. E.CITY AGREEMENT TO LOAN FUNDS Subject to the terms and conditions under this Agreement, CITY hereby agrees to loan to CONTRACTOR the sum of Three Hundred Seventy Five Thousand Dollars ($375,000.00) from the Residential Account of CITY’s Housing Reserve Fund and Sixty. Nine Thousand Three Hundred Dollars ($69,300) from CDBG funds (the "Loan"). F.TERM; TERMS OF REPAYMENT; PROMISSORY NOTE This Agreement shall commence as of the date of its execution by CITY, and shall remain in full force and effect unti! forty (40) years from the date of Project Completion. On or before the close of escrow for purchase of the Property by CONTRACTOR; CONTRACTOR shall execute a promissory note for the acquisition loan (the "Purchase Note"), secured by a deed of trust which shal! be subordinated only to the first deed of trust for CONTRACTOR’s private financing for the Project in the amount of Eighty Thousand Dollars ($80,000.00). Prior to approval by CITY of this Amendment No. One, CONTRACTOR shall execute a promissory note for the rehabilitation !oan (the "Rehabilitation Note"). The Rehabilitation Note shall be secured by a modification agreement in a form acceptable to the City Attorney. The term of the Purchase Note and the Rehabilitation Note shall include the fol!owing: !. Form. The form of the Purchase Note shall be substantially similar to the form attached hereto as Exhibit "C" and incorporated herein by thisreference. The form of the Rehabilitation Note shall be substantially similar to the form attached hereto as Exhibit "~’ and incorporated herein by this reference. 2. Term. shall be forty Completion. The term of repayment of the Loan (40) years from the date of Project 3. Payments. Except for modifications that may be made after the Periodic Review described in the following subparagraph (I) (F) (5), or except in case of default or as otherwise provided under this Agreement or under the Notes, no repayment of the Loan shal! be required under this Agreement unti! the date of fifteen 010802 srn 0052791 5 (15) years from the date of Project Completion. However, CONTRACTOR, at its option, may make earlier payments or ful! repayment of the Loan from any surplus cash flow from the Project, or from any other source, without penalty at any time during the term of this Agreement. 4. Periodic Review. On or before the date of fifteen (15) years from the date of Project Completion, CONTRACTOR shal! submit to CITY a current income and expense proforma on the Project. The proforma sha!l include updated first mortgage payments based on the most recent adjusted interest rate (if applicable) and amortization schedule of CONTRACTOR’S private bank !oan, if the private !oan is not yet repaid. The proforma shall also include an updated budget for renta! income and operating-costs, including reserves for replacement and a management fee based on customary charges in the market for similar properties and on CONTRACTOR’s experience over the previous fifteen (15) years with the Project itself. - The figures used in the proforma shall be reconciled with the information in the most recent audit of the Project’s income and expenses. If the parties agree that the proforma projects a reliable and sufficient surplus cash flow that would thereafter allow regular payments on the Loan, CONTRACTOR shal! commence making annua! payments to the CITY from such surplus cash f!ow. Such Loan repayment shall be defined under amendments to this Agreement and the Notes, with such amendments to be processed as set forth under Section III(E) hereof. The parties agree that CONTRACTOR’s compensation for Project management shal! be deducted from cash flow prior to a determination of whether surplus cash flow exists for purposes of requiring Loan repayment. 5. Payment of Balance Due. Notwithstanding any other provisions of this Agreement or the Notes, as of the date of forty (40) years from the date of Project Completion, CONTRACTOR shall pay to CITY the tota! remaining unpaid balance, plus accrued interest, if any, on the Loan. G.DISBURSEMENT OF FUNDS; TITLE INSURANCE !. Acquisition Funds.The Loan proceeds shall be funded through an escrow with First American Title Guaranty Company (the "Escrow"). The parties to this Agreement shall place al! funds and documents, together with appropriate escrow instructions, into the Escrow in order to fulfil! the terms of this Agreement. // // 010802 sm 00:52791 CITY shall pay Three Hundred Seventy Five Thousand Dollars ($375,000), in the form of a check payable to Escrow, toward the cost of Property acquisition. That amount shall be funded from the Residential Account of CITY’s Housing Reserve Fund. At the close of Escrow for purchase of the Property, CONTRACTOR, at its own cost and expense, shall secure the issuance of an ALTA extended coverage lender’s policy of title insurance naming CITY as beneficiary, in the amount of the purchase price of the Property, clear of any title defects that would prevent the rehabilitation and operation of the Project. 2. Rehabilitation Funds.The CITY shall disburse the rehabilitation loan funds of $69,300 to CONTRACTOR on a cost reimbursement basis only upon the receipt by CITY of written proof ofactual costs incurred and paid for by CONTRACTOR.All requests for reimbursement under this Agreement shal! be made in accordance~ with the CITY’s cost reimbursement~ policies and procedures. CONTRACTOR shall submit with each request for reimbursement a written certification that (!) the construction work or services, or both, have been satisfactorily performed, (2) the costs have been paid in accordance with applicable law, contracts and subcontracts, (3) that al! applicable federal procurement regulations, procedures and reporting has been completed in the bidding and awarding of contracts and subcontracts for the rehabilitation work, and (4) all funds have been expended on behalf of and exclusively for the obligations of CONTRACTOR with respect to the rehabilitation of the Property.The $3,300 for CONTRACTOR’s construction supervision and management fee shall be paid after completion of the rehabilitation work described in Exhibit "E". H.DUE ON SALE PROVISION The full and total amount of any outstanding Loan balance under this Agreement shal! immediately become due and payable upon any of the following occurrences: !.Voluntary sale by CONTRACTOR, or any other transfer,assignment or further encumbering of the Property,in whole or in part, including but not limited to any judicial or nonjudicial~ foreclosure of the Property. or transfer in lieu of foreclosure, during the term of this Agreement; 2. Termination of the Low/Very Low Income restrictions set forth in Part II of this Agreement; 3. Any other default that is not remedied, in accordance with Section (II) (J) of this Agreement; or 010802 sm 0052791 4. The termination of this Agreement. I.SUBORDINATION;DISTRIBUTIONS UPON SALE CITY agrees that it shall subordinate the Loan and related deed of trust to the private bank financing obtained by CONTRACTOR for the initial purchase of the Project, provided that any necessary subordination agreement to be executed by CITY complies with CITY’s requirements and the Regulations. CONTRACTOR shall have no right to apply for or to refinance the private bank loan after Project Completion, or to apply for or incur any other debt that would result in a lien or other encumbrance on the Property, or require further subordination of CITY’s secured interest in the Property, without the prior written consent of the City Manager to make such application or to incur such additional debt. Any attempted application or incurring of debt without CITY’s prior written permission shall be null and void. In the event of .any sale of the Property, the proceeds of such sale shall be distributed in the following order: I.To cover the costs of the sale; o To the private bank, to repay the loan obtained for the initial purchase of the Project; To CITY, to repay the Loan; and Any remaining proceeds to CONTRAC%OR. J.ASSIGNMENT OR TRANSFER OF TITLE No assignment or transfer of title to the Project shal! be permitted, except with the prior written approval of the City Manager.No such approva! may be given until and unless the proposed assignee or new holder of title agrees in writing to assume all obligations of this Agreement and the Note.Any attempted assignment or transfer of title shal! be void without the required prior written consent of CITY as set forth in this Agreement. PART II: REGUlaTORY REQUIREMENTS A.SUBORDINATION TO HUD REQUIREMENTS The parties acknowledge that CONTRACTOR anticipates applying for HOME or CDBG funds to assist with the cost of renovating or rehabilitating the 010802 srn 0052791 Property. The parties further acknowledge that in order for CITY funding for the Project to be eligible as HOME match funds, this Agreement and the Project must comply with the applicable sections of the HOME Regulations. Therefore, it is agreed and understood that the terms and conditions of this Agreement are subject and subordinate to the provisions of the HOME Regulations and the CDBG program regulations. B.TERM OFREGULATORY REQUIREMENTS These regulatory requirements,including the Project’s use restrictions as set forth in this Agreement, shall be in effect for forty (40) .years from the date of Project Completion, and shall survive any early payoff -of the Loan by ~CONTRACTOR or any other person or entity. C.USE OF PROPERTY Except as may~ otherwise be provided under this Agreement, as of the date of Project Completion the Property shall be used as six (6) Assisted Units of renta! housing for Low and Very Low income Households as defined under this Agreement. D.RENT LEVELS; OCCUPANCY; TENANT PROTECTIONS CONTRACTOR shall maintain rents and occupancy of ¯ all the Assisted Units in compliance with Section 92.252 of the Regulations, as amended, throughout the term of this Agreement. Notwithstanding the foregoing, and subject to the exception set forth in Section (Ii) (F) of this Agreement for existing tenants as of the date of c!ose of Escrow for CONTRACTOR’s acquisition of the Project, the Assisted Units shall be rented as fol!ows: I. Four (4) of the Assisted Units shall be occupied by Very Low Income Households and shall be rented in accordance with Section 92.252(a) (2) (ii) of the Regulations, as amended. 2. The remaining two (2) Assisted Units shall be occupied by Low Income Households. The rents for those Units shall beno greater than the lesser of: The rent determined under Section 92.252(a) (i) (i) of the Regulations, as amended; or The rent determined under Section 92.252(a) (I) (ii) of the Regulations, as amended, however, based on gross income of no more than sixty percent (60%) of the Median Income for the Area, rather 010802 sm 0052791 than sixty-five percent (65%), forth in such Regulation. as set 3. If a Household ceases to qualify as Low Income, as required by this Section (Ii) (D), the Household shall pay rent in accordance with Section 92.252(c) of the Regulations, as amended. 4. Notwithstanding the foregoing,to the extent financially feasible during the term of this Agreement, CONTRACTOR shal! maintain rents for the Assisted Units at levels below the maximum rents specified in Subsections (i) and (2) of this Section (II) (m). In addition, CONTRACTOR shall, as financially feasible, maintain rents for all the Low Income tenants within thirty percent (30%) of each tenant’s median income as certified annua!ly. CONTRACTOR shall continue to seek HUD Section 8 rent subsidies, or any other eligible HUD subsidies that may become available during the term of this Agreement, for all Assisted Units, as the subsidies or any other assistance become available. Tenants shall be offered leases for a minimum term of one (I) year. However, a shorter lease, including a term of one (i) or more months, may be entered into by mutual agreement of tenant and CONTRACTOR. All leases under the Project shall be consistent with the requirements of the Regulations, including Section 92.253(a) and (b), as amended. In accordance with the Regulations, CONTRACTOR may evict a tenant only for serious or repeated violations of the lease; for violation of applicable federal, state or !oca! law; or for other good cause. Failure by CONTRACTOR to maintain the affordability levels and occupancy restrictions required by this Agreement shall be considered a default under this Agreement. However, the Project shall qualify as affordable housing despite a temporary noncompliance with Section(II) (D) (i) and (2) if the noncompliance is caused by increases in the incomes of existing tenants and if al! vacancies are filled in accordance with Section (II) (E) hereof unti! the noncompliance is corrected. E.TENANT SELECTION To the extent feasible as determined by CONTRACTOR, priority in the selection of tenants for occupancy of the Project shall be given to applicants who meet the fol!owing criteria: !. Two (2) of the six (6) units shall be designated for preference for occupancy by Households 010802 sm 0052791 10 with annual incomes within twenty percent (20%) of the Median Gross Income for the Area; 2. Two (2)~ of the six (6) units shall be designated for preference for occupancy by Households with annual incomes within thirty percent (30%) of the Median Gross Income for the Area; and 3. Two (2) of the six (6) units shall be designated for preference for occupancy by Households with annual incomes within fifty percent (50%) of the Median Gross Income for the Area. CONTRACTOR may change the designation of particular units as vacancies occur and as tenants’ incomes change, in order to maintain, as closely as possible, the occupancy objectives stated herein. F.EXISTING TENANTS All tenants of the Project in residence as of the date of Project Completion shal! be entitled to remain tenants after Project Completion, with rents to be determined in accordance with this Agreement and the Regulations. CONTRACTOR shall conduct an income certification of each Household as soon as .possible following Project Completion. Any existing tenants of the Project who do not qualify as tenants of Households with Low or Very Low Incomes shall be entitled to remain tenants only unti! the earlier of either: i. One (I) year from the date of Project Completion; or 2. The date of execution of any agreement between CONTRACTOR and any public entity or jurisdiction to provide federa! funds (under the HOME or CDBG programs) to assist the Project in any way. Upon any expiration of their existing rental agreements, such existing tenants’ rents shall be adjusted to comply with Section (II) (D) (4) hereof. If it is determined that any tenants of the Project qualify as displaced persons under the regulations for the HOME or CDBG programs as a result of CONTRACTOR’s efforts to obtain federa! funds for the Project’s rehabilitation, then CONTRACTOR shal! follow all federa! relocation procedures and provide any relocation benefits as required under the HOME program and Regulations or CDBG program and regulations,as applicable. // 010802 sm 0052791 11 G.PROPERTY STANDARDS AND REHABILITATION i. Property Standards and Repairs. CONTRACTOR shal! at all times during the term of this Agreement maintain the Property in a manner so as to meet the Property Standards set forth in Section 92.251 of the Regulations and the minimum housing quality standards set forth in 24 CFR Section 882.109, as amended. In addition, CONTRACTOR shal! complete such repairs as are treenecessary so that the Project is from all known health and safety defects not later than six (6) months fol!owing the date of Project Completion. All rehabilitation shall, at a minimum, meet the housing quality standards set forth in 24 CFR Section 882.109, as amended, and all applicable CITY building and zoning codes and ordinances, rehabilitation standards and any other applicable codes and ordinances. H.RECORDKEEPING CONTRACTOR shall maintain records of the Project as required by Section 92.508 of the Regulations, as applicable, and as may be required under the CDBG program, as amended. CONTRACTOR shall document all costs by maintaining complete and accurate records of al!financia! transactions, including, but not limited to,contracts, invoices, time cards, cash receipts, vouchers,cancelled checks, bank statements, and/or other official documentation evidencing in proper detai! thenature and propriety of all charges. All tenant lists, applications, verification and annua! recertification of tenant income relating to the Project shall at a!l times be kept separate and identifiable from any other business of CONTRACTOR that is unrelated to the Project, shall be maintained by CONTRACTOR in a reasonable condition for proper audit, and shall be made available to CITY during business hours, to the extent permissible under laws and regulations protecting individual confidentiality. Failure to keep such lists and applications or to make them available to CITY shall be considered a default under this Agreement. CONTRACTOR shall.preserve its records and make them available for review by CITY: !. For a period of three (3) years from the date of the submission of the final expenditure report under this Agreement; or 2. For such longer period, required by applicable law; or if any, as is 0]0802 sm 005279| 12 3. If this Agreement is terminated, the records relating to the work terminated shall be preserved and made available for a period of three (3) years from the date of any resulting final settlement; and 4. For a period of three (3) years from the final termination date of this Agreement. I.ON SITE INSPECTIONS CITY shall have the right to make periodic on-site inspections of the Project during working hours, including during the rehabilitation of the Property. J.DEFAULTS; REMEDIES If, as determined in the sole discretion of CITY, CONTRACTOR fails to observe or perform any covenant, condition or agreement contained in this Agreement for a period of thirty (30) days after written notice from CITY specifying such failure and requesting that it be remedied, unless CITY shall agree in writing to an extension of such time prior to its expiration, which consent shall not be unreasonably withheld in the event that the failure specified in the notice cannot be corrected within the . applicable time period and CONTRACTOR has instituted corrective action within the applicable period and has diligently pursued such corrective action, then and- in such event (an "Event of Default"), CITY shall be entitled, and in addition to all other remedies provided by law or in equity: !. To compel specific performance by CONTRACTOR of its obligations under this Agreement, it being recognized that compensation by monetary damages will not~ be adequate compensation in the event of CONTRACTOR’s default; 2. To exercise its rights under the Notes to accelerate payment in full of the Loan, in accordance with Part (I) Section (H) hereof; 3. To cure any default; any election by CITY to cure any default shall not be deemed a waiver by CITY of any duties or obligations imposed on CONTRACTOR by this Agreement or by the Regulations; and- 4. Notwithstanding any other provision of law relating to the acquisition, management or disposal of rea! property by the State, to do any or al! of the following: a o Possess, operate, complete, lease, rent, renovate, modernize, insure, or sell for cash or credit, in its sole discretion 010802 sm 0052791 13 any properties conveyed to it in exchange for debentures as provided in the Insurance Law; bo Pursue to final collection by way of compromise or otherwise all claims against CONTRACTOR assigned by CONTRACTOR to CITY; and Convey and execute in the name of CITY deeds of conveyance, deeds of release, assignments and satisfactions of the deeds of trust, and any other written instrument relating to tea! or personal property or any interest therein acquired by CITY. PART llI: GENERAL REQUIREMENTS A.INDEPENDENT CONTRACTOR CONTRACTOR shall maintain its nonprofit corporate status as defined by California Corporations Code section 5060, as amended, during the term of this Agreement. Nothing contained in this Agreement is intended to, or shall be construed in any manner, as creating or establishing the relationship of employer/emp!oyee between the parties. CONTRACTOR shal! at al! times remain an independent contractor with respect to the services to be performed under this Agreement. B.INDEMNIFICATION CONTRACTOR shall protect, indemnify, defend and hold harmless CITY from and against any and all claims, actions, -suits, liability, charges and judgments whatsoever that arise out of, or are caused by, CONTRACTOR’s negligent performance or nonperformance of the terms of this Agreement or CONTRACTOR’s willful misconduct or conduct for which the law imposes strict liability on CONTRACTOR in connection with the performance of or failure to perform under this Agreement. CONTRACTOR’s obligations under this Section (iII) (B) include the duty to protect, indemnify, hold harmless and defend CITY, its Council members, officers, agents and employees from and against any and al! claims, demands, liabilities, losses, damages, costs, expenses, liens, penalties, suits, or judgments that may arise at any time, in connection with or as a result of this Agreement or the Project, under the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C., §§ 9601-75, as amended); the Resource 010802 sm 0052791 Conservation and Recovery Act (42 U.S.C., §§ 6901"82, as amended); the Hazardous Waste Contro! Act (Heal. & Saf. Code, §§ 25100-25250.24, as amended); the Safe Drinking Water and Toxics Enforcement Act (Heal. & Saf. Code, §§ 25249.5-25249.13, as amended); the Underground Storage of Hazardous Substances Act (Heal. & Saf. Code, §§ 25280- 99.6, as amended); the Hazardous Substance Account Act (Hea!. & Saf. Code, §§ 25300-95, as amended); the Toxic Substances Control Act (15 U.S.C., §§ 2601-2671, as amended); the Carpenter-Presiey-Tanner Hazardous Substance Account Act (Hea!. & Saf. Code, §§ 25300-25395, as amended); or any other local, State or Federal ordinance, law or regulation that may now exist or hereinafter be enacted, or at common law. C.INSURANCE As of the date of Project Completion, CONTRACTOR, at its sole cost and expense, shal! have secured and shall continue to maintain throughout the term of this Agreement, workers’ compensation, comprehensive general liability, automobile liability, persona! injury, property damage, and fire and extended coverage insurance, insuring against all liability of CONTRACTOR and its authorized representatives arising out of or in connection with the Project, the Property or CONTRACTOR’s performance or nonperformance under this Agreement. CONTRACTOR and any subcontractors assigned to the performance of the terms and conditions of this Agreement shall comply with the coverage amounts, required endorsements, certificates of insurance and coverage verifications as defined in Exhibit "D," "insurance Requirements," attached hereto and incorporated herein by this reference. D.ASSIGNIVIENT All rights granted hereunder are personal to CONTRACTOR and are not assignable or transferable absent the prior written consent of the City Manager on behalf of CITY, and any attempted assignment thereof shal! be void. E. AMENDMENTS Amendments to the terms and conditions of this Agreement shall be requested in writing by the party desiring such revision, and any such adjustment to this Agreement shall be determined and be effective only upon the mutua! agreement of CITY and CONTRACTOR, as set forth in a written and executed amendment to this Agreement. ~en~ments made by HUD, or any authorized federal official, wil! be deemed to be incorporated herein. Any 010802 srn 0052791 15 duly authorized and executed amendment hereto shall be recorded in the Office of the Recorder of Santa Clara County, California. F.NO THIRD PARTY BENEFICIARY This Agreement shall not be construed or deemed to be an agreement for the benefit of any third-party or parties, and no third party or parties shal! have any claim or right of action hereunder for any cause whatsoever. G.SEVERABILITY CLAUSE In case any one or more of the provisions contained herein shall, for any reason, be held invalid, illegal, or unenforceable in any respect, it shall not affect the validity of the other provisions herein, which shal! remain in full force and effect. H.NO PLEDGING OF CITY’S CREDIT Under no circumstances shall CONTRACTOR have .the authority or power to pledge the credit of CITY or incur any obligation in the name of CITY. i.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 have been mailed by first class mai!,postage prepaid,addressed as fol!ows: CITY:CONTRACTOR: City Clerk 250 Hamilton Avenue Palo Alto, CA 94301 (415) 329-2563 Executive Director Palo Alto Housing Corporation 725 Alma Street Palo Alto, CA 94301 A copy of al! notices and correspondence must also be sent to: Director, Planning & Community Environment City of Palo Alto 250 Hamilton Avenue Pa2o Alto, CA. 94301 Phone: (415) 329-2441 F~: (415) 329-2240 010802 srn 0052791 16 J.MERGER CLAUSE This Agreement constitutes the sole agreement of the parties hereto relating to the Project and fully states the rights, duties and obligations of each party as of the date of this Agreement. Any prior agreement, promises, negotiations, or representations between the parties not expressly stated in this Agreement are not binding. K.RECORDATION This Agreement and any amendments or supplements thereto shall be recorded in the Office of the County Recorder of Santa Clara County, California. L.SUCCESSORS BOUND This Agreement and the covenants and conditions contained herein shall run with the land and shall bind, and the benefits shall inure to, CONTRACTOR, including its respective successors and assigns, and all subsequent owners of the Project or Property or any interest therein (regardless of how any such ownership interest is obtained in the Project or Property, including through any foreclosure or transfer in lieu of foreclosure), and to CITY and its successors and assigns. // // // // // // // // // // // // // // 010802 sm 0052791 17 IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. CITY OF PALO ALTO PALO ALTO HOUSING CORPORATION Mayor ATTEST: City Clerk APPROVED AS TO-FORM: City Attorney By: Marlene Prendergast Executive Director By: By: APPROVED : City Manager APPROVED: Director of Administrative Services Director of Planning and Community Environment City Auditor Risk Manager Exhibit "~’: Exhibit "B": Exhibit "C": Exhibit "D": Exhibit "E": Exhibit "F": Exhibit "G": Income Certification Form Property Description Promissory Note Insurance Requirements Description of Rehabilitation Work and Estimated Budget Promissory Note for Rehabilitation Funds) Federa! Assurances With Respect to Funds (CDBG CDBG 010802 sm 0052791 18 CERTIFICATE OF ACKNOWLEDGMENT (Civil Code § 1189) STATE OF COUNTY OF ) ) ) On , before me,, a notary public in and for said County,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 tothe 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. 010802 sm 0052791 19 CERTIFICATE OF ACKNOWLEDGMENT (Civil Code § 1189) STATE OF COUNTY OF ) ) ) On , before me, , a notary public in and for said County, personally appeared MARLENE PRENDERGAST, 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. 010802 sm 0052791 2O CERTIFICATE OF ACKNOWLEDCqqENT (Civil Code § 1189) STATE OF COUNTY OF ) ) ) On , before me,,~ a notary public in and for said County, 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. 010802 sm 0052791 21 EXHIBIT " G" FEDERAL ASSURANCES WITH RESPECT TO CDBG FUNDS CONTRACTOR agrees to comply with the requirements of 24 CFR Part 570 (theHousing and Urban Development regulations concerning Community Deve!opment B!ock Grants). CONTRACTOR also agrees to comply with al! other applicable federa!,, state and loca! laws, regulations, and policies governing the funds provided under this Agreement. CONTRACTOR further agrees to utilize funds available under this Agreement to supplement rather than supplant funds otherwise available. A.CONTRACTOR hereby assures and certifies that: i)It possesses legal authority to receive federal grant funds and to carry out the proposed program(s) assisted thereby. 2)Its governing body has duly acquainted itself with the funds application, including all understandings and assurances contained therein, and directed and authorized the person identified as the official representative of CONTRACTOR to provide such additional information as may be required hereunder. 3)it consents to accept the jurisdiction of the federal or California courts for the purpose of enforcement of its responsibilities imposed hereunder. (4)The proposed program(s) has been developed so as to give maximum feasible priority to activities which will benefit low and moderate income persons. (5 The receipt of any program income, as defined in 24 CFR 570.500(a), as amended, generated by the use of grant funds under this Agreement, wil! be recorded, reported and returned to CITY in accordance with 24 CFR 570.504, as amended. (6 it will comply with the provisions set forth in 24 CFR 85.43 and 24 CFR 85.44 regarding the suspension or termination of ~ grant agreement for cause or convenience. (7 It will maintain and retain all books, documents, papers, financial, or other records which are pertinent to the grant for a period of not less than three (3) years following the expiration of this Agreement. CONTRACTOR wil! allow City and the U.S. Department of Housing and Urban Deve!opment, through any authorized representatives, access to such documents, papers and records. 010802 sm 0052792 8) (!) (2) (3) (4) (5) if CONTRACTOR is a primarily religious entity, in connection with the provision of services required under this Agreement, CONTRACTOR agrees to comply with federal regulations specified in 24 CFR 570.200(j). CONTRACTOR further: (a)will not discriminate against any employee or applicant for emp!oyment on the basis of religion and will not limit emp!oyment or give preference in employment to persons on the basis of religion; (b)will not discriminate against any person applyfng for such services on the basis of religion and will not limit such services or give preference to persons on the basis of religion; (c)will provide no religious instruction or counseling, conduct no religious worship or services, engage in no religious proselytizing, and exert no other religious influence in the provision of such services; and (d)will ensure that the portion of CONTRACTOR’s facility used to provide the services shal! contain no religious symbols or decorations, other than those permanently affixed to or are part of the structure. CONTRACTOR also hereby assures that it shall: Comply with the nondiscrimination provisions of public law 88- 352 (Title VI of the Civi! Rights Act of 1964)., and the fair housing provisions of public law 90-284 (Title VIII of the Civi! Rights Act of 1968) and Executive Order 11063, as amended by Executive Order 12259, with respect to sale, lease or transfer of land acquired, cleared or improved w£th grant assistance. Comply with the provisions of Section 109 of Title I of the Housing and Community Development Act of 1974 which prohibit discrimination. Comply with the Fair Housing Act of 1989 (42 USC 3601-20), which prohibits discriminatory housing practices based on race, color, religion, sex, nationa! origin, disability or familia! status. Comply with the Davis-Bacon Act, as amended, Federal Labor Standards provisions with respect to al! construction contracts in excess of Two Thousand Dollars ($2,000). Comply with the requirement of the Flood Disaster Protection Act of 1973 and the National Flood Insurance Act of 1968 applicable to acquisition or construction projects. 010802 sm 0052792 2 (6)Comply with the relocation and displacement requirements of the Uniform Re!ocation Assistance and Real Property Acquisition Policies Act of 1970, as amended. (7)Comply with provisions of Executive Order 11246, as amended, by Executive Orders 11375 and 12086, on equa! emp!oyment opportunities and affirmative action relative to employees and applicants and nonexempt contracts and subcontracts. (8) ° Comply with 42 USC 4831(b), and 24 CFR 570.608 and 24 CFR Part 35 of the HUD regulations, prohibiting the use of lead-based paint in the construction or rehabilitation of residentia! structures. (9)Comply withthe provisions of 24 CFR Part 24 which prohibit the utilization of debarred, suspended, or ineligible contractors or subrecipients. (I0)Comply with the uniform administrative requirements and cost principals of 24 CFR Part 85 and OMB circulars A-87, A-!I0, A- 122, and A-!28 and A-!33 as they relate to the acceptance and use of federal funds by nonprofit organizations, and as other- wise may be required under 24 CFR 570.502, as amended. (I!)Comply with the requirements of 24 CFR 85.36 and OMB circular A-I!0 with respect to conflict of interest, and as otherwise may be required under 24 CFR 570.611, as amended. (12)Comply with the provisions of the Hatch Act which prohibit the use of federa! funds for lobbying activities. (13)Comply with Section 319 of public law 101-121, which generally prohibits recipients of federa! contracts, grants or !oans from using appropriated funds for !obbying the executive or the legislative branches of the federal government in connection with a specific contract, grant or !oan. Accordingly, CONTRACTOR hereby certifies to the best of its knowledge and belief, that: (a)No federal appropriated funds have been paid or will be paid, by or on behalf of CONTRACTOR, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or emp!oyee of Congress, or an emp!oyee of a Member of Congress in connection with the awarding of any federal contract, the making of any federa! grant, the making of any federal loan, the entering into of any cooperative agreement, or the extension, continuation, renewa!, amendment, or modification of any federal contract, grant, !oan, or cooperative agreement; and 010802 sm 0052792 3 (b)If any funds other than federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or emp!oyee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this federal contract, grant, loan or cooperative agreementr CONTRACTOR shall complete and submit Standard Form-LLL, "Disc!osure Form to Report Lobbying" in accordance with its instructions. (14)Comply with the Age Discrimination Act of 1975, as amended, which states that no persons in the United States shall, on the basis of age, be denied the benefits oft or be subjected to discrimination under, any program or activity receiving federa! financial assistance. (15)Comply with Section 504 of the Rehabilitation Act of 1973, which prohibits discrimination against people with disabilities in any federally assisted program. 16)Comply with the Americans with Disabilities Act of 1990, as amended, and implementing regulations when~published. (17)Transfer to City any CDBG funds on hand, and any accounts receivable attributable to the use of CDBG funds, at the time of expiration of this. Agreement. In addition, CONTRACTOR shall ensure that any rea! property under CONTRACTOR’s control that was acquired or improved in whole or i~ part with CDBG funds in excess of $25,000 is either: (a)used to meet one of the national objectives in 24 CFR 570.208 until five years after expiration of this Agreement, or for such !onger period of time as determined appropriate hereunder by City; or (b)is disposed of in a manner which results in City being reimbursed in the amount of the then current fair market value- of the .property less any portion thereof attributable to expenditures of non-CDBG funds for acquisition of, or improvement to, the property. 010802 srn 0052792 Attachment B Proposed Rehabilitation Work & Estimated Costs Emerson North Apartments Exterior Work $27,752 (Includes landscape upgrade and tree pruning, replace railings, hot water heater replacements, replace wood fencing) Interior Repairs & Replacement $17,508 (Includes electrical upgrades, dry rot & termite work, replace carpets in three units) New Appliances (Includes three new stoves and refrigerators) $ 3,280 ¯ Baths $1,850 (Includes new safety glass shower doors, replacement of vinyl flooring in five baths) Kitchens $15,610 (Includes replacement of countertops, new vinyl flooring in 5 units; replacement of cabinets in 6 units) CONSTRUCTION COSTS FUNDED WITH CITY LOAN Plus: PAHC’s Construction Supervision & Management Fee $66,000 $3,3OO TOTAL COSTS TO BE PAID WITH CITY LOAN $69,300 H:kDOC~EmerNo. CMR Budget.doc