25J - AGMT ARTS COLLECTIVE GRANT

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Total Development Costs $35,896,000 (Less) Available Funding Sources (33,218,000) Financial Gap $2,678,000 Per Affordable Unit $46,200 Based on the KMA analysis, the Project's financial gap is estimated at $2.68 million. In comparison, the Developer is requesting $2,627,631 in HOME funds from the City, which is less than the KMA financial gap estimate. Thus, it is concluded that the $2.63 million in HOME assistance to the Project is warranted by the Project economics. As noted previously, the City entered into a HOME Loan Agreement with the Developer on July 5, 2017 to provide $2,219,760 in HOME funds to the Project. The purpose of this analysis is to increase the amount of HOME funds provided by the City. Based on the KMA analysis, the Developer's request for $2,627,631 in total HOME funds for the Project is warranted. This equates to an additional $407,871 in HOME funds to be provided by the City. The City is planning to designate 11 units as HOME units. D. Cash Flow Over Affordability Term (Table 4) KMA also conducted a cash flow analysis to estimate the present value of the debt service payments to the City. The following describes the basic cash flow assumptions: 1. Year 1 is based on the pro forma rent and expense assumptions presented in the stabilized analysis (Table 2). 2. Additional revenue and expense assumptions are as follows: a. The projected residential income and miscellaneous income are estimated to increase at 2.5% per year. b. A 5.0% vacancy and collection allowance. C. The general operating expenses and social services are increased at 3.5% per year. d. The property taxes are increased at 2.0% per year. e. Replacement reserves and the HCD mandatory payment remain constant. The priority distributions are categorized as follows: An annual debt service payment of $230,904; City of Santa Ana HOME Subsidy Layering Review: Santa Ana Arts Collective Page 111 25J-33