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Item 4.11 - 3315 Local Housing Trust Fund Program Page 1 of 4 STAFF REPORT CITY COUNCIL DATE: July 21, 2020 TO: Honorable Mayor and City Councilmembers FROM: Linda Smith, City Manager SUBJECT: Local Housing Trust Fund Program Prepared by: Jim Bergdoll, Senior Planner and Kristie Wheeler, Assistant Community Development Director EXECUTIVE SUMMARY: The City Council will consider adoption of a Resolution authorizing the City Manager to submit an application and receive up to $3,333,333 in grant funds from the State of California’s Local Housing Trust Fund (LHTF) Program. The purpose of the LHTF Program is to provide matching funds to local and regional housing trust funds dedicated to the creation, rehabilitation, or preservation of affordable housing, transitional housing and emergency shelters. These grant funds will be used to help fund a 100 percent affordable rental housing project proposed at 6541 Regional Street. The City Council will also consider reserving up to 114 units from the Downtown Dublin Specific Plan Development Pool for this affordable housing project. STAFF RECOMMENDATION: 1) Adopt the Resolution Authorizing Application for, and Receipt of, Local Housing Trust Fund Program Funds; 2) Authorize the reservation of up to 114 residential units from the Downtown Dublin Specific Plan Development Pool and preparation of a Community Benefit Agreement; and 3) Direct Staff to issue a Letter of Intent to Eden Housing to provide funding for an affordable rental housing project at 6541 Regional Street. FINANCIAL IMPACT: The Local Housing Trust Fund Program requires a minimum one-to-one match from eligible local housing trust funds and awards maximum points for applications proposing a three-to-one match. Staff proposes to commit land (valued at approximately $5 million) plus approximately $5 million from the Alameda County A-1 Bond or the City’s Affordable Housing Fund as matching funds for a three -to-one match. Additionally, Staff time is required to prepare the grant application and administer the receipt and disbursement of the grant funds. Page 2 of 4 DESCRIPTION: The Local Housing Trust Fund (LHTF) Program is funded by the Veterans and Affordable Housing Bond Act of 2018 (Proposition 1) and administered by the California Department of Housing and Community Development (HCD). HCD will allocate up to $300 million of the bond proceeds over a number of years. The purpose of the LHTF Program is to provide matching funds to local and regional housing trust funds dedicated to the creation, rehabilitation, or preservation of affordable housing, transitional housing, and emergency shelters. A Notice of Funding Availability (NOFA) was released on April 30, 2020, for approximately $57 million in funds from the LHTF Program with an application deadline of August 3, 2020. The program provides grants of up to $5 million. Grants are awarded on a competitive basis using a number of criteria to rate application submittals. Amongst other requirements, the City Council must adopt a Resolution authorizing the City Manager to submit an application and receive grant fun ds from the LHTF Program (Attachment 1). In addition, the application must identify an eligible project, provide matching funds and make a commitment to housing affordability. Staff is proposing to request a grant of $3,333,333 as further discussed below. Eligible Project Staff proposes to submit a grant application for a proposed affordable housing project on a 1.3-acre site located at 6541 Regional Street. This site will be acquired by the City for affordable housing through an approved Community Benefit Agreement (CBA) associated with the adjacent St. Patrick Way Residential Project. Staff has been working with Eden Housing (Eden) over the past two years on potential affordable housing proposals for this site. Eden has prepared a preliminary proposal to develop between 70 and 114 units of affordable senior and/or special needs housing with a projected total development cost of between $46 million and $74 million (Attachment 2). Commitment of Housing Affordability Eden’s proposal for the Regional Street site would meet the required LHTF Program affordability criteria. One hundred percent of the project units would be affordable to households earning no more than 60 percent of area median income (AMI), with 30 percent of the project units affordable to households earning no more than 30 percent of AMI. Matching Funds for Project The LHTF Program requires a minimum one-to-one local match of funds and maximum points are awarded to applications that include a three-to-one match. Staff is proposing a three-to-one match which includes the 1.3-acre site that the City will acquire through the CBA (valued at approximately $5 million) plus approximately $5 million either from the Alameda County A-1 Bond (leaving approximately $3 million in A-1 Bond money available to allocate to another affordable project in the future) or the City’s Affordable Housing Fund. Dublin’s Affordable Housing Fund currently has sufficient funds that could be pledged for the match, but grant applicants receive extra points for using a “non-residential source” such as the A-1 Bond funds. The total match of approximately $10 million equals three times the $3,333,333 grant request in the proposed LHTF Program application. The requested amount is based on the project need and the opportunity to leverage the local funds to maximize the competitiveness of the Page 3 of 4 application. Downtown Dublin Specific Plan Development Pool The Downtown Dublin Specific Plan identifies the number of residential units that can be constructed within the Specific Plan area and has established a pool of these units. A developer must request City Council authorization to reserve units from the pool and provide a benefit to the community for use of the units. A Community Benefit Agreement is required to ensure that a benefit is provided and establishes a timeframe in which the developer must construct the units. The units are returned to the pool at the end of the established timeframe, if not constructed. Eden has prepared a preliminary proposal, being reviewed at a staff level currently, to develop between 70 and 114 units of affordable senior and/or special needs housing and is requesting authorization for an allocation of up to 114 units from the Downtown Dublin Specific Plan Development Pool. In order to construct the pro ject, a Community Benefit Agreement and Site Development Review Permit will be required. Eden and Staff have discussed the terms of the community benefit, as follows: • Eden would receive an allocation of up to 114 units from the Downtown Dublin Specific Plan Development Pool. In exchange for the allocation of development capacity, 100 percent of the project units would be affordable to households earning no more than 60 percent of AMI, with 30 percent of the project units affordable to households earning no more than 30 percent of AMI. • The term of the reserved units obtained from the Development Pool is two years from City approval of project entitlements, which in this case will be a Site Development Review Permit, unless that timeframe is extended by the City. City Council authorization to prepare the Community Benefit Agreement does not imply any endorsement of the project. Eden will need to submit a Site Development Review Permit application for complete review. This application will be reviewed concur rently with preparation of the Community Benefit Agreement. Letter of Intent Staff proposes to issue a Letter of Intent (Attachment 3) to Eden Housing to provide the project site and approximately $5 million for the proposed affordable housing project identified in the LHTF Program application. The Letter of Intent will increase the competitiveness of the City’s application by providing “tie-breaker” points, if needed. Through the Letter of Intent, the City is committing to the development of an affordabl e housing project on the Regional Street site in partnership with Eden Housing, contingent on the project securing all the necessary financing and permits to build the project. Eden has successfully developed four other affordable housing projects in Dubli n over the past 15 years and has established a solid working relationship with the City over those years. ENVIRONMENTAL REVIEW: The Resolution authorizing the City Manager to submit an application and receive grant Page 4 of 4 funds from the LHTF Program is exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15378 as the application does not meet CEQA’s definition of a “project” and would not result in either a direct physical change, or a reasonably foreseeable indirect physical change in the environment. STRATEGIC PLAN ALIGNMENT: Strategy 3: Create More Affordable Housing Opportunities Objective A: Facilitate production of affordable housing for lower income seniors, workforce and special needs households by leveraging the Alameda County Measure A-1 Bond funds and the City’s Affordable Housing Fund. NOTICING REQUIREMENTS/PUBLIC OUTREACH: None. ATTACHMENTS: 1. Resolution Authorizing Application for, and Receipt of, Local Housing Trust Fund Program Funds 2. Project Description 3. Letter of Intent RESOLUTION NO. xx-20 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN * * * * * * * * * AUTHORIZING APPLICATION FOR, AND RECEIPT OF, LOCAL HOUSING TRUST FUND PROGRAM FUNDS WHEREAS, a necessary quorum and majority of the Council members of the City of Dublin (“Applicant”) hereby consents to, adopts and ratifies this resolution; and WHEREAS, the State of California (the “State”) Department of Housing and Community Development (“Department”) is authorized to provide up to $57 million under the Local Housing Trust Fund (“LHTF”) Program from the Veterans and Affordable Housing Bond Act of 2018 (Proposition 1) (as described in Health and Safety Code section 50842.2 et seq. (Chapter 365, Statutes of 2017 (SB 3)) (“Program”); and WHEREAS, the Department issued a Notice of Funding Availability (“NOFA”) dated April 30, 2020, under the LHTF Program; and WHEREAS, the City of Dublin is an eligible Local Housing Trust Fund applying to the Program to administer one or more eligible activities using Program Funds; and WHEREAS, the Department may approve funding allocations for the LHTF Program, subject to the terms and conditions of Health and Safety Code Section 50842.2, the LHTF Program Guidelines, NOFA, Program requirements, the Standard Agreement and other related contracts between the Department and LHTF award recipients. NOW, THEREFORE, BE IT RESOLVED, the Dublin City Council confirms the following: SECTION 1. The City Manager, Linda Smith, is authorized to execute the LHTF Program Application, the LHTF Standard Agreement and any subsequent amendments or modifications thereto, as well as any other documents which are related to the Program or the LHTF Award to Applicant, as the Department may deem appropriate; and SECTION 2. If the City of Dublin receives an award of LHTF funds from the Department pursuant to the above referenced LHTF NOFA, it represents and certifies that it will use all such funds on Eligible Projects in a manner consistent and in compliance with all applicable state and federal statutes, rules, regulations, and laws, including, without limitation, all rules and laws regarding the LHTF Program, as well as any and all contracts Applicant may have with the Department (“Eligible Project”); and SECTION 3. The City of Dublin, with its “Inclusionary Zoning In Lieu Fees Fund,” established by Ordinance No. 8-02 in May 2002 and published in Dublin Municipal Code Chapter 8.68 (also known as the “Affordable Housing Fund”), as an eligible LHTF, is hereby authorized to act as the trustee in connection with the Department's funds to Eligible Projects pursuant to the above-described NOFA in an amount not to exceed $5,000,000 (the "LHTF Award"); and SECTION 4. Applicant hereby agrees to match on a dollar for dollar basis the LHTF Award pursuant to Guidelines Section 104. Applicant hereby agrees to utiliz e matching finds on a dollar-for-dollar basis for the same Eligible Project for which Program Funds are used, as required by HSC Section 50843.5(c) (A summary of the City’s commitment on the Eligible Project is included as Attachment 1); and SECTION 5. Pursuant to Attachment 1 and the Applicant’s certification in this resolution, the LHTF funds will be expended only for Eligible Projects and consistent with all program requirements and Applicant shall be subject to the terms and conditions as specified in the Standard Agreement, H&S Section 50842.2 and LHTF Program Guidelines. PASSED, APPROVED, AND ADOPTED by the Dublin City Council on this 21st day of July, 2020 by the following vote: AYES: NOES: ABSENT: ABSTAIN: ______________________________ Mayor CERTIFICATE OF THE ATTESTING OFFICER The undersigned does hereby attest and certify that the foregoing Resolution is a true, full and correct copy of a resolution duly adopted at a meeting of the Dublin City Council which was duly convened and held on the date stated thereon, and that said document has not b een amended, modified, repealed or rescinded since its date of adoption and is in full force and effect as of the date hereof. ATTEST: ______________________________ City Clerk ATTACHMENTS: 1. Summary of City of Dublin Commitment of Funding Attachment 1: Summary of City of Dublin Commitment for Use of the Local Housing Trust Fund Program Funds and Matching Funds The City of Dublin’s Local Housing Trust Fund (LHTF) match of land and funding and the proposed LHTF grant will be used for a project proposed by Eden Housing, Inc. for approximately 71 affordable rental units on a 1.3-acre site located at 6541 Regional Street. This project is being accepted by the City for LHTF funding contingent upon project financing and necessary entitlements. One hundred percent of the proposed 71 units are committed to be affordable to households earning no more than 60 percent of area median income (AMI). Twenty-two of the proposed 71 units (31 percent) and at least 30 percent of the Program Funds are committed to be used for households earning no more than 30 percent of AMI. None of the LHTF Program funding is proposed to be expended on assistance to moderate-income households. July 7, 2020 City of Dublin Community Development c/o Jim Bergdoll, AICP Senior Planner City of Dublin 100 Civic Plaza, Dublin, CA 94568 Dear Jim, Thank you for the opportunity to provide a proposal to partner with you on an affordable housing development at the 6541 Regional Street site in Dublin, CA. Eden Housing has developed over 65 projects and 4,600 units in Alameda County, including 4 properties totaling 300 units in the City of Dublin and has deep experience and expertise with affordable housing development. We are extremely interested in participating in this project, and we have put together the following preliminary development proposal for consideration. Proposed Project The following is preliminary proposal based on our knowledge of the site and current understanding of available financing. We can easily adjust the project to include more or fewer units after further discussions with the City, completing the entitlement approval process, and continued exploration of available financing sources. Eden proposes to develop the 1.33-acre Regional Street site with approximately 70 to 114 units of senior and/or special needs housing to compliment other market rate, non-age restricted housing in the area. The majority of the units would be one-bedroom with one two- bedroom manager unit and would be affordable to households earning between 60 percent and 20 percent of area median income (AMI). The final unit count will depend on the entitlement process and feedback from stakeholders and the availability of funding. Eden anticipates developing a four-story, elevator-served community designed to accommodate the unique needs of seniors. The project will be surface-parked and will include amenities common to Eden’s high-quality projects – a community room, a computer center, and well-appointed outdoor spaces such as community gardens and BBQ areas. Eden will also have its service coordination staff provide programming that helps build community and support the residents, including health and wellness programming along with financial literacy and fraud prevention training. Project Financing The proposed project is expected to cost approximately $46 to $74 million or $651,000 per unit, estimated using recent pricing for similar Eden projects. This amount is inclusive of the land value, project design, construction, in-direct costs, and finance and carrying costs. We have made conservative but well-informed financing assumptions as a place to start our discussion and expect to refine these assumptions as necessary and practicable. 2 In addition to the $3,333,333 grant application that the City intends to submit through the Local Housing Trust Fund Program and the City’s proposed matching, the project site is near several neighborhood amenities and, therefore, qualifies for the competitive nine percent Low Income Housing Tax Credit (LIHTC) program. Of the two LIHTC executions, nine percent LIHTC garners the largest amount of equity and, therefore, reduces the need for local subsidy. That being said, it is a very competitive resource and can take multiple rounds to secure an award. In addition, to these tax credits, the development will score well for the State’s Infill Infrastructure Grant Program (IIG). Eden has secured this funding for multiple projects, including four of our five most recently completed developments: Alta Mira, Miraflores Apartments, Hana Gardens, and Valor Crossing. We are highly accustomed to working with the State and have developed strategies to best position our projects for competitiveness during the application process. The project also supports a small traditional permanent loan and will score well on the Federal Home Loan Bank Affordable Housing Program. We have excellent relationships with banks within the FHLB network that can sponsor our application for these funds. Community Outreach & Messaging We know that all development projects require extensive community engagement and are prepared to develop and implement an extensive outreach plan that will engage the community both early and often. We will coordinate and facilitate a number of meetings with neighbors and key stakeholders to gather feedback on the project design and approach. A senior-level Eden staff member will attend all community meetings and these meetings can be held virtually if required. Eden is pleased to be considered for this project and welcomes the opportunity to partner with the City on this site. Please contact me at (415) 846-2823 with any questions on the proposal above or if you require additional information. Sincerely, Andrea Osgood Vice President of Real Estate Development July 22, 2020 Linda Mandolini, President Eden Housing 22645 Grand Street Hayward, CA 94541 Re: Letter of Intent to Commit Funding Dear Linda, This Letter of Intent is provided to Eden Housing (Eden) as the City of Dublin’s commitment to provide funding for the development of an affordable rental housing project at 6541 Regional Street. City staff has been working with Eden over the past two years on potential affordable housing proposals for this site. Eden has prepared a preliminary proposal to develop between 70 and 114 units of affordable senior and/or special needs housing on the Regional Street site with a projected total development cost of between $46 million and $74 million. One hundred percent of the project units would be affordable to households earning no more than 60 percent of area median income (AMI), with 30 percent of the project units affordable to households earning no mo re than 30 percent of AMI. The City intends to submit an application for grant funding in the amount of $3,333,333 from the State of California Local Housing Trust Fund Program. To ensure competitiveness of the application, the City is proposing a three-to-one match and will commit land (valued at approximately $5 million) plus approximately $5 million from the Alameda County A-1 Bond base city allocation pledged to Dublin or the City’s Affordable Housing Fund. In addition, the City has reserved up to 114 residential units from the Downtown Dublin Specific Plan Development Pool for the proposed project. Through this Letter of Intent, the City is committing to the development of the Regional Street site with the proposed affordable housing project in partnership with Eden, contingent on the project securing all the necessary financing and permits to build the project. We look forward to working with you on this project. Sincerely, Linda Smith City Manager