Loading...
HomeMy WebLinkAboutItem 27 - Extension of Pre-Loan Commitment for North Harbor Village and TEFRA Community Development Agency https://www.santa-ana.org/cd Item # 27 City of Santa Ana 20 Civic Center Plaza, Santa Ana, CA 92701 Staff Report March 2, 2021 TOPIC: Extension of Pre-Loan Commitment for North Harbor Village and TEFRA AGENDA TITLE: Approve a Two-Year Extension of the Pre-Loan Commitment Letter for the Development of North Harbor Village and Adopt a Resolution Approving the Issuance of Bonds (Non- General Fund) RECOMMENDED ACTION 1. Authorize the City Manager to execute a two-year extension of the pre-loan commitment letter with Jamboree Housing for $1,687,047 in Community Development Block Grant funds for the development of the North Harbor Village (formerly Budget Inn) affordable housing project located at 1108 N Harbor Boulevard, subject to non- substantive changes approved by the City Manager and City Attorney. 2. Adopt a resolution approving the issuance of revenue bonds by the California Municipal Finance Authority in an amount not to exceed $30,000,000 for the acquisition, construction, improvement, and equipping of a multi-family rental housing project located at 1108 North Harbor Boulevard. DISCUSSION Two years ago, the City Council approved an award of $1.6 million in funding for the development of the North Harbor Village affordable housing project by Jamboree Housing (Jamboree). After two years of pre-development in which Jamboree worked with staff to secure all of their remaining sources of financing in their capital stack as a condition of the City’s award of funds, staff is now returning to the City Council to extend their award of funds for two years because the project may not need the City’s funds now that Congress has established a new fixed rate for 4% tax credits in the Consolidated Appropriations Act of 2021. However, the project does need approval of a TEFRA Resolution in order to close on their financing before March 30, 2021. On March 5, 2019, the City Council approved a pre-loan commitment letter with Jamboree for $1,687,047 in Community Development Block Grant (CDBG) funds for the development of the North Harbor Village (formerly Budget Inn) affordable housing project Extension of Pre-Loan Commitment for North Harbor Village and TEFRA Resolution March 2, 2021 Page 2 4 9 5 located at 1108 N. Harbor Blvd, by a unanimous vote. The staff report from March 5, 2019 is attached as Exhibit 1 and the pre-loan commitment is attached as Exhibit 2, both of which provide further information on the project. After the City Council approves a pre-loan commitment of funding for an affordable housing project, a developer is responsible to secure their entitlements and secure their remaining financing as a condition of the award of funds. The majority of large multi- family affordable housing projects require Low-Income Housing Tax Credits (LIHTC), which are very competitive for the higher value 9% tax credits with only two application deadlines a year and more difficult to finance with the lower value 4% tax credits. After almost two years since the North Harbor Village project received a commitment of funding from the City Council, Jamboree has now secured their remaining financing and are prepared to close on their financing before March 30, 2021 and begin building the project. To close on their financing, Jamboree secured an award of 4% tax credits for this project. To the benefit of this project, as well as the City’s Legacy Square project, the Consolidated Appropriations Act of 2021 included a new fixed rate for 4% tax credits. Specifically, after years of advocacy by affordable housing developers, one of the leading proposals from the Affordable Housing Credit Improvement Act and Moving Forward Act to establish a 4% minimum LIHTC rate for acquisition LIHTCs and tax- exempt private activity bond-financed developments was included in year-end tax legislation attached to the Consolidated Appropriations Act of 2021. The provision is effective for acquisition LIHTCs allocated after December 31, 2020 and for bond-financed properties placed in service and receiving allocations from private activity bonds issued after December 31, 2020. Affordable housing developers have been advocating for this 4% fixed rate for the past several years to help provide predictability to the marketplace and increase production by making more developments financially feasible. According to the Affordable Housing Tax Credit Coalition, the 4% housing credit rate has fallen to lows hovering between 3.07% and 3.09% in recent months due to COVID-19 and ensuing cuts to federal borrowing rates, putting housing developments’ financial feasibility at risk. With the new 4% floor, Novogradac & Co. estimates that an estimated 130,000 affordable homes could be created from 2021 to 2030. The new 4% fixed tax rate allowed Jamboree to generate additional tax credit equity for the development of the North Harbor Village project. This happened similarly with the Legacy Square project being developed by National CORE. After the approval by Congress of the new rate, National CORE was able to decline the City’s award of $3.1 million in Inclusionary Housing Funds after the City Council had approved their loan documents on December 15, 2020. However, the Legacy Square project is a new construction project and Jamboree’s North Harbor Village project is a motel rehabilitation project. Therefore, Jamboree is requesting the City to extend their pre-loan commitment of $1.6 million in CDBG funds in case Jamboree experiences any unexpected cost Extension of Pre-Loan Commitment for North Harbor Village and TEFRA Resolution March 2, 2021 Page 3 4 9 5 increases during the rehabilitation of the motel (Exhibit 3). The $1.6 million will generally be used as a backstop to ensure the rehabilitation project is successful. The extension will be for two years. If City Council does not approve the extension, staff will need to return to City Council on March 16, 2021 with a recommendation to approve the CDBG Loan Documents for the project in order to comply with the City’s original pre-loan commitment letter for the project. Project Description The North Harbor Village project is a motel rehabilitation project that will provide 89 units of permanent supportive housing for homeless individuals. This will be the City’s third motel conversion project in the last five years for people experiencing homelessness following the development of the Orchard and Casa Querencia. The Orchard project converted the former Guest House motel into 72 units of permanent supportive housing and the Casa Querencia project converted the former Aqua Motel. Both the Guest House and Aqua Motel were high-crime, short-term use motels prior to their conversion into permanent supportive housing with wrap-around supportive services. Fifty-five of the units at North Harbor Village will be designated for chronically homeless individuals and 34 units will be designated for homeless veterans. There will be a local preference for individuals who live or work in Santa Ana. The unit mix and rent restrictions are as follows: Unit Size No. Units AMI Studio 89 30% TEFRA Resolution North Harbor Housing Partners LP (the “Borrower”), a partnership of which Jamboree Housing Corporation (the “Developer”), consisting of the Developer and one or more limited partners, has requested that the California Municipal Finance Authority (“CMFA”) adopt a plan of financing providing for the issuance of one or more series of revenue bonds issued from time to time, including bonds issued to refund such revenue bonds in one or more series from time to time, in an aggregate principal amount not to exceed $30,000,000 (the “Bonds”) for the acquisition, construction, improvement and equipping of the North Harbor Village project located at 1108 North Harbor Boulevard. However, in order for all or a portion of the Bonds to qualify as tax-exempt bonds, the City of Santa Ana must conduct a public hearing (the “TEFRA Hearing”) providing for the members of the community an opportunity to speak in favor of or against the use of tax- exempt bonds for the refinancing of the project. Following the close of the TEFRA Hearing, an “applicable elected representative” of the governmental unit hosting the Project (in this case the City) must provide its approval of the issuance of the Bonds by the Authority for the refinancing of the project. On February 12, 2020, staff held a staff- level TEFRA Hearing, telephonically, as permitted by the Internal Revenue Service to satisfy the public hearing requirement in light of the COVID-19 pandemic, at which time Extension of Pre-Loan Commitment for North Harbor Village and TEFRA Resolution March 2, 2021 Page 4 4 9 5 an opportunity was provided to interested parties to present arguments both for and against the issuance of the revenue bonds. Staff held the staff-level TEFRA Hearing because the Internal Revenue Service requires the use of a toll-free number and it is an administrative burden for the Clerk of the Council to create a toll-free number specifically for this TEFRA resolution. Therefore, as an alternative, a staff-level TEFRA Hearing was held. No public comments were received during the staff-level TEFRA Hearing and staff is recommending approval of the resolution for the issuance of the revenue bonds (Exhibit 4). The bonds to be issued by the CMFA are the sole responsibility of the Borrower. The City has no financial or legal liability for the project or repayment of the bonds and does not constitute any type of indebtedness for the City. FISCAL IMPACT Upon future approval of the loan agreement, if needed, funds in the amount of $1,687,047 will be available in the Community Development Block Grant, Loans and Grants account (No. 13518782-69152). The City received a payment of $896.78 to hold a TEFRA Hearing for this project, which was deposited into account No. 01102002-53902. The Board of Directors of the California Foundation for Stronger Communities, a California non-profit public benefit corporation (the “Foundation”), acts as the Board of Directors for the CMFA. Through its conduit issuance activities, the CMFA shares a portion of the issuance fees it receives with its member communities and donates a portion of these issuance fees to the Foundation for the support of local charities. With respect to the City of Santa Ana, it is expected that a portion of the issuance fee will be granted by the CMFA to the general fund of the City. Such a grant may be used for any lawful purpose of the City. EXHIBIT(S) 1. March 5, 2019 Staff Report http://clerk/WebLink/1/doc/106298/Page1.aspx 2. Original Pre-Loan Commitment Letter 3. Two-Year Extension of Pre-Loan Commitment Letter 4. TEFRA Resolution Submitted By: Steven Mendoza, Assistant City Manager Approved By: Kristine Ridge, City Manager EXHIBIT 2 EXHIBIT 2 EXHIBIT 2 EXHIBIT 2 EXHIBIT 2 SANTA ANA CITY COUNCIL Vicente Sarmiento Mayor vsarmiento@santa-ana.org David Penaloza Mayor Pro Tem, Ward 2 dpenaloza@santa-ana.org Thai Viet Phan Ward 1 tphan@santa-ana.org Jessie Lopez Ward 3 jessielopez@santa-ana.org Phil Bacerra Ward 4 pbacerra@santa-ana.org Johnathan Ryan Hernandez Ward 5 jryanhernandez@santa-ana.org Nelida Mendoza Ward 6 nmendoza@santa-ana.org MAYOR Vicente Sarmiento MAYOR PRO TEM David Penaloza COUNCILMEMBERS Phil Bacerra Johnathan Ryan Hernandez Jessie Lopez Nelida Mendoza Thai Viet Phan CITY OF SANTA ANA COMMUNITY DEVELOPMENT AGENCY 20 Civic Center Plaza ● P.O. Box 1988 Santa Ana, California 92702 (714) 647-5360 www.santa-ana.org CITY MANAGER Kristine Ridge CITY ATTORNEY Sonia R. Carvalho CLERK OF THE COUNCIL Daisy Gomez March 2, 2021 Laura Archuleta President Jamboree Housing Corporation 17701 Cowan Avenue, Suite 200 Irvine, California 92614 Re: North Harbor Village (previously referred to as “Budget Inn”) 1108 N. Harbor Boulevard, Santa Ana, CA 92703 Pre-Commitment Letter for CDBG Loan and Project Based Vouchers Dear Ms. Archuleta: Jamboree Housing Corporation (“Developer”) requested financial assistance in connection with the proposed development of an eighty-nine (89) unit affordable housing complex to be located at 1108 N. Harbor Boulevard, Santa Ana, CA 92703 (“Project”). The City of Santa Ana (“City”) and the Housing Authority of the City of Santa Ana (“Housing Authority”) previously reviewed the Developer's request for assistance, and at the City Council / Housing Authority meeting on February 5, 2019, the City Council and Housing Authority Board authorized and approved issuance of a pre-commitment letter evidencing the preliminary award of (collectively, the “City Assistance”): -A loan in the maximum amount of $1,687,047 funded from the U.S. Department of Housing and Urban Development (HUD) Community Development Block Grant funds (“CDBG”) held by the City of Santa Ana (“City Loan”); and, -Eighty-nine (89) U.S. Department of Housing and Urban Development-Veterans Affairs Supportive Housing (“HUD-VASH”) Project-Based Vouchers (“PBV”) for Permanent Supportive Housing for the Project. EXHIBIT 3 At the City Council / Housing Authority meeting on March 2, 2021, the City Council and Housing Authority Board authorized and approved issuance of an extension of this pre- commitment letter to March 2, 2023. This letter shall evidence the City’s pre-commitment of the City Assistance to the Developer for the Project subject to the conditions described below. City Loan: The amount of the proposed City Loan has been determined based upon the City’s review of the Developer's request for the receipt of the City Assistance and the development proforma and projected cash flows for the Project submitted by the Developer to the City (“Proforma”). The City Manager and Housing Authority Executive Director has authority to approve revised development proformas and projected cash flows for the Project; provided, however, that the City Assistance is not increased or extended. The City Loan shall include the following terms:  $1,687,047 maximum principal amount, or as much thereof as is disbursed for acquisition costs to construct the Project, funded from the HUD CDBG funds held by the City of Santa Ana.  3% simple interest per annum.  Repayment from 50% of Residual Receipts (pro-rata with payments due in connection with other financing provided by other public agencies) (after payment of operating expenses, debt service, any deferred developer fee, and partnership fees to be described in the Agreement) with the remaining 50% to be disbursed to the Developer.  Remaining principal and accrued interest due upon the 55th anniversary of the issuance of Certificate of Occupancy and/or final building permits or earlier upon sale, refinancing or default. On that date, the City agrees to review the performance of the property and consider in good faith any reasonable request by Developer to modify the terms or extend the term of the City Promissory Notes. Additionally, the City will receive a pro rata share of 50% of the net proceeds received from any sale or refinancing of the Project, after payment of outstanding debt and payment in full of any deferred developer fee and establishment of any reserves and transaction costs.  Cost savings from the Project, if any, will be applied first to pay down the City Loan, subject to compliance with the Tax Credit Allocation Committee (“TCAC”) Regulations.  The City’s lien and regulatory agreement pursuant to the City Loan will be subordinated pursuant to an approved subordination agreement, in conformance with the City’s adopted Affordable Housing Funds Policies and Procedures.  In the event title to the Property is transferred as a result of a foreclosure, or in the event the HAP contract is terminated, reduced or not renewed for a reason other than EXHIBIT 3 the default of the Borrower, a deed in lieu of foreclosure or other realization upon the Property under Senior Loan Documents, notwithstanding anything to the contrary contained in the City’s regulatory agreement, the units subject to restriction under the City’s regulatory agreement shall be restricted for rental to and occupancy by households whose income does not exceed 60% of the area median income for the Orange County, California PMSA, adjusted for household size, as published by the U.S. Department of Housing and Urban Development, and rent in such units shall be restricted to the product of 30% of 60% of the area median income adjusted for family size appropriate for the unit. Project-Based Vouchers: The Project consists of eighty-nine (89) permanent supportive housing units to be made available at affordable rents for a term of fifty-five (55) years. The project-based vouchers (PBVs) shall include the following terms:  Voucher Source: The eighty-nine (89) PBVs will be funded exclusively out of the tenant-based voucher program annual budget authority received by the Housing Authority from the U.S. Department of Housing and Urban Development (HUD). Fifty-five (55) PBVs must be used to serve chronically homeless individuals with strong ties to the City of Santa Ana. Four (4) of these fifty-five (55) project-based vouchers must be designated for non-HUD-VASH homeless veterans as required by the Veterans Housing and Homelessness Prevention Program funds from the State of California Department of Housing and Community Development. The remaining thirty-four (34) PBVs are HUD-VASH PBVs that shall be referred from the Veterans Affairs Medical Center of Long Beach through the Orange County Coordinated Entry System, and are residing or working in the City of Santa Ana as defined under the City’s criteria. In addition, the Authority will also have a local preference for chronically homeless veterans with strong ties to the City of Santa Ana for fifty-one (51) of these fifty-five (55) project-based vouchers, but it will not be a requirement as through HUD- VASH. Specifically, the chronically homeless veterans served at the Project must be a City of Santa Ana resident established by fulfilling one or more of the following requirements: o Proof of strong ties to the community, to include current residency of an immediate family member – mother, father, sibling, or grandparent in the City of Santa Ana; o Proof that the individual attended a K-12 school in Santa Ana; o Proof that the individual resided on property zoned for residential use in Santa Ana and the individual was on the lease and/or paid utilities necessary for legal use of the property for residential purposes; or o Knowledge – either first-hand or recorded – by the Santa Ana Police Department that the individual has been a member of the Santa Ana homeless community. EXHIBIT 3 If there are no chronically homeless veterans with strong ties to the City of Santa Ana, then these fifty-one (51) project-based vouchers must be used to serve chronically homeless individuals with strong ties to the City of Santa Ana after the local veteran preference is exhausted.  Rents: The PBV Housing Assistance Payments (“HAP”) Contract rents below are preliminary and contingent upon a reasonable rent determination to be conducted at the time of execution of the HAP Contract: o 0 Bedroom - $1,527 In accordance with HUD regulations and the Housing Authority’s Housing Choice Voucher Program Administrative Plan, these rents are subject to review prior to the execution of a HAP Contract. Rents and income requirements for the remaining affordable units shall be based on the requirements of the federal Low Income Housing Tax Credit Program as administered by TCAC.  Annual Amount: The Project will receive PBVs for eighty-nine (89) units: Unit Size Income Target No. Units Proposed Rent Total Annual Revenue 0-Br 30% AMI 89 $1,527 $1,630,836 The estimated maximum annual amount received under this award is $1,630,836. These estimates assume 100% occupancy of the assisted units over the twelve - month period.  Term: The HAP Contract will have a term of twenty (20) years. Any time before the expiration of the HAP Contract, the Developer may request an additional twenty (20) years, subject to a determination by the Housing Authority that it is appropriate to continue providing affordable housing for homeless veterans or to expand housing opportunities and HUD funding. Subsequent extensions are subject to the same requirements.  Units Receiving PBV Assistance: The maximum number of units receiving PBV assistance will be eighty-nine (89). General Provisions: The City's obligation to provide the City Assistance to the Project is subject to each of the following conditions:  Developer must provide proof that it has secured all of its remaining financing for the development of the Project before staff will return to the City Council for consideration of the Loan Agreement. EXHIBIT 3  All provided funding and project requirements shall conform to the City’s adopted Affordable Housing Funds Policies and Procedures, unless alternative requirements are expressly provided in the executed Loan Agreement or any other documents related to the development of the Project.  Approval of all required entitlements and discretionary actions, to allow the construction of a 89-unit affordable housing complex to be located at 1108 N. Harbor Boulevard, Santa Ana, CA 92703.  The City's obligation to provide the Loan is and shall remain subject to all covenants, conditions, and restrictions set forth in the Loan Agreement, and in particular City's analysis of the available funding sources and development and operating costs of the Project and the overall economic feasibility of the Project.  Review and approval of the documents evidencing the City Loan by the City Council, as applicable.  Execution of HAP Contracts and all necessary documents for the PBV’s.  Compliance with applicable federal regulations set forth in 24 Code of Federal Regulations (CFR) Part 570 and 24 CFR Part 983. Developer, at its sole cost and expense, will be responsible for securing any and all permits and discretionary approvals that may be required for the Project by the City, Housing Authority, or any other federal, state, or local governmental entity having or claiming jurisdiction over the Property or Project. Notably, this pre-commitment letter shall not obligate the City or any department thereof to approve any application or request for or take any other action in connection with any planning approval, permit or other action necessary for the construction, rehabilitation, installation or operation of the Project. This pre-commitment letter for the Project will expire on March 2, 2023. If you have any questions or require any additional information regarding this award letter, please contact Judson Brown, Housing Division Manager, by telephone at (714) 667- 2241 or by e-mail at jbrown@santa-ana.org. Sincerely, _____________________________ _____________________________ Kristine Ridge Steven A. Mendoza City Manager Executive Director City of Santa Ana Housing Authority of the City of Santa Ana EXHIBIT 3 Attest: _____________________________ _____________________________ Daisy Gomez Daisy Gomez Clerk of the Council Recording Secretary City of Santa Ana Housing Authority of the City of Santa Ana EXHIBIT 3 RESOLUTION NO. 2021-____ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA ANA APPROVING THE ISSUANCE BY THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY OF MULTIFAMILY HOUSING REVENUE BONDS FOR THE NORTH HARBOR VILLAGE APARTMENTS WHEREAS, North Harbor Housing Partners LP (the “Borrower”) a partnership of which Jamboree Housing Corporation (the “Developer”) or a related person to the Developer is the general partner, has requested that the California Municipal Finance Authority (the “Authority”) adopt a plan of financing providing for the issuance of exempt facility bonds for a qualified residential rental project pursuant to Section 142(a)(7) of the Internal Revenue Code of 1986 (the “Code”) in one or more series issued from time to time, including bonds issued to refund such exempt facility bonds in one or more series from time to time, and at no time to exceed $30,000,000 in aggregate principal amount (the “Bonds”), to finance or refinance the acquisition, construction, improvement and equipping of a multifamily rental housing project located at 1108 North Harbor Boulevard, Santa Ana, California (the “Project”); and WHEREAS, pursuant to Section 147(f) of the Code, the issuance of the Bonds by the Authority must be approved by an “applicable elected representative” of the governmental units on whose behalf such bonds are expected to be issued and by a governmental unit having jurisdiction over the entire area in which any facility financed by such bonds is to be located, after a public hearing held following reasonable public notice, which for this Project will be the City of Santa Ana (the “City”) because the Project is located within the territorial limits of the City; and WHEREAS, the City Council of the City (the “City Council”) is the elected legislative body of the City and is one of the “applicable elected representatives” required to approve the issuance of the Bonds under Section 147(f) of the Code; and WHEREAS, the Authority has requested that the City Council approve the issuance of the Bonds by the Authority in order to satisfy the public approval requirement of Section 147(f) of the Code and the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the “Agreement”), among certain local agencies, including the City; and WHEREAS, pursuant to Section 147(f) of the Code, following notice duly given, on February 12, 2021, the City conducted a public hearing, telephonically, as permitted by the Internal revenue Service to satisfy the public hearing requirement in light of the COVID-19 pandemic, at which time an opportunity was provided to interested parties to present arguments both for and against the issuance of the Bonds, and the City Council now desires to approve the issuance of the Bonds by the Authority. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANTA ANA AS FOLLOWS: Section 1. The above recitals are true and correct. Section 2. The City Council hereby approves the issuance of the Bonds by the Authority. It is the purpose and intent of the City Council that this resolution constitute approval of the issuance of the Bonds by the Authority, for the purposes of (a) Section 147(f) of the Code by the applicable EXHIBIT 4 2 elected representative of the governmental unit having jurisdiction over the area in which the Project is located, in accordance with said Section 147(f) and (b) Section 4 of the Agreement. Section 3. The issuance of the Bonds shall be subject to approval of the Authority of all financing documents relating thereto to which the Authority is a party. The City shall have no responsibility or liability whatsoever with respect to repayment or administration of the Bonds. Section 4. The adoption of this Resolution shall not obligate the City or any department thereof to: (i) provide any financing with respect to the Project; (ii) approve any application or request for or take any other action in connection with any planning approval, permit or other action necessary with respect to the Project; (iii) make any contribution or advance any funds whatsoever to the Authority; or (iv) take any further action with respect to the Authority or its membership therein. Section 5. The City Manager and applicable Executive Directors of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents that they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing approved hereby. Section 6. This resolution shall take effect immediately upon adoption. ADOPTED this ___ day of _________, 2021. _______________________________ _______________________ Vicente Sarmiento Mayor APPROVED AS TO FORM: Sonia R. Carvalho City Attorney By:__________________________ Ryan O. Hodge Assistant City Attorney AYES: Councilmembers NOES: Councilmembers ABSTAIN: Councilmembers NOT PRESENT: Councilmembers EXHIBIT 4 3 CERTIFICATE OF ATTESTATION AND ORIGINALITY I, DAISY GOMEZ, Clerk of the Council, do hereby attest to and certify the attached Resolution No. 2021- to be the original resolution adopted by the City Council of the City of Santa Ana on March 2, 2021. Date: ________________ ____________________________________ Clerk of the Council City of Santa Ana EXHIBIT 4