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HomeMy WebLinkAbout2003-032 - Approving Subsidy Layering Guidelines2/24/03LS RESOLUTION NO. 2003-032 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA ANA APPROVING SUBSIDY LAYERING GUIDELINES BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANTA ANA, AS FOLLOWS: Section 1: The City Council of the City of Santa Ana hereby finds, determines and declares as follows: The City of Santa Aha is a participating jurisdiction in Federal grant programs that provide funding for affordable housing. Under the HOME Program, the City is required to adopt subsidy layering guidelines. These guidelines establish procedures to ensure that the City does not invest any more HOME funds, in combination with other governmental assistance, than is necessary to provide affordable housing. The proposed Subsidy Layering Guidelines (attached hereto as Exhibit 1) was prepared in accordance with Title 24, Section 92.250 (b) of the Code of Federal Regulations. Section 2: The City Council hereby approves the proposed Subsidy Layering Guidelines and authorizes the Executive Director of the Community Development Agency, or his/her designee, to make any necessary modifications as required by law. Section 3. This Resolution shall take effect immediately upon its adoption by the City Council, and the Clerk of the Council shall attest to and certify the vote adopting this Resolution. M ig u~el~.. Pulido May/or' APPROVED AS TO FORM: Joseph W. Fletcher, City Attorney By: ,-'~/~ ,._ ,~. ~_~ Lisa E. Storck Assistant City Attorney Resolution No. 2003-032 Page 1 of 5 AYES: NOES: ABSTAIN: NOT PRESENT: Councilmembers: Councilmembers: Councilmembers: Councilmembers: Christy, Franklin, Garcia, Pulido, Solorio (5) None (0) None (0) Alvarez, Bist (2) CERTIFICATE OF ATTESTATION AND ORIGINALITY I, PATRIClA E. HEALY, Clerk of the Council, do hereby attest to and certify the attached Resolution No. 2003-032 to be the original resolution adopted by the City Council of the City of Santa Ana on March 17, 2003. Date: "~/z.- 0/¢'3 (?.~~~~'~ Clerk of the Council 0 City of Santa Ana Resolution No. 2003-032 Page 2 of 5 CITY OF SANTA ANA- HOME PROGRAM SUBSIDY LAYERING GUIDELINES INTRODUCTION · As required by the subsidy layering provisions of § 92.250(b) of the HOME final rule, the City of Santa Ana has established and will use these.guidelines to ensure that when HOME funds are used in combination with Other governmental assistance, no more subsidy is invested than is necessary. The City will keep the results of its analysis in the project file and will certify that no more assistance is being used than is necessary. Where available, the City will rely upon guidelines developed and evaluation conducted by other agencies pursuant to either applicable HUD regulations or the Internal Revenue Code. PROJECT EVALUATION Before the City of Santa Ana invests HOME funds in a project, it will assess if other governmental assistance has been, or is likely to be, made available to the project. In performing this evaluation, the City will consider the aggregate amount of assistance from HUD and other sources that is necessary to ensure the project's feasibility. These may include, but will not be limited to, past rates of return to owners, sponsors and investors; the long-term needs of the project and its tenants3 and the usual and customary fees in project development. Major emphasis will be given to the income level of the population to be served, the level of rent restriction to be recorded against the property, and time of duration of such restrictions. A. Certification of Federal Assistance The City will obtain a formal certification from each applicant concerning the governmental assistance provided or to be provided to the project. If no such assistance is to be provided at the time of application or in the future, the applicant(s) will need to certify to that fact. The applicant must also certify that should other governmental assistance be sought in the future, the City will be notified promptly. B. Sources and Uses of the Funds Statement All applicants are required to submit a Sources af~d~ Uses of Funds Statement for their project. This Statement must be consistent with the project development budget (see below) and must list: EXHIBIT Resolution No. 2003-032 Page 3 of 5 All proposed sources (both public and pri3afe) '(~f funds and the dollar amounts for each source. The application must include documentation such as commitment letters from all fund sources. All uses of funds (including acquisition costs, rehabilitation and/or construction costs, financing costs and professional fees) required for the project. All uses must also be documented. Appropriate forms of documentation include, but are not limited to_, .appraisals for property to be purchased, escrow closing cost estimates, construction, cost estimates prepared by competent professionals, and reserve requirement statements from other lenders. If the documentation is not adequate for either the sources or uses of funds, the City will request additional documentation, a second opinion and/or reference from another source such as another construction cost estimator. C. Project Development Budget In addition to the Sources and Uses Statement, applicants are required to submit a Project Development Budget. This Budget should categorize costs in a manner consistent with the Sources and Uses Statement and be presented in such a manner that the City can easily refer back to the Statement to determine the source of funding to be used for all costs. It should include all costs associated with the project regardless of funding sources. In its review of the Development Budget, the City will focus on the quality of the end product, construction costs, architectural and engineering fees, and consulting fees. The City will determine what costs are customary and necessary depending on the type of development activity. For example, it will consider the demands of new construction as opposed to rehabilitation and senior housing as opposed to housing for large families. · It will also determine if these costs are reasonable. The City's determination of "reasonableness" will be based on all of the following factors: · Costs of comparable projects in Southern California; · The qualifications of the cost estimators for the various budget line items; and · Comparable costs as published by recognized industry cost index services. D. Rate of Return on Equity Investment The City of Santa Ana will require the applicant to furnish a proforma, or project income and expense statement. At a minimum, the proforma must include achievable rent levels, market vacancies and operating expenses. It must also EXHIBIT Resolution No. 2003-032 Page 4 of 5 specify the consequences of tax benefits, if any.,'an~l a~y other assumptions used in calculating the project cash flow to determine the reasonableness of the rate of return on equity investment. The proforma must represent the term of the HOME affordability requirements or the term of other affordability requirements as mandated by other funding sources if longer. The proforma should not exceed the anticipated useful life of the facility. In general, adequacy of the proforma will be evaluated on the basis of industry standards as identified by HUD. The City will examine the proforma to ensure tl~at cash flow projections are reasonable in the light of present economic conditions, and are neither unduly conservative nor overly optimistic. It will also examine the proforma to determine that the projected rates of return are reasonable and that the applicants will not receive excessive profit or windfalls from the project. In doing so it will use cash on cash return analysis or other approaches that may be more suitable to the project. EXHIBIT Resolution No. 2003~032 Page 5 of 5