REPORT TO COUNCIL
SUBJECT
Title
Action on Loan Agreement with Allied Housing, Inc. for a Loan of up to $4,000,000 to Support the Construction of 80 Affordable Housing Units at 3333-3337 Kifer Road and Approve the Related Budget Amendment
Report
COUNCIL PILLAR
Promote and Enhance Economic, Housing and Transportation Development
BACKGROUND
The project, Kifer Senior Housing project, is a 100% affordable residential rental development, to be constructed on a rectangular 0.52-acre parcel at 3333-3337 Kifer Road, just west of the intersection of Kifer Road and Corvin Drive. The assessor’s parcel number is 216-33-035 (“Site”).
The development will contain 79 senior affordable housing development units with long-term affordability restrictions in Santa Clara, CA with incomes at or below 60% of area median income (AMI) and one unrestricted manager unit. 39 of these units will be set aside for formerly chronically homeless senior (55+) residents with incomes at or below 30% of AMI (supportive housing households). The developer of the project is Allied Housing, Inc. (“Allied”), in partnership with Abode Services as the primary service provider and the John Stewart Company as the property manager. The County Office of Supportive Housing would be responsible for coordinating and providing ongoing onsite supportive services for the 39 permanent supportive housing households through a contract with Abode Services.
Several community amenities will be incorporated into the Project’s programming, including a ground floor community room, property management office, resident services office, elevator lobby and bike storage room. The second floor will have another designated community space overlooking Kifer Road and a solarium is proposed at the top floor adjacent to the shared outdoor patio. Common laundry rooms will be available at the second through sixth floors.
DISCUSSION
The Kifer Senior Housing project has been awarded $14 million from the County of Santa Clara, Measure A Affordable Housing Bond funds and $8.4 million from the State of California HCD’s Housing for a Healthy Community program. Allied is requesting a $4 million loan from the City of Santa Clara to complete its financing package before applying to The California Tax Credit Allocation Committee (TCAC) for tax credits.
Secured and Pending Funding Sources
A summary of the anticipated funding Sources and Uses includes the following:
The largest piece of financing to support development of the Project will be a 4% tax credit equity, which will generate approximately $28 million through the Low-Income Housing Tax Credit program. Once the financing and subsidy sources outlined above are in place, the project will be highly competitive to receive an award of tax credits.
On March 10, 2020, the County of Santa Clara (“County”) Board of Supervisors approved a loan of up to $14,000,000, subject to underwriting, with a portion of the funding allocated to the County’s acquisition of the Site, a portion of the funding allocated to financing predevelopment costs, and the balance allocated to construction and permanent financing. To effectuate the financing of the project, several actions need to occur. Immediately prior to the closing of financing, the County shall acquire the Site for $4,700,000, which is the estimated Seller’s cost of acquiring the land (“Land Acquisition Price”). Upon closing on the Land Acquisition, the County shall ground lease the property to the Borrower for $1 per year for a term of at least 75 years.
The Project has also secured funding from California Housing and Community Development Housing for a Healthy California program, which provides $8.4 million of capital funding and approximately $3 million of funding that is capitalized operating subsidy reserve (“COSR”) which will subsidize the gap between the income the project will generate from rent and the operating expenses. This will allow the units reserved for people experiencing homelessness to only have to pay about 1/3 of their income in rent.
General Plan and Zoning Consistency
The site is located within the Lawrence Station Area Plan (“Area Plan”) and has all the zoning and general plan designations required for the development of a high-density residential project, as proposed. The Area Plan is intended to guide development in a specific geographic area, and it establishes development policies and sets forth design standards and guidelines applicable to properties within the boundary of the Area Plan. Proposals for development within the Area Plan are required to be consistent with the policies, standards and guidelines contained in the Area Plan. The proposed housing development is consistent with the Area Plan, but the City of Santa Clara requires that a design review application be considered by the City of Santa Clara’s Architectural Review Committee. The project is eligible for the AB 2162 streamlining process. The Project was approved by the Architectural Review Committee at the March 17, 2021 Committee meeting.
Next Steps and Project Timing
City approval of a loan up to $4,000,000 is the last discretionary funding approval needed for the developer so that they can apply for 4% bond financing and competitive low-income housing state tax credits. Applications are due by May 2021. If approved by City Council, the next step for the Developer is to transition from design development drawings to full construction drawings that can be submitted to the City for review for the purposes of issuing building permits. Assuming a tax credit allocation is secured in the May 2021 round, the tax credit funding will require that the Project start construction by the end of 2021. All financing needs to be closed with the construction loan prior to the start of construction, which would be December 2021. Construction is anticipated to be approximately 18 months and building occupancy would be around summer of 2023.
ENVIRONMENTAL REVIEW
Pursuant to the California Code of Regulations Section 65583, Chapter 3 of Division 1 of Title 7 of the Government Code, also known as AB 2162, this project is only subject to ministerial review and therefore exempt from the California Environmental Quality Act (CEQA).
FISCAL IMPACT
The City’s loan of up to $4,000,000 would enable Allied Housing to apply for low-income housing tax credits and close on the construction financing as early as December 2021.
If approved, the City’s loan of up to $4,000,000 would be drawn from the City’s Affordable Housing Fund. The City’s Affordable Housing Fund has an unrestricted fund balance of approximately $6.3 million that can be utilized to fund this loan. Please note that revenues are expected to increase due to impact fees and in-lieu fees associated with the Affordable Housing Ordinance, which was implemented in August 2018.
The approved loan commitment is reflected in the Budget Amendment below. It is anticipated that the loan will be drawn in FY 2021/2022 and an appropriate carryover will be included in the upcoming Biennial Budget. The principal under this loan will bear simple interest at a rate of 3% per year, subject to final underwriting. The principal and interest due under this agreement would be paid over 55 years from the date of the agreement. Annual payments would be made upon the availability of residual receipts and would be proportionally split between the subordinate lenders.
The budget amendment below allocates funding from the City Affordable Housing Fund for a $4,000,000 loan for the Kifer Senior Housing Project located at 3333-3337 Kifer Road as recommended in this memorandum.
Budget Amendment
FY 2020/21
|
|
Current |
Increase/ (Decrease) |
Revised |
|
City Affordable Housing Fund |
|
|
|
|
Expenditures |
|
|
|
|
Kifer Senior Housing Project Loan |
$0 |
$4,000,000 |
$4,000,000 |
|
|
|
|
|
|
Unrestricted Ending Fund Balance |
$6,272,665 |
($4,000,000) |
$2,272,665 |
COORDINATION
This report was coordinated with City Manager’s Office, City Attorney’s Office, Department of Finance, and Department of Community Development.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov>.
ALTERNATIVES
1. Adopt a resolution approving and authorizing the City Manager negotiate and execute a Loan Agreement with Allied Housing, Inc. for a loan of up to $4,000,000 to support the construction of 80 affordable housing units located at 3333-3337 Kifer Road; to make modifications to the Loan Agreement and attachments consistent with the Term Sheet and as reviewed by the City Attorney for form and consistency; to execute all documents necessary (including Deeds of Trust, Promissory Notes, and Affordable Housing Agreements) to implement the Loan Agreement and close escrow;
2. Approve the Related Budget Amendment; and,
3. Any other alternate action as directed by Council.
RECOMMENDATION
Recommendation
Alternative 1 and 2:
1. Adopt a resolution approving and authorizing the City Manager to negotiate and execute a Loan Agreement with Allied Housing, Inc. for a loan of up to $4,000,000 to support the construction of 80 affordable housing units located at 3333-3337 Kifer Road; to make modifications to the Loan Agreement and attachments consistent with the Term Sheet and as reviewed by the City Attorney for form and consistency; to execute all documents necessary (including Deeds of Trust, Promissory Notes, and Affordable Housing Agreements) to implement the Loan Agreement and close escrow; and
2. Consistent with the City Charter Section 1305 “At any meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by the affirmative votes of at least five members so as to authorize the transfer of unused balances appropriated for one purpose to another purpose, or to appropriate available revenue not included in the budget,” approve the following FY 2020/21 budget amendments:
A. In the City Affordable Housing Fund, appropriate $4,000,000 to the Kifer Senior Housing Project Loan and reduce the unrestricted ending fund balance by $4,000,000 (five affirmative Council votes required for the use of unused balances).
Staff
Reviewed by: Andrew Crabtree, Director of Community Development
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Resolution Approving Authority to enter into Loan Agreement - Kifer 2
2. Permanent Loan Term Sheet DRAFT - Kifer 2