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HomeMy WebLinkAbout2013/04/23 Item 04CITY COUNCIL AGENDA STATEMENT \~(1/ CITY OF '~` CHULAVISTA Apri123, 2013, Item ITEM TITLE: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA COMMITTING HUD FUNDS TO WAKELAND HOUSING AND DEVELOPMENT SUBMITTED BY: REVIEWED BY: BACKGROUND DEVELOPMENT 4/STHS VOTE: YES ~ NO ^X The City of Chula Vista has received a request from Wakeland Housing and Development Corporation ("Wakeland") for financial assistance to support the construction of a mixed use development that includes 33-units of affordable rental housing, located at 240 Landis Avenue (the "Project"). Staff recommends providing a commitment of a total amount not to exceed $2,000,000 from its available housing fund balance, using $1,500,000 from U.S. Department of Housing and Urban Development ("HUD") HOME Investment Partnership ("HOME") funds and $500,000 from the Neighborhood Stabilization Program ("NSP") to assist Wakeland in obtaining additional housing financing to undertake the project. ENVIRONMENTAL REVIEW The Developmental Services Director is reviewing the proposed project for compliance with the California Environmental Quality Act ("CEQA") and has determined the proposed funding of the loan will be conditioned upon the completion of all required CEQA review to ensure the project is adequately covered in previously adopted Final Environmental Impact Report, EIR 06-01. The City's federal HUD funds will also be a source of financial assistance. Therefore, as required by the federal entitlement funds, the project must also be reviewed under the National Environmental Protection Act ("h1EPA"). Funding of the loan will be conditioned upon the completion of all required review under NEPA. CORPORATION FOR AN AMOUNT NOT-TO-EXCEED $2,000,000 FOR THE DEVELOPMENT OF A PROPOSED MIXED USE RESIDENTIAL PROJECT AT 240 LANDIS AVENUE AND AUTHORIZING THE CITY MANAGER, OR HIS DESIGNEE TO EXECUTE ~.LL NECESSARY DOCUMENTS ASSISTANT CITY MA GER ~/ SERVICES DIRECTO CITY MANAGER 4-1 APRIL 23 2013, Item Page 2 of 6 RECOMMENDATION Council adopt the Resolution. BOARDS/COMMISSION RECOMMENDATION On April 8, 2013, the Housing Advisory Commission voted (4-1) to recommend the conditional approval of City housing funds to assist in the Project financing. DISCUSSION The City of Chula Vista receives inquiries from time to time on the availability of its funding for affordable housing projects. These inquiries include both acquisition/rehabilitation and new construction projects. Although inquiries have been made, no formal applications for City assistance have been submitted within the last 24 months. The City has recently received an application for financial assistance from Wakeland for a proposed mixed use residential complex comprised of office space and pazking for existing Family Health Centers of San Diego ("FHCSD") employees and 33 affordable housing units located at 240 Landis Avenue (Attachment 1: Locator Map). The Applicant With over 5,000 units in its portfolio, Wakeland has significant experience in developing affordable rental housing. Wakeland's most recent development in Chula Vista was the awazd winning Los Vecinos project. Wakeland is well-qualified and has demonstrated a desire and commitment to partner with the City in the development of another affordable housing project. In reviewing their qualifications, Wakeland exceeds the standazds to successfully build this proposed mixed use project based on prior performance on City of Chula Vista projects. The Proposed Proiect The proposed project site is located at 240 Landis Avenue, on the northwest corner of Landis Avenue and Davidson Street. The project consists of mixed use residential complex and is a partnership between Wakeland, as the developer of the project, and FHCSD, as owner of the property. The Project will house offices for FHCSD and 33 affordable housing units. Housing units would be made affordable to families at 30% to 60% of the AMI (maximum income for a household of 4 persons $43,360). The site will continue to be owned by FHCSD and will be leased to Wakeland for the life of the project. Site Characteristics The 0.5 acre site is within the V-3 (West Village) district of the Urban Core Specific Plan ("UCSP"). An office building was previously on the site, which was vacant from 2000 unti12005 when it was destroyed in a fire. During this time code enforcement complaints were received due to transient activity on the property. A concrete slab on the majority of the property remains today. Since the fire and demolition of the building, complaints received relate to securing the site to prevent illegal use of the property and its upkeep. 4-2 APRIL 23 2013, Item ~t Page 3 of 6 In May 2009, the site was entitled for a mixed use medical office complex. In this economy, the owner has been unable to develop the property for that use. The site has remained vacant and on the market for sale. FHCSD recently purchased the property and currently uses the usable space for staff parking for their medical offices located at the southeast corner of Landis Avenue and Davidson Street. Site and Neighborhood Benefits The site is within the UCSP azea and is close to public transit and neighborhood services and facilities, including health facilities and commercial areas due to its close proximity to the Third Avenue Village. This project would provide the following: • Help with the revitalization of the West Village of the UCSP through the construction of new development on a previously vacant and_ blighted parcel and lessening the associated Code Enforcement complaints; • Provide a healthy living environment for residents with quality amenities, including a community room and walkability to neighborhood services; • Alleviate financial strain to working families with affordable rents; • Provide parking opportunities for existing FHCSD staff; • Offer opportunities to families with direct access to public transportation and availability of Section 504 ADA accessible units; • Meet the goals set forth in the City of Chula Vista's UCSP, its Housing Element and HUD approved Consolidated Plan; and • Serve as a catalyst for other mixed used projects in the UCSP. Affordable Housin¢ Financing Financing and development of the Project is proposed as a joint private-public partnership. Wakeland is applying for 9% Low Income Housing Tax Credit financing to support the majority of the estimated $12 million ($361,247 per unit) cost of constructing the project (Attachment 2: Source and Uses). The first mortgage on the project and 9% tax credits would bring approximately $10 million to the project. With rents restricted on the 33 units for lower income households for the required 55 yeaz term, the net operating income is insufficient to support a loan large enough to cover all the project costs. Therefore, there remains a financing gap of approximately $2 million. To close the financing gap, Wakeland has requested direct financial assistance from the City. Staff proposes the use of $1.5 million from the City's existing funds ($1,000,000 from HOME funds and $500,000 from NSP funds) and allocating $500,000 from the 2013/2014 HOME funds for the Project. For each dollar of City subsidy is leveraged by $17 other private investment. Project Feasibility -NSP & HOME Funds Staff has reviewed the proposal and financial pro forma. The estimated project costs are consistent with industry standards and comparable affordable housing developments within the San Diego Region in today's market. 4-3 APRIL 23 2013, Item Page 4 of 6 In recent yeazs, the City, with the assistance of anon-profit developer, has itself acquired and rehabilitated nine (9) properties using NSP and HOME funds for the purpose of providing affordable rental opportunities for low income households. In comparison, the Project offers a significantly lower subsidy at $60,606, reference Table 1, and is considered low for this type of new construction. By partnering with FHCSD, owner of the site, the subsidy required is reduced. The Project represents an opportunity to meet revitalization goals for the community west of I-805. In its recent efforts, Housing Division staff partnered with the City's Police Department to identify properties with high calls of service in the City for outreach to participate in an owner rehabilitation program or the potential to acquire and rehabilitate the property with a portion of the units reserved for affordable housing. The City's outreach efforts did not result in any interested parties willing to participate in a rehabilitation program or interest in selling their property for affordable housing purposes. With today's demand for rental properties, acquisition ofmulti-family unit building(s) for the purpose of revitalizing properties and the surrounding neighborhoods and guaranteeing affordable housing is difficult. In staff's recent experience to acquire rental properties for expenditure of its NSP funds, staff has found limited inventory of multi- family properties available for sale and those that aze available aze quickly sold to investors purchasing with cash and above appraised value. Using City assistance requires payment at fair mazket value and a seller willing to wait months as the project financing is secured through tax credits or bond financing, approval by City Council/Housing Authority, and the necessary environmental clearance. The Project is an eligible use of the City's NSP and HOME funds. The City's use of these funds is necessary to demonstrate local commitment and leveraging of local funds in Wakeland's application for the 9% tax credit program by the June 30th deadline. In accordance with HUD requirements, the City must also commit $400,000 of its HOME funds to an eligible housing project by June 30, 2013. With no current plans for the commitment of HOME funds to an eligible project and looming expenditure deadlines, the funding of this project would assist the City in meeting the allocation and expenditure requirements. This action will direct staff and the City Manager to take the following actions to meet HUD's requirements for the use of NSP and HOME funds: • Commit $1,500,000 of HOME funds, including $500,000 from its 2013/2014 Annual Action Plan; 4-4 APRIL 23 2013, Item Page 5 of 6 • Amend the City's NSP plan to allocate $500,000 in NSP funds to this project; and • Enter into all necessary documents, contingent on the items listed above, including but not limited to development loan agreement, all associated loan documents, and regulatory agreements to commit, an amount not to exceed, $2,000,000 in HUD funds. Once, the Project has obtained its primary financing of 9% tax credits and building permits, the City will then execute and record the loan agreements and all associated loan documents, with terms reviewed by the City Attorney's office and satisfactory to the City. Assistance will be in the form of a loan in an amount not to exceed $2,000,000 using City's HUD Housing funds and secured by a note and deed of trust recorded against the property. The principal and interest on the loan would be amortized over fifty-five yeazs and repaid from cash surplus in annual installments. The required income and rent restrictions would be incorporated into the various deed restrictions for the property and maintained for the full 55-year compliance period. Such restrictions would bind all subsequent owners so that the commitment remains in force regardless of ownership. Compliance with these restrictions would be subject annually to regulatory audit and annual tax credit certification. Article XXXIV Article XXXIV of the California Constitution (Article 34) requires that voter approval be obtained before any "state public body" develops, constructs or acquires a "low rent housing project". The City of Chula obtained voter approval on April 11, 1978 and subsequently on November 6, 2006 with the passage of Proposition C, which authorizes the development, construction and acquisition of housing for persons of low-income. With the addition of these 33-units, this leaves 1585 units under the City's current authority to facilitate these activities. CONCLUSION The Project offers opportunities to provide quality affordable housing to Chula Vista's working families consistent with City housing goals in a location within walking distance to neighborhood services, employment centers, and transportation links, revitalize an existing blighted property under current market conditions and provide existing FHCSD staff additional parking opportunities to alleviate the surrounding residential street parking. The requested financial assistance, in an amount not-to-exceed $2,000,000, provides significant leveraging of the City's resources and is necessary to obtain primary financing for the Project. DECISION MAKER CONFLICT Staff has reviewed the property holdings of the City Council and has found no property holdings within 500 feet of the boundaries of the property which is subject of this action. Staff is not independently awaze, nor has staff been informed by any City Councilmember, of any other fact that may constitute a basis for adecision-maker conflict of interest in this matter. 4-5 APRIL 23 2013, Item Page 6 of 6 CURRENT YEAR FISCAL IMPACT There is no fiscal impact in the current fiscal year. The City will allocate HOME and NSP grant funds from the U.S. Department of Housing and Urban Development to provide financial assistance for the development and construction of 240 Landis as part of the City Manager's Fiscal Yeaz 2013/2014 proposed budget. There is no financial impact to the City's General Fund as the project and staff costs are covered by the grants. ONGOING FISCAL IMPACT Upon approval of the resolution committing HUD funds to Wakeland for an amount not- to-exceed $2,000,000, the funding for this project will be included in the City Manager's fiscal year 2013/2014 proposed budget, as referenced in Table 2. Funds for this project will come from the following sources: Table 2 -Funding Sources ATTACHMENTS 1. Locator Map 2. Summary of Project Sources & Uses Prepared by: Jose Dorado, Project Coordinator, Development Services-Housing Division 4-6 The fiscal year 2013/2014, the use of reserves (gant funds) will result in a negative fiscal impact to HOME and NSP funds. However, these funds aze intended to be used for these types of projects. ATTACHMENT 1 O r ~~~ ~~ NORTH ~S~ ~t --"~ PROJECT LOCATION 4-7 s ~p ~G F S~ a ~ Z Q ~G ~G 240 Landis Ave Attachment 2 240 Landis Source and Uses ~Y ANALYSIS Cost Fw-ds Cost Land Site Construction (Structures) __ Construction Contingency Interest/Fees, Financing Costs Legal and Audit Developer Fees _ _ _. Reserves, Legal, Other (Surveys, Studies, ff Sources of Funds Tax Credit Fees $5,727,408 __ $1,258,926 $4.60,232 __ _.__.. $160,000 $1,250,000 $2,014,575 Gap Loan'. r $ 1,405,985 _ __ _ _. Contingency ', ` $ (29,474) i __ Tax Credit Equity _ __ _,_$8,544,630' _.. _.. 'Gifu Subsidy City ofChula Vista Housing funds' $2,000,000 4-8 RESOLUTION NO 2013 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA COMMITTING HUD FUNDS TO WAKELAND HOUSING CORPORATION FOR AN AMOUNT NOT TO EXCEED $2,000,000 FOR THE DEVELOPMENT OF A PROPOSED MIXED USE RESIDENTIAL PROJECT AT 240 LANDIS AVENUE AND AUTHORIZING THE CITY MANAGER, OR HIS DESIGNEE TO EXECUTE ALL NECESSARY DOCUMENTS WHEREAS, the City of Chula Vista is an entitlement/participating jurisdiction for the U.S. Department of Housing and Urban Development (HUD) funding programs and is awarded on an annual basis a formula grant from the HOME Investment Partnership Program (HOME); and WHEREAS, the City of Chula Vista received one-time Neighborhood Stabilization Program (NSP) funds for eligible activities that help stabilize neighborhoods, including removing blighted vacant, foreclosed and/or abandoned properties, while providing rental opportunities to low income households; and WHEREAS, pursuant to Council Resolution Numbers 2010-098, 2011-072, and 2012-72 respectively, City Council approved the HUD Annual Action Plans which includes funding for the production of affordable rental housing for low income households using HOME Investment Partnership Program (HOME) funds; and WHERES, in May 2013, the City Council will approve the final 2013/2014 Annual Action Plan for the HOME Investment Partnership Program that includes funding for the production of affordable rental housing for low income households; and WHEREAS, Wakeland Housing and Development Corporation . (Developer) has proposed to construct a mixed use residential project at 240 Landis, with thirty-three (33) units affordable to extremely low, very low, and low income households located on the northwest corner of Landis and Davidson in the V-3 (West Village) district of the Urban Core Specific Plan; and WHEREAS, the Developer is applying for an allocation from California Tax Allocation Committee (CTAC), nine percent (9%) tax credits from the Tax Credit Allocation Committee; and WHEREAS, the City's evaluation of the development budget, operating pro forma, and source and uses for the Project determined that additional financing is appropriate and necessary in order to make the Project feasible; and WHEREAS, the City wishes to provide Developer with a development loan of an amount not to exceed two million dollars ($2,000,000) using $1,000,000 of HOME Investment Partnership funds from prior years, $500,000 of Neighborhood Stabilization Program funds, and an allocation of $500,000 from 2013/2014 HOME funds to assist with the financing gap for the construction of the Project, more particularly for 33 affordable rental housing units; and 4-9 WHEREAS, NSP funds will be used for the land costs and HOME funds will be used for the construction of the housing units; and WHEREAS, the City's development loan does not exceed the HOME maximum per-unit subsidy limits based on the Section 221(d)(3) limits established by HUD; and WHEREAS, the City's provision of funds to the Project will directly improve the City's supply of extremely low, very low, and low-income housing. WHEREAS, the City has adopted a Housing Element of the General Plan which sets forth the objective of providing balanced and vaned housing opportunities throughout the City to satisfy needs and desires of various age, income, and ethnic groups of the community, and which specifically provides for the construction of new affordable housing units through City assistance; and WHEREAS, the Project furthers the goals of the City set forth in the City's HUD approved Consolidated Plan as it will facilitate the creation of affordable housing which will serve the residents of the neighborhood and the City; and WHEREAS, the City's Housing Advisory Commission did, on April 8, 2013, hold a public meeting to consider said request for financial assistance; and WHEREAS, the Housing Advisory Commission, upon hearing and considering all testimony, if any, of all persons desiring to be heard, and considering all factors relating to the request for financial assistance, recommended to the City that financial assistance be approved on the condition that all other necessary financing be secured for the Project, and WHEREAS, the Housing Advisory Commission found that the City's financial participation in the development of the Project will be a sound investment based upon Developer's ability to effectively serve the City's housing needs and priorities as expressed in the Housing Element and Consolidated Plan and the cost effectiveness of the City's financial assistance based upon the leveraging of such sources; and WHEREAS, the. development of the Project is subject to completing an environmental review under CEQA and NEPA prior to construction; and NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista does hereby approve committing $1,000,000 of HOME Investment Partnership funds (HOME) and $500,000 of Neighborhood Stabilization Program funds (NSP) and authorizing the allocation of $500,000 of 2013/2014 HOME funds to Wakelahd Housing and Development Corporation in a total amount not- to-exceed $2,000,000 for the development of a proposed mixed use residential project at 240 Landis Avenue. BE IT FURTHER RESOLVED by the City Council of the City of Chula Vista, that it directs staff to prepare all necessary documents and any actions, as required by HUD, to commit the HOME and NSP funds and authorizing the City Manager, or his designee to execute a Development Loan Agreement and all associated loan documents, and regulatory agreements, consistent with the City's standard documents as reviewed by the City Attorney's office, 4-10 necessary for the financing of the proposed mixed use development and, at minimum, subject to the following terms and conditions: 1. Certification of the appropriate CEQA and NEPA documentation prior to any City and Housing Authority Loan disbursements for any portion of the Project. 2. Developer shall secure all other financing necessary for the acquisition and development of the Project. 3. The loan repayment will be secured by a Deed of Trust and Promissory note for the property on behalf of the City of Chula Vista and recorded against the Project property. 4. The term of the loan shall be fifty-five (55) years. 5. Developer will be required to operate the Project consistent with the Regulatory Agreement required by the Project's tax credit financing, and the City's Affordable Housing Program, and the City's financing, the covenants imposed by these Agreements, and any other project requirements. 6. The City assistance is based upon the assumptions presented within the sources and uses of funds, development budget, development proforma and other information filed with the Affordable Housing Review Application for the project as submitted and reviewed by the City's Development Services Housing Division. The City assistance is a maximum level of participation. It is expected that any substantive revisions in such financing assumptions which would lead to an increase in other resources available, would therefore reduce the level of City assistance. 7. This conditional approval remains subject to additional approvals by City Council, in which City Council retains its sole and unfettered discretion to approve, deny, or to take alternative actions, of, but not limited to, the following: the commitment of $1,500,000 of HOME funds, including $500,000 from its 2013/2014 Annual Action Plan, and an amendment to the City's NSP Plan to allocate $500,000 in NSP funds to the Project. Presented by Gary Halbert, AICP, PE Assistant City Manager/ Development Services Director Approved as to form by 'S VVu~trN r ~ Glen R. Googins City Attorney 4-11 /~ ~ 4/~3~3 Apri123, 2013 TO: Mayor Cheryl Cox Councilwoman Pamela Bensoussan Councilwoman Mary Salas Councilman Rudy Ramirez Councilwoman Pat Aguilaz FROM: Peter Watry SUBJECT: Item #4 on the Agenda -- property at 240 Landis Avenue Dear Members of the Council: (Susan is in the hospital for a spell so I will not be able to attend today's Council meeting.) I am very sad about Item #4, the proposal to construct an affordable housing unit on Landis Avenue. Some of you will remember the process we went through to plan the Urban Core Specific Plan some years ago. Mark Brodeur was the consultant leading the planning. After several meetings and discussions, he produced his first draft of a Plan. It had Third Avenue changing into mid-rise buildings, 7 or 8 stories high, with retail and offices on the first two floors, and residential units above that. The "new" Third Avenue, he believed, would be sustainable. Many of us "history fanatics" objected to destroying the historic Third Avenue. So Mark scrapped that first plan, and instead placed mid-rise condo units along Landis, just on the west side of Third Avenue. He said he hoped young professionals would want to live there who had healthy disposable incomes, and that was what would "save" Third Avenue. That Plan is the one that was adopted. So Item #4, the plan to build "affordable housing" on Landis is the exact opposite of the UCSP. And the irony of the situation is that, with one hand you are spending millions of tax dollars to fix up Third Avenue ("Streetseape') * to help save Third Avenue, while on the other hand you are spending tax dollars to subsidize low-income people with low disposable income on Landis! It would almost seem silly, if it wasn't so sad. l ~_ ~L. *T don't know if it will work or not, but Streetscape and the new TAVA signs are sure looking good.