STAFF REPORT - CITY COUNCIL/SUCCESSOR AGENCY/PUBLIC FINANCE AUTHORITY

Adoption of Resolution No. 3940 authorizing the submission of a HOME application in the amount not to exceed $5.1 Million to the State Department of Housing and Community Development and identifying the 32-Unit Coalinga Senior Apartments project as the project beneficiary if awarded, and further authorizing the City Manager to enter into an Owner Participation Loan Agreement for the Deferral of Impact Fees in the amount of $380,328.00.

On January 10, 2017 the Planning Commission approved and supported the Coalinga Senior Apartments project, a 32-unit affordable housing project to be located at the southeast corner of Elm Ave and Walnut, that will accommodate affordable housing for income qualified seniors 55 years of age and older. In order for this project to be financially feasible, AMG & Associates (“Developer”) is requesting the following from the City Council to consider:

1. Designate the Coalinga Senior Apartment Project as the project beneficiary of HOME funding should the City of Coalinga receive an award. This action would be completed by the adoption of Resolution No. 3940. There is no cost to the City to apply for HOME project funds as the developer will bear all costs associated with the application preparation.
   
   
2. Deferral of Development Impact Fees in the amount of $380,328.00 which will be paid back through residual receipts beginning in year 16.

The developer's request of the City Council has two components and this report will discuss both. Staff will begin with background on HOME Investment Partnerships Program and then will discuss the anticipated terms of the deferred impact fee loan agreement.

HOME Investments Partnerships Program

The HOME Investment Partnerships Program (HOME) provides formula grants to States and localities that communities use - often in partnership with local nonprofit groups - to fund a wide range of activities including building, buying, and/or rehabilitating affordable housing for rent or home ownership or providing direct rental assistance to low-income people. HOME is the largest Federal block grant to state and local governments designed exclusively to create affordable housing for low-income households.

HOME funds are awarded annually as formula grants to participating jurisdictions (PJs).The program’s flexibility allows States and local governments to use HOME funds for grants, direct loans, loan guarantees or other forms of credit enhancements, or rental assistance or security deposits.

The program was designed to reinforce several important values and principles of community development:

• HOME's flexibility empowers people and communities to design and implement strategies tailored to their own needs and priorities.
   
• HOME's emphasis on consolidated planning expands and strengthens partnerships among all levels of government and the private sector in the development of affordable housing.
   
• HOME's technical assistance activities and set-aside for qualified community-based nonprofit housing groups builds the capacity of these partners.
   
• HOME's requirement that participating jurisdictions match 25 cents of every dollar in program funds mobilizes community resources in support of affordable housing.

Types of Assistance

HOME funds are awarded annually as formula grants to participating jurisdictions. HUD establishes HOME Investment Trust Funds for each grantee, providing a line of credit that the jurisdiction may draw upon as needed. The program's flexibility allows States and local governments to use HOME funds for grants, direct loans, loan guarantees or other forms of credit enhancement, or rental assistance or security deposits.

Eligible Grantees

States are automatically eligible for HOME funds and receive either their formula allocation or $3 million, whichever is greater. Local jurisdictions eligible for at least $500,000 under the formula ($335,000 in years when Congress appropriates less than $1.5 billion for HOME) also can receive an allocation. The formula allocation considers the relative inadequacy of each jurisdiction's housing supply, its incidence of poverty, its fiscal distress, and other factors.

Eligible Customers

The eligibility of households for HOME assistance varies with the nature of the funded activity. For rental housing and rental assistance, at least 90-percent of benefiting families must have incomes that are no more than 60-percent of the HUD-adjusted median family income for the area. In rental projects with five or more assisted units, at least 20-percent of the units must be occupied by families with incomes that do not exceed 50-percent of the HUD-adjusted median. The incomes of households receiving HUD assistance must not exceed 80-percent of the area median. HOME income limits are published each year by HUD.

Eligible Activities

The PJ’s may choose among a broad range of eligible activities, using HOME funds to provide home purchase or rehabilitation financing assistance to eligible homeowners and new home-buyers; build or rehabilitate housing for rent or ownership; or for "other reasonable and necessary expenses related to the development of non-luxury housing," including site acquisition or improvement, demolition of dilapidated housing to make way for HOME-assisted development, and payment of relocation expenses. Up to 10-percent of the PJ's annual allocation may be used for program planning and administration.

Application

Program funds are allocated to units of general local government on the basis of a formula that considers the relative inadequacy of each jurisdiction's housing supply, its incidence of poverty, its fiscal distress, and other factors. Shortly after HOME funds become available each year, HUD informs eligible jurisdictions of the amounts earmarked for them. Participating jurisdictions must have a current and approved Consolidated Plan, which will include an action plan that describes how the jurisdiction will use its HOME funds. A newly eligible jurisdiction also must formally notify HUD of its intent to participate in the program.

As part of the application process, the State Department of Housing and Community Development (hereafter “HCD”) requires a standard resolution be adopted by the applicant authorizing the submission of a project application as well as a project beneficiary for the funds.

Attached for the Council's consideration is Resolution No. 3940 authorizing staff to proceed with submitting an application for HOME project funds  totaling $5.1 Million ($5 Million project, $100,000 administrative/program), officially declaring a specific project beneficiary, and further authorizes the City Manager to sign all appropriate documents including standard agreements, pursuant the requirements of HCD, as they relate directly to the application and project beneficiary.

Staff is requesting utilizing the tool of HOME funding because the City does not have the capacity to fund a new construction projects without other resources and HOME funds are intended to be supplemental funding to more conventional funding (ie. tax credits). With the loss of Redevelopment Agency (RDA) there are limited funding opportunities for affordable housing projects in California since RDA's were a huge contributor to the diversifying housing in California.

If the Council chooses to select a project as the beneficiary of the HOME funds, staff will begin working with the Developer in preparation of the application and submission of said application by the deadline. If the Council takes this avenue there will be no cost to the City to prepare the application.

Deferred Impact Fee Loan Request

The developer has requested for an impact fee deferral to be loaned to their partnership with similar terms and conditions the City has previously approved for the Warthan Place Apartments project consisting of a residual receipts repayment from available cash flow with a term of 55 years, and a below market interest rate of 1-3%, secured by a Deed of Trust subordinate to senior regulatory agreements and financing, be repaid on a residual receipts basis commencing after repayment of deferred developer fee from available cash flow 30-50% to repay City Loans. This agreement would ensure repayment of fees beginning no later than year 16. By approving a deferred impact fee loan agreement, the City would not be responsible for paying back the impact fees as they are expected to be repaid but just deferred for a period of time negotiated. The proposed loan terms have been attached for the Council’s review.

If the Council chooses to proceed with approving Resolution No. 3940 for the HOME beneficiary and further authorize the City Manager to enter into an Owner Participation Agreement for the HOME loan and deferred impact fees, staff will proceed immediately. With this financing mechanism, award of HOME funds would secure the financing needed to develop this project since the developer will be utilizing 4% tax credits which are non-competitive.

Do not direct staff to proceed with submission of an application for HOME funding and Owner Participation Agreement – Staff does not recommend.

There is not direct fiscal impact to the City as the project beneficiary will bear all costs associated with submitting the Application to HOME and the deferred impact fee loan agreement will be on the City’s books as a deferred receivable with no impact to the general fund or its reserve. The City, if awarded HOME funds, would be entitled to $100,000 for administration of the grant. This would be accomplished by contracting with a non-profit affordable housing advocacy group to assist in all the reporting and administrative functions of HOME funds.