Item 05 - Crossroads at Washington Affordable Housing Project at 1126, 1136, & 1146 East Washington Ave.

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Crossroads at Washington Affordable Housing Project at 1126, 1136, & 1146 East Washington Avenue June 21, 2022 Page 8 2 8 1 5 a routine practice, the Developer submitted their request under California Government Code Section 66007 and the City is required to consider their request. The collection of the development impact fees for a new residential development is to generally fund planned acquisition and development of parks and open space within the City to mitigate the impacts that new developments will have on the demand for parks and open space within the City. While the request will defer the collection of the development impact fees to a later time in the development process, it will not waive or prevent the City from collecting the fees through protections and securities provided to the City under the agreement. Furthermore, the fees will be paid prior to the actual impact, as no residents will be allowed to occupy the Project until payment is received by the City. The Development Impact Fee Deferral Agreement has been pre-signed by Related to acknowledge their acceptance of the terms. Award of up to Eight Additional Project-Based Vouchers On August 17, 2021, City Council approved an award of up to seven project-based vouchers and authorized the Executive Director of the Housing Authority to execute an Agreement to enter into a Project-Based Vouchers Housing Assistance Payments Contract. At the time of that approval, staff reported to City Council that the Developer’s costs had increased since their initial award in July 2019. Since that date, the Developer’s costs have increased further. On May 6, 2022, Keyser Marston Associates (“KMA”) reviewed the Developer’s pro forma (as of April 22, 2022) and determined that the Project has an approximately $1.0 million additional financial gap due to an increase in the interest rate on the permanent loan and increase in construction costs. Given the extreme volatility within the construction industry at this time, the cost estimates appear reasonable, and are similar to other affordable housing projects that KMA has recently reviewed. Therefore, staff are recommending approval of up to eight additional project-based vouchers for the development of the Project to pay for an unanticipated increase in development costs. This will bring the Housing Authority’s total contribution to the Project to 15 project-based vouchers (“PBVs”). Staff is recommending an amount up to eight additional project-based vouchers contingent upon a review of the Developer’s proforma prior to closing to determine if a full award of eight additional PBVs is necessary. If the Developer does not need the full award of 15 PBVs, staff will reduce the PBVs according to the Developer’s need prior to closing on their construction loan and/or permanent loan financing. Proposed Revisions to the Joint Sixty-Five (65) Year Ground Lease On February 18, 2020, City Council authorized the Executive Director of the Housing Authority to enter into a Joint Powers Agreement with the County of Orange for the joint