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Approve Affordable Housing Loans for the Rehabilitation of Cornerstone Apartments <br />September 17, 2019 <br />Page 6 <br />much interest would be paid under each scenario to ensure that the interest rate on the assumed <br />loan is approximately equal to the interest amount one would pay over the term at the AFR rate. <br />The tax credit investor has calculated that the interest rate needed on the assumed City and <br />Housing Authority Loans would have to be at least 5% simple interest to be equal to the AFR and <br />not trigger a situation where the investor would have to pay taxes on "income" as a result of the <br />favorable financing and thereby reduce their financing/tax credit equity commitment to the <br />project. <br />Staff requested KMA to analyze this relatively unique request. KMA confirmed that the higher <br />interest rate is in the City's favor even though almost all affordable housing projects have soft <br />public loans at an interest rate in the range of 3% simple interest or less. <br />STRATEGIC PLAN ALIGNMENT <br />Approval of this item supports the City's efforts to meet Goal # 4 Fiscal Sustainability, Objective # <br />1 (maintain a stable, efficient and transparent financial environment) and Goal # 5 - Community <br />Health, Livability, Engagement & Sustainability, Objective # 3 (Facilitate diverse housing <br />opportunities and support efforts to preserve and improve the livability of Santa Ana <br />neighborhoods). <br />FISCAL IMPACT <br />The Residual Receipt payment schedule under the existing Loan Agreements call for the City <br />Loans to be repaid at the end of a 40-year term. Under the two new Loan Agreements, the City <br />and Housing Authority will receive approximately $2,204,000 from the resyndication at bond <br />closing. The $2,204,000 payment will be applied to the various sources according to the table <br />below: ` <br />Tax Increment <br />TI/CHFA <br />HOME <br />TOTAL <br />(Fund 607) <br />(Fund 607) <br />(Fund 130) <br />Outstanding Loan Balances <br />as of September 24, 2019 <br />$3,218,628.20 <br />$946,667.19 <br />$5,221,184.19 <br />$9,386,479.58 <br />Projected Allocation of <br />$2,204,000 Payment <br />$2,100,968.00 <br />$ 0.00 <br />$ 93,032.00 <br />$2,204,000.00 <br />New Loan Balances <br />$1,107,660.20 <br />$946,667.19 <br />$5,128,152.19 <br />$7,182,479.58 <br />Due to the nature of residual payments, future revenues cannot be estimated. However, In FY <br />2017-18, residual repayments received by the City/Housing Authority for the existing loans were <br />as follows: <br />. 1 m ., <br />