Item 62 - Pre-Commitment of Affordable Housing Funds for Jamboree Housing Corporation and WISEPlace

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Pre-Commitment of Affordable Housing Funds for Jamboree and WISEPlace June 21, 2022 Page 12 2 7 6 5 structured with a 55-year term and a 1% simple interest rate. The loan repayments were to be made from 50% of the project’s residual receipts. In 2001, the City amended the terms of the CDBG Loan. At that time, the outstanding principal balance of the loan was set at $916,265, which consisted of two components: (1) a $250,000 component, and (2) a $666,616 component. The amended promissory note set the loan term at 55 years – starting in 2002 and ending in 2056. The interest rate was set at 1% and was applied to the $666,265 component of the CDBG Loan, which resulted in annual interest payment of $6,662.65 per year. WISEPlace was required to make interest only payments of $6,662.65 per year for the 55-year loan term. However, as long as the project was not in default, the amended promissory note required the City to forgive $16,666 of the CDGB Loan per year for the first 15 years. This resulted in $250,000 of the $916,265 CDBG Loan being forgiven. The current outstanding loan balance is currently $723,446.41. Per the terms of the amended promissory note, WISEPlace is required to continue paying annual interest only payments until the end of the loan term in 2056. The entire balance of the CDBG Loan ($723,446.41 plus interest) will become due and payable at that time. The current financial structure of the Project requires WISEPlace to enter into a long-term ground lease with a to-be-formed Tax Credit partnership. The Tax Credit partnership will consist of WISEPlace, Jamboree and a Tax Credit Investor. However, per discussions with Jamboree and WISEPlace, the Tax Credit partnership cannot assume any of WISEPlace’s existing debt – including the existing CDBG Loan. Furthermore, given that the Tax Credit partnership will be ground leasing the site from WISEPlace, there are no available sales proceeds to pay off the existing CDBG Loan. As such, to effectuate the proposed WISEPlace PSH project, WISEPlace is requesting forgiveness of the existing CDBG Loan. Staff recommends that the City Council approve WISEPlace’s CDBG Loan forgiveness request. As discussed above, the amended promissory note already allowed for loan forgiveness during the first 15 years of the loan term. The additional loan forgiveness would be in line with past City actions regarding loans provided to WISEPlace. In addition, the CDBG Loan is structured with interest only payments; therefore, none of the outstanding principal balance is currently being paid down. This would leave an outstanding balance of $723,446.41 plus interest to be repaid in full in Year 2056. Additionally, as part of the proposed Project, the City will be placing new City loan(s) on the Project. Thus, the City will still be entitled to receive residual receipts from the PSH project. ENVIRONMENTAL IMPACT Pursuant to the Adaptive Reuse Ordinance (Ordinance No. NS-2874), the proposed project is found and determined to be consistent with the General Plan of the City of Santa Ana. Therefore, in accordance with the California Environmental Quality Act, the