HomeMy WebLinkAbout2009/02/03 Item 4
CITY COUNCIL
ACENDASTATEMENT
~ CITY OF
~:: ~~ (HUlA VISTA
ITEM TITLE:
SUBMITTED BY:
REVIEWED BY:
February 3, 2009, Item~
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA CONDITIONALL Y APPROVING
FINANCIAL ASSISTANCE, SUBJECT TO FUTURE
APPROPRIATION FROM THE HOME INVESTMENT
PARTNERSHIP (HOME) PROGRAM IN AN AMOUNT
NOT - TO-EXCEED $2,400,000 TO CHELSEA INVESTMENT
CORPORATION FOR THE DEVELOPMENT OF A 147
UNIT PROJECT FOR LOW INCOME HOUSEHOLDS, THE
LANDINGS AT WINDING WALK-PHASE II, IN OTA Y
RANCH VILLAGE ELEVEN
DEPUTY C~~X ~MANAGER / DEVELOPMENT SERVICES
DIRECTOR~
CITY MANAGE~
4/STHS VOTE: YES D NO 0
SUMMARY
Under the Balanced Communities Policy of the City's General Plan Housing Element,
Brookfield Shea Otay, LLC (master developer) has an affordable housing obligation to
provide 207 total affordable units (92 low income and 115 moderate income) within the
Winding Walk community. The 92 unit low income housing obligation has been satisfied
with the completion of The Landings affordable apartments by Chelsea Investment
Corporation (CIC).
With the current economic climate and difficulty in obtaining financing, the master
developer is proposing satisfaction of its moderate income obligation through the
development of a second phase of low income housing, The Landings Phase II. Staff
recommends providing a pre-commitment of $2,400,000 from its federal HOME Investment
Partnership Program (HOME) funds to assist CIC in obtaining affordable housing fmancing.
ENVIRONMENTAL REVIEW
The Environmental Review Coordinator has reviewed the proposed project for
compliance with the California Environmental Quality Act and has determined that the
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February 3, 2009, Item~
Page 2 of 5
proposed project was adequately covered in previously adopted Final Second Tier
Environmental Impact Report, EIR 01-02. Thus, no further CEQA review is necessary.
The City's HOME funds will be the source of fmancial assistance. Therefore, as required
by the HOME Program, the project must also be reviewed under NEP A. Funding of the
loan will be conditioned upon the completion of all required review under NEP A>
RECOMMENDATION
The City Council adopt the resolution.
BOARDS/COMMISSION RECOMMENDATION
On January 28, 2009, the Housing Advisory Commission voted to recommend the
development of The Landings II at Winding Walk as an affordable rental community and
the conditional approval of HOME funds to assist in its financing.
On August 1, 2005, the Design Review Committee (DRC) reviewed and approved the
proposed site plans and architectural elevations for the 147 unit development.
DISCUSSION
Affordable Housin2: Obli2:ation
Under the City's Balanced Communities Affordable Housing Program, the master
developer of Otay Ranch Village 11 (aka Winding Walk) has an obligation to provide a
total of 207 affordable units: 92 low income and 115 moderate income. The master
developer identified Neighborhood R-19 to be developed with a total of 239 units to
satisfy both the low and moderate income housing obligations.
CIC was selected by the master developer to satisfy its obligation of 92 low income units.
CIC has completed construction of a 92 unit affordable rental community, known as The
Landings. It opened in November 2008.
Pursuant to the existing Affordable Housing Agreement, the master developer was to
satisfy the moderate income housing obligation through the development of a first time
homebuyer project, with 115 as moderate income units and 32 as market rate/unrestricted
units. The Agreement provides flexible language to allow lease/purchase of the units
should there be difficulty in selling the units.
Under the current economic climate, fmancing is limited and difficult to obtain for both
construction of developments and individuals purchasing homes. With fmancing so
difficult, a for-sale project is infeasible for moderate income households. Financing remains
available for development of rental housing opportunities for lower income households.
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The master developer is now proposing rental housing to satisfy the balance of their
affordable housing obligation based upon the increasing difficulty in developing and
implementing successful homeownership opportunities for moderate income households in
Chula Vista and throughout the region. Given the success of The Landings, the master
developer has selected CIC to pursue a second phase of The Landings which will provide
additional rental housing for low income households on the remaining affordable site.
Any necessary amendments to the existing Affordable Housing Regulatory Agreement
will be brought back to City Council for approval at such time CIC is successful in
obtaining all necessary financing for the rental dev~lopment.
Financin2: a Rental Development
Financing continues to be available for rental housing for lower-income households
through the Low Income Housing Tax Credit Program and Tax Exempt Multi-Family
Revenue Bonds. CIC is in the process of securing such financing for the project and is
requesting consideration of financial assistance from the City. CIC has proposed Tax
Exempt Multi-Family Revenue Bonds, Low Income Housing Tax Credit financing, and a
permanent loan to support the majority of the estimated $46.7 million ($318,164 per unit)
cost of constructing the project(Attachment 2).
With rents restricted at very low and low income levels, the net operating income is
insufficient to support a loan large enough to cover all the project costs. There remains a
financing gap of approximately $14 million.
It is proposed that the remaining financing gap will be met by a combination of deferred
master developer land/contractor fees, deferred developer fee and City assistance. To
close the financing gap, CIC has requested direct financial assistance of $4.4 million.
The City's funds available for affordable housing primarily consist of HOME funds from
the U.S. Department of Housing & Urban Development and Redevelopment Tax
Increment Funds set-aside for low and moderate income housing. Redevelopment funds
should generally be used to provide affordable housing opportUnities for households
within the redevelopment project areas to meet the Agency's housing obligations within
these areas. HOME funds are a source available for projects outside the redevelopment
project areas.
During such a difficult time to secure financing, staff is supportive of providing CIC's
The Landings II with a pre-commitment of HOME funds. Due to time restrictions on
HOME funds, the City is only able to identify $2.4 million available for this project. The
leveraging of local dollars is necessary to obtain the critical bond/tax credit financing for
the project. As proposed, the project would be able to leverage $18 in private investment
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for each $1 of our local resources. However, there remains a $2 million gap even with
the City's participation.
With an obligation to provide only 115 moderate income units, The Landings II will
provide a surplus of 32 units. These surplus units could be used as a potential source of
additional funding by making these surplus units available as "affordable housing
credits". Other developers could provide financial assistance in exchange for the use of
such credits to satisfy their respective affordable housing obligations.
The Eastlake Company (Eastlake) recently entered into an agreement with the City to
provide 25 additional low income affordable units asa result of a 494 residential unit
increase from the 2006 SPA plan amendment. Since Eastlake no longer owns residential
land to provide these affordable units, the agreement offers alternative options to provide
off-site affordable units in eastern Chula Vista. Eastlake has expressed their willingness
to provide the remaining $2 million financing gap for The Landings II in exchange for
receiving the affordable housing credits towards their own obligation. The use of the
credits would complete the financing necessary for The Landings II and provide Eastlake
with a flexible option for meeting their obligations.
Staff recommends that the City Council adopt a resolution conditionally approving fmancial
assistance of $2,400,000 from the HOME Investment Partnership Program to Chelsea
Investment Corporation for the development of the proposed Landings Phase II at Winding
Walk. Financial assistance for the residential units will be subject to negotiation of
satisfactory terms of the Regulatory Agreement and Loan Agreement and the approval of
such terms and documents by the City once all other financing has been secured.
Form of Assistance - HOME Funds
Assistance will be in the form of a loan from the City's HOME funds and secured by a
note and deed of trust recorded against the property. The principal and interest on the
loan will" be amortized over fifty-five years and repaid fro~ cash surplus in annual
installments. Terms of the loan will be further negotiated and all related loan documents
will be presented to the City for approval at a later date.
Due to the financing mechanisms CIC will be pursuing, the project will provide rents
even lower than the moderate income level (110% of the Area Median Income) required
by the City's Balanced Communities Affordable Housing Program. Units will be made
affordable to very low (50% AMI) and low income (60% AMI) families. Income and
rent restrictions will be maintained for a period of 55 years (Attachment 3).
CONCLUSION
As stated within the City's Housing Element, the more pressing need for the City's lower
income population is for quality affordable rental housing and a more balanced and
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varied housing stock is recommended for eastern Chula Vista. The proposal of 147
additional affordable rental units for low income households in the Winding Walk
community of Otay Ranch meets both of these goals and provides a variety of benefits
such as a preferred location to neighborhood services, amenities and employment centers,
private funding opportunities, and long term affordability.
At the request of the master developer, and following staffs review and analysis, staff
recommends changing the project from for-sale affordable housing to an affordable rental
community. Staff also recommends approval of the City resolution conditionally
approving financial assistance, subject to future appropriation, in an amount not-to-
exceed $2,400,000 from the City's HOME funds for the development and construction of
units for lower income households within The Landings II at Winding Walk.
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 the subject of this
action.
FISCAL IMPACT
Approval of this resolution indicates an intention by the City to provide financial
assistance for the development and construction of The Landings II to provide affordable
rental housing opportunities within the Winding Walk Otay Ranch community, once all
other necessary financing for the project is secured. The loan amount of $2,400,000 will
be appropriated at the time of execution of the City Loan Agreement from the
unappropriated balance in the HOME Program. Funds for staff support are budgeted in
the personnel portion of the Housing Authority budget.
ATTACHMENTS
1. Locator Map
2. Summary of Project Sources & Uses
3. Proposed Income & Rent Levels
Prepared by: Amanda Mills, Redevelopment & Housing Manager, Development Services Department
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Locator Map
The Landings II at Winding Walk
Attachment 1
4-6
The landings I & II
2122 Burdoclc Way
The Landings II at Winding Walk
Attachment 2
Tax Credit Equity
Tax Exempt Bonds-Permanent Loan
Subordinate Bond
Subtotal
Subsidies
City Loan
Eastlake Co - AffHsg Credits
Deferred Contractor Fee
Deferred Developer Fee
TOTAL
Cost per Unit @ 147 Units)
City/Agency Subsidy per Unit @ 11 Units
-
$16,332,000
$15,677,000
$1,000,000
$ 46,770,070 $ 33,009,000 $
$ 46,770,070
$2,400,000
$2,000,000
$7,300,000
$2,061,070
$ 46,770,070 $
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13,761,070
$
$
318,164
218,182
______~,."..,1,~~~g~
Attachment 3
The Landings II at Winding Walk
PROPOSED INCOME & RENT LEVELS
3 Bd/2 Ba
3 Bd/2 Ba
MGR
Total Restricted 147
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RESOLUTION NO. 2009-
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA CONDITIONALL Y APPROVING FINANCIAL
ASSISTANCE, SUBJECT TO FUTURE APPROPRIATION FROM
THE HOME INVESTMENT PARTNERSHIP (HOME) PROGRAM
IN AN AMOUNT NOT - TO-EXCEED $2,400,000 TO CHELSEA
INVESTMENT CORPORATION FOR THE DEVELOPMENT OF
A 147 UNIT PROJECT FOR LOW INCOME HOUSEHOLDS, THE
LANDINGS AT WINDING WALK-PHASE II, IN OT A Y RANCH
VILLAGE ELEVEN
WHEREAS, the City ofChula 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, HOME funds are designed exclusively to create affordable housing
opportunities for low income households through the construction, purchase, and/or rehabilitation of
affordable housing for rent or homeownership or provide direct rental assistance to low income
people; and
WHEREAS, Chelsea Investment Corporation ("Developer") proposes to construct a 147 unit
multifamily rental development, with units affordable to very low households at 50 percent of the
Area Median Income (AMI) and to low households at 60 percent ofthe Area Median Income (AMI)
within the Winding Walk master planned community on a vacant site (Loti of Map No. 15479)
located east of Eastlake Parkway south of Birch Road and north of Crossroads Street in the City of
Chula Vista ("Project"); and
WHEREAS, Developer is applying for an allocation of Multifamily Housing Revenue Bonds
from the California Debt Limit Allocation Committee (CDLAC); and
WHEREAS, Developer is applying for four percent (4%) tax credits from the Tax Credit
Allocation Committee (TCAC); and
WHEREAS, additional financing is necessary in order to make the Project feasible; and
WHEREAS, the provision of affordable housing units like the Project is consistent with and
called for by the City's General Plan Housing Element and Consolidated Plan; and
WHEREAS, the City wishes to provide Developer with a development loan of two million
four hundred thousand dollars ($2,400,000) to assist with the financing gap for the construction of
the residential units of the Project; and
WHEREAS, the City's provision of funds to the residential use of the Project will directly
improve the City's supply of very low and low income housing; and
J:lAtlomeyIRESOLUTIONSIREDEVELOPMEN1\Landings 11 Financial_02.03.2009.doc 4 - 9
Resolution No. 2009-
Page 2
WHEREAS, the City's Housing Advisory Commission did, on the 28th day of January, 2009,
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, has recommended to the City Council that the conditional financial
assistance be approved because the Commission believes 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 the
Consolidated Plan and the cost effectiveness of the City's financial assistance based upon the
leveraging of such resources; and
WHEREAS, in accordance with the requirements of CEQA, the Environmental Review
Coordinator has determined that the proposed project has had adequate prior review and is in
compliance with the previously adopted Final Second Tier Environmental Impact Report, EIR 01-02
and no further action by the City Council is necessary.
NOW, THEREFORE, BE IT RESOLVED the City ofChula Vista does hereby conditionally
approve financial assistance subject to future appropriation in an amount not-to-exceed $2,400,000
from the City's HOME funds to Developer for the construction of the Project subject to the City's
approvals of an affordable housing and loan agreement which shall include, at a minimum, the
following terms and conditions. Terms of the loan will be further negotiated and all related loan
documents will be presented to the City Council at such time other necessary financing is secured.
1. The loan repayment will be secured by a Deed of Trust and Promissory note for the
property on behalf of the City ofChula Vista and recorded against the Project property.
2. The principal and interest on the loan will be amortized over fifty-five years and repaid
from cash surplus in annual installments.
3. Developer will be required to operate the Project consistent with the Regulatory
Agreement required by the Project's tax credit and bond financing, the covenants
imposed by the Agreement, and any other project requirements.
4. Developer shall enter into a loan agreement with the City consistent with the terms set
forth above and with such other terms as shall be required or approved by the City
Attorney.
5. The City assistance is based upon the assumptions presented within the sources and uses
offunds, development budget, development proforma and other information filed with
the Affordable Housing Review Application for the project as submitted and reviewed
by the Development Services Department. 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.
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Resolution No. 2009-
Page 3
6. This conditional approval remains subject to final approval by the City in its sole
discretion.
Presented by
Gary Halbert, P.E., AICP
Deputy City Manager / Development
Services Director
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