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Pre-Commitment of Affordable Housing Funds for Jamboree Housing Corporation and <br />WISEPlace; Density Bonus Agreement; Loan Forgiveness <br />June 21, 2022 <br />Page 12 <br />2 <br />8 <br />1 <br />6 <br />(1) a $250,000 component, and (2) a $666,616 component. The amended promissory <br />note set the loan term at 55 years – starting in 2002 and ending in 2056. The interest <br />rate was set at 1% and was applied to the $666,265 component of the CDBG Loan, which <br />resulted in annual interest payment of $6,662.65 per year. <br />WISEPlace was required to make interest only payments of $6,662.65 per year for the <br />55-year loan term. However, as long as the project was not in default, the amended <br />promissory note required the City to forgive $16,666 of the CDGB Loan per year for the <br />first 15 years. This resulted in $250,000 of the $916,265 CDBG Loan being forgiven. The <br />current outstanding loan balance is currently $723,446.41. Per the terms of the amended <br />promissory note, WISEPlace is required to continue paying annual interest only payments <br />until the end of the loan term in 2056. The entire balance of the CDBG Loan ($723,446.41 <br />plus interest) will become due and payable at that time. <br />The current financial structure of the Project requires WISEPlace to enter into a long-term <br />ground lease with a to-be-formed Tax Credit partnership. The Tax Credit partnership will <br />consist of WISEPlace, Jamboree and a Tax Credit Investor. However, per discussions <br />with Jamboree and WISEPlace, the Tax Credit partnership cannot assume any of <br />WISEPlace’s existing debt – including the existing CDBG Loan. Furthermore, given that <br />the Tax Credit partnership will be ground leasing the site from WISEPlace, there are no <br />available sales proceeds to pay off the existing CDBG Loan. As such, to effectuate the <br />proposed WISEPlace PSH project, WISEPlace is requesting forgiveness of the existing <br />CDBG Loan. <br />Staff recommends that the City Council approve WISEPlace’s CDBG Loan forgiveness <br />request. As discussed above, the amended promissory note already allowed for loan <br />forgiveness during the first 15 years of the loan term. The additional loan forgiveness <br />would be in line with past City actions regarding loans provided to WISEPlace. In addition, <br />the CDBG Loan is structured with interest only payments; therefore, none of the <br />outstanding principal balance is currently being paid down. This would leave an <br />outstanding balance of $723,446.41 plus interest to be repaid in full in Year 2056. <br />Additionally, as part of the proposed Project, the City will be placing new City loan(s) on <br />the Project. Thus, the City will still be entitled to receive residual receipts from the PSH <br />project. <br />ENVIRONMENTAL IMPACT <br />Pursuant to the Adaptive Reuse Ordinance (Ordinance No. NS-2874), the proposed <br />project is found and determined to be consistent with the General Plan of the City of Santa <br />Ana. Therefore, in accordance with the California Environmental Quality Act, the <br />recommended action is exempt from further review under Section 15194 (Affordable <br />Housing Exemption), as this project meets all the required criteria as a 100-percent <br />affordable/permanent supportive housing development. Based on this analysis, a Notice <br />of Exemption, Environmental Review No. 2022-05 will be filed for this project.