Item 03 - Crossroads at Washington Affordable Housing Project

Home Browse Search

Crossroads at Washington Affordable Housing Project August 17, 2021 Page 6 1 9 7 8 environmentally contaminated, staff is recommending to allocate the remaining balance of NSP funds. The origin of the City’s NSP funds is from the American Recovery and Reinvestment Act of 2009 and HUD will rescind these funds if the City does not use them. In addition, staff did not discover the Housing Authority’s property is environmentally contaminated until after the original Pre-Loan Commitment was approved by the City Council in July 2019. In addition, the Developer’s costs have increased since their initial award in July 2019. The main changes to their proforma are as follows: - Operating expenses: John Stewart Management provided an updated operating budget which includes increased material, utility, and vendor prices. - Construction costs: As part of the Developer’s due diligence for updating the proforma, they solicited construction estimates from three general contractors and used the median estimate for their proforma. As has been well documented, construction costs (e.g., lumber, concrete, steel, drywall, labor, etc.) have continued to increase at a rapid pace since staff’s last update due to production and supply chain issues. The Developer’s proforma assumes the City/County backstop of the remediation funding but does not include their conditional $1,145,188 Orange County Housing Finance Trust (OCHFT) loan. As such, the Developer has a $2,207,846 financing gap (of which $1,145,188 could be covered by the OCHFT contingent loan) which needs to be addressed. This financing gap was confirmed by Keyser Marston Associates. Due to their financing gap and the September 1, 2021 tax credit deadline, staff is recommending an award of up to seven project-based vouchers (PBVs) to address this financing gap, contingent upon a review of the Developer’s proforma prior to closing to determine if a full award of seven PBVs is necessary. If the Developer does not need the full award of seven PBVs, staff will reduce the PBVs according to their need to close. The First Amended and Restated Pre-Loan Commitment Letter will provide a new commitment of $4,305,182 and seven PBVs to the Developer for the development of the Project (Exhibit 3). Next Steps If this item is not approved, the Developer will decline the FCAA tax credits before their September 1, 2021 deadline and it will take at least another year for the Developer to secure their other sources of financing to develop the Project. If approved, staff will support the Developer to secure funding for the environmental remediation. If the Developer is not successful and the Second Amendment to Option Agreement is triggered, staff will return to the City Council to request approval of an appropriation adjustment to pay for the backstop from the Housing Successor Agency funds or another source of eligible funding. FISCAL IMPACT