Item 68 - Crossroads at Washington Affordable Housing Project at 1126, 1136, & 1146 East Washigton Ave.

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Agreements for the Development of the Crossroads at Washington June 21, 2022 Page 9 2 7 6 6 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, the 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 ownership of the adjacent properties located at 1126 and 1146 E Washington Avenue. At that same meeting, the City Council also authorized the Executive Director of the Housing Authority to execute a joint sixty- five (65) year Ground Lease and an Option Agreement with Washington Santa Ana Housing Partners, L. P., a California limited partnership formed by the Developer. The Staff Report from February 18, 2020, is attached as Exhibit 10. Since that date and during the option term, the Developer conducted a site assessment of the Project area and identified a number of unexpected environmental contaminants. This issue was communicated to the City Council on December 15, 2020 and August 17, 2021. To summarize the environmental contamination issue, the Developer retained Altec Testing & Engineering, Inc. (“Altec”) during their due diligence period to conduct environmental investigations for the sites. An initial Phase I environmental investigation was conducted on October 19, 2019. A Phase II Environmental Site Assessment (“Phase II”) Report was warranted based on the Phase I findings and was prepared by Altec on February 19, 2020. The Phase II identified unexpected contaminants and recommended additional environmental investigations to determine the extent of the soil contamination on the County and Housing Authority-owned properties. In addition, the County retained Geosyntec Consultants, Inc. to provide environmental peer review services and to act as the County’s consultant with respect to environmental issues on the property (the City retained services from a City consultant only as needed). Thereafter, and following approval by the Board of Supervisor on August 21, 2021, the County entered into a voluntary oversight agreement with the State of California Department of Toxic Substances Control (“DTSC”) that authorized DTSC to serve as the oversight agency for the Project. The Agreement allowed DTSC the ability to facilitate and help coordinate further inspections and investigations, review and approve appropriate remediation measures and documents, and engage the public, as necessary. Since the Developer did not contribute to the existing on-site environmental contaminants, the Developer has requested to amend the indemnity obligations in the Ground Lease to reflect the preexisting condition of the property related to the existing contaminants. As a result, the County and the Housing Authority staff have negotiated a revised Ground Lease to eliminate the Developer’s indemnity obligations associated only with these existing hazardous materials in Section 4.4.4 of the Ground Lease, but to maintain all