SUBJECT: APPROVAL OF A CHANGE OF FUNDING FOR A
CONDITIONAL GRANT IN AN AMOUNT NOT TO EXCEED $4,804,900 TO THE MEXICAN AMERICAN
COMMUNITY SERVICES AGENCY, INC. (MACSA), OR AN AFFILIATED ENTITY, FOR THE
DEVELOPMENT OF THE LAS GOLONDRINAS APARTMENTS
COUNCIL DISTRICT: 5
SNI AREA: Mayfair
RECOMMENDATION
It is
recommended that the City Council adopt a resolution approving a change in the
source of funding for the conditional grant of up to $4,804,900 to MACSA, or an
affiliated entity, from the Extremely Low-Income Housing Reserve Fund (ELI), to
the 20% Low- and Moderate-Income Housing Fund, for the development of Las
Golondrinas, a 50-unit senior rental development to be made affordable to
extremely low-income households, on a 1.31-acre site located on the southerly
terminus of Kentucky Place, southerly of Alum Rock Avenue.
BACKGROUND
On June 13,
2000, MACSA (“Sponsor”)
submitted a funding application to the Housing Department for the development
of the Las Golondrinas Apartments (“Development”), consisting of 49 one-bedroom
units affordable to extremely low-income senior households and one unrestricted
two-bedroom manager’s unit.
On December 19,
2000, the City made a CDBG predevelopment loan of $100,000 to the Sponsor to
finance preliminary development costs.
On January
23, 2001, the City Council approved an acquisition/predevelopment loan of up to
$1,599,028 for the Development.
On September
4, 2001, under the Director of Housing’s delegation of authority, the City
acquisition/predevelopment loan was increased to $1,758,928.
On January
14, 2003, the City Council approved a conditional grant of up to $4,804,900
from the Extremely Low-Income Housing Fund (ELI). In January 2003, based on budget reductions and other proposals
included in the Governor’s FY 2003-2004 Budget, the Redevelopment Agency
notified the Housing Department that no additional ELI funds will be available
for commitments not yet executed, pending the outcome of State budget
negotiations.
The Sponsor
has received a Section 202 grant from
the United States Department of Housing and Urban Development (“HUD”) in the
amount of $4,423,700 to provide construction and permanent financing that would
be jeopardized if this Development were delayed until after the Agency’s budget
situation is resolved.
The total estimated cost for the
Development is $9,233,922. The Housing
Department is recommending that the source of funds be changed for this
Development from ELI to the 20% Low- and Moderate-Income Housing Fund to allow
the Development to proceed.
ANALYSIS
Under City policy, 20% Funds may only be provided in the form of
loans. However, because this Development
involves Section 202 funding, HUD restrictions will be placed on the
Development which severely limits other financing, and such other financing may
not include recordation of a deed of trust to secure subordinate financing. HUD restrictions against other financing
have resulted in the adoption of a City policy to make certain City financial
contributions to HUD-funded projects in the form of grants rather than loans at
the construction and permanent financing phase. Additionally, because ELI funds are not currently available, and
in light of the City Council’s original approval of a grant for this
Development, providing 20% Funds for this Development in the form of a grant is
consistent with prior Council action.
On February 2, 2001, the City recorded two existing affordability
restrictions on the property. Because
the property is in a Redevelopment Project Area, the City recorded an
affordability restriction for the inclusionary units for the term of the
project area. In addition, the City
recorded a 55-year affordability restriction for the 20% funded units. The restrictions may be subject to
subordination to senior lenders as permitted by State law.
Pursuant to the Delegation of
Authority approved by the City Council on June 25, 2002, the City Manager will
approve the specific business terms of the conditional grant.
COST IMPLICATIONS
Funding for the
conditional grant is available in the Housing Department’s Fiscal Year
2002-2003 20% Low-and Moderate-Income Fund Budget. The use of 20% tax increment
funds in lieu of ELI Housing Reserve Funds is consistent with the Council
approved Budget Strategy Memo, adopted on January 30, 2003.
Negative Declaration (PDC 00-12-124)
LESLYE CORSIGLIA
Director of Housing