65A - AFFORDABLE HOUSING OPTIONS

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Discussion on Four Affordable Housing Development Projects and Options for City Financial Assistance June 1, 2017 Page 3 On May 17, 2017, the Ad Hoc Committee met and recommended staff bring the four projects to City Council for discussion and seek direction based on the results of the financial gap analysis. In addition, the Ad Hoc Committee requested that staff provide the currently available affordable housing development funds (Exhibit 1), estimate of potential future funding, restrictions and uses of those funds (Exhibit 2), and development schedule for each project (Exhibit 3). Following is the description, history and status of each of the four projects seeking City financial assistance: Santa Ana Arts Collective, Meta Housing Corporation: 1666 North Main Street The Santa Ana Arts Collective is an artist focused affordable housing development project that consists of a 57 -unit adaptive reuse project to convert an existing five -story office building to residential units and ground -floor commercial and community space. The unit mix consists of 26 one bedroom units, 14 two bedroom units and 17 three bedroom units for 30%, 50% and 60% of the Area Median Income (AMI). This project applied to the City for financial assistance through a competitive Request for Proposals (RFP) process on August 21, 2015. On November 3, 2015, the City Council awarded $4,635,000 in funding for the project from its Community Development Block Grant (CDBG $500,000), Inclusionary Housing Funds ($1.875 million), and a pre -commitment of HOME Investment Partnerships Program funds ($2.26 million). As conditioned in the City's approval, the developer Meta Housing Corporation (Meta Housing) then gathered the balance of awards projected to fully finance the project. In October 2016, the project was awarded Affordable Housing and Sustainable Communities (AHSC) funds by the California Department of Housing and Community Development (CA HCD). In November 2016, Meta Housing was competitively awarded 9% Low Income Housing Tax Credits (LIHTC). Under normal circumstances a LIHTC allocation is the final piece of financing needed for a project to move forward. However, since the November 2016 presidential elections, anticipated federal tax reform has upended LIHTC equity markets and resulted in a financial gap that, absent additional funds, renders the project infeasible. On December 14, 2016, Meta Housing submitted a request for an additional $3.1 in City funds due to the financial gap created by lower tax credit equity pricing and rising interest rates. The request was submitted to KMA for review. In December of 2016, City staff informed Meta Housing of other alternatives such as a hybrid 9 percentA percent tax credit structure proposed by the California Tax Credit Allocation Committee. Meta Housing applied and was unsuccessful in securing the hybrid tax credits. On March 1, 2017, KMA completed a financial gap analysis and determined $2,900,000 as the financial gap for the project if the City required the Developer to defer or forgo $600,000 of the developer fee included in the Project's budget (Exhibit 4). Later as requested by the Ad Hoc Committee, CSG Advisors completed a second opinion financial gap analysis on May 9 and determined $1,481,215 as the financial gap for the project if the City required Meta Housing to contribute a portion of its developer fee to the partnership in the form of a $1 million General Partner Capital Contribution (Exhibit 5). The developer fee would need to be negotiated. 65A-3