Agenda Item Wording:
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Authorize re-certification of Self-Help Enterprises, Inc. (SHE) as a Community Housing Development Organization (CHDO); authorize an award for approximate $630,000 in FY 23/24 HOME funds, as a 55-year residual receipt loan, toward construction of an 80-unit multi-family housing development known as Rancho Colegio; and authorize the City Manager to execute a letter of commitment for Self-Help Enterprises for Rancho Colegio for an amount up to $1,290,000 (combined FY 23/24 and FY 24/25 HOME funding).
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Deadline for Action: 8/7/2023
Submitting Department: Finance and Technology Services
Contact Name and Phone Number: Margie Perez, Housing Specialist, 713-4460, margie.perez@visalia.city <mailto:margie.perez@visalia.city>; Melody Murch, Assistant Finance Director, 713-4379, melody.murch@visalia.city <mailto:melody.murch@visalia.city>; Renee Nagel, Finance Director, 713-4375, renee.nagel@visalia.city <mailto:renee.nagel@visalia.city>
Department Recommendation:
Staff Recommends that Council:
1. Authorize the City Manager to execute an agreement re-certifying Self-Help Enterprises, Inc. (SHE) as a Community Housing Development Organization (CHDO) under the terms, regulations, and requirements of the U.S. Department of Housing and Urban Development (HUD) - HOME Investment Partnership (HOME) Program; and
2. Authorize an award for approximate $630,000 in FY 23/24 HOME funds, contingent upon actual program income received, as a 55-year residual receipt loan for construction of the 80-unit multi-family housing development known as Rancho Colegio; and
3. Authorize the City Manager to execute a letter of commitment to Self-Help Enterprises for the Rancho Colegio project to provide an amount up to $1,290,000 in HOME funding (combined amount from FY 23/24 - $630,000 and FY 24/25 - $660,000 - estimated); and
4. Authorize the City Manager to negotiate terms, approve any minor or technical revisions, and execute necessary contracts and loan agreements for the Rancho Colegio project, including provisions required to maintain ownership and use.
Background Discussion:
Executive Summary:
In the FY 2023 Annual Action Plan approved by Council on April 17, 2023, approximately $630k of HOME-CHDO funding was appropriated for a Community Housing Development Organization (CHDO) project. An additional $660k is estimated to be available in the HOME grant program next year (2024/25) for a total of up to $1,290,000 over the next 2 years. SHE has submitted a proposal requesting HOME CHDO funding for approximately $1,290,000 to be used for an 80-unit multi-family affordable housing development known as “Rancho Colegio”. The Rancho Colegio complex will provide affordable housing to working low-income families with some designated for farmworker housing as well. The project has been through the planning process for entitlements. On July 24, 2023, the Rancho Colegio project parcel map was reviewed and approved by the Planning Commission. The July 24, 2024, Planning Commission Meeting staff report can be found at the City of Visalia webpage under Committees and Commissions and also at the following link: <https://www.visalia.city/civicax/filebank/blobdload.aspx?BlobID=53991>.
Staff recommends awarding the FY 2023/24 funds (estimated $630k, contingent upon program income received) to the Rancho Colegio project, as well as the City's commitment (contingent upon availability) to award FY 24/25 funds ($660k estimated) which will be available next year for this project. Award of these funds would restrict 11 of the 80 project units to occupancy by residents who are at or below 50% of Area Median Income and provide local investment in this low-income housing project, which is an important factor in the application process for additional project funding. SHE has already been awarded grant funding of $13.7 million towards this project and will be applying for 9% tax credit funding to bridge the gap between this amount and the estimated total project cost of $29 million.
To provide the requested funding, staff is asking Council's authorization to negotiate and execute the necessary contracts and agreements, as well as to provide a letter of commitment for the 2024/25 funding (contingent upon availability) to be used by SHE in support of their tax credit funding application. A more detailed description of this request and the Rancho Colegio project follows.
Project and Funding Background:
The City of Visalia, as a Participation Jurisdiction (PJ) receives HOME Investment Partnership Program (HOME) funding on an annual basis from the U.S. Department of Housing and Urban Development (HUD). Within 24 months after the date HUD notifies the PJ of HUD’s execution of the HOME agreement, the PJ must reserve not less than 15% of the HOME allocation for investment only in housing to be owned, developed, or sponsored by a Community Housing Development Organization (CHDO) per 24 CFR 92.300(a). Each time an award is made to a CHDO, the PJ must certify the organization as meeting the definition of CHDO and must document that the organization has the capacity to own, develop, or sponsor housing. HOME-CHDO set-aside eligible activities include:
• Acquisition and/or rehabilitation of rental housing; and
• New construction of rental housing; and
• Acquisition and/or rehabilitation of homebuyer properties; and
• New construction of homebuyer properties; and
• Direct financial assistance to purchasers of HOME-assisted housing that has been developed with HOME funds by the CHDO.
CHDO set-aside funds that are not reserved for designated CHDOs within 24-months will be recaptured by HUD.
On April 20, 2020, Council approved the 5-year Consolidated Plan (ConPlan), which planned the use of FY 2023/24 and FY 2024/25 HOME CHDO funds toward development of a HOME CHDO multi-family housing project. On April 17, 2023, Council approved an estimated $635,325 in HOME funding based on the estimated 2023/24 annual HOME allocation and program income to be received for a HOME CHDO multi-family development project as planned in the current 5-year ConPlan. As stated in the FY 2023 Annual Action Plan (AAP), any increase or decrease of the FY 2023 HOME annual allocation or program income will be an adjustment to the HOME CHDO multi-family project. In the FY 2023 AAP, the CHDO 15% was combined with additional HOME funds to fund a CHDO multi-family project that had not yet been identified and staff planned to return to Council with a potential HOME CHDO multi-family project for Council’s review and approval.
CHDO Certification: The HOME Final Rule requires that each time the City commits HOME CHDO funds, it must re-certify a nonprofit’s qualifications to be a CHDO and its capacity to own, sponsor, or develop housing per 24 CFR 92.300(a). According to the HOME program requirements, CHDO certifications are based upon meeting the definition of a CHDO and capacity assessment. These are required at the time of commitment and the CHDO is expected to remain a CHDO throughout the project's period of affordability. To satisfy the requirement to reserve not less than 15% of the HOME allocation for CHDO projects, funds are reserved when a PJ enters into a written agreement with the CHDO committing the funds to a specific local project.
The City has reviewed SHE’s CHDO re-certification documentation and has determined the SHE has the capability to own, develop, or sponsor a housing development project, and is eligible for City Authorization for CHDO re-certification. CHDO funds must be committed to CHDO development projects requiring acquisition, construction, or rehabilitation components to be considered a “development” project.
Self-Help Enterprises: Self-Help Enterprises, Inc. (SHE) has been headquartered in Visalia since its founding in 1965 and developed single family housing for low-income Visalians as early as 1969. SHE is currently the only designated CHDO for the City of Visalia. The City has looked for other potential CHDO’s within the region and SHE was found to be the sole organization both interested and eligible for designation as a CHDO within Tulare County. SHE has a strong connection to the low and moderate -income residents of Visalia and has been a great asset as a City designated CHDO. SHE is a private, non-profit, 501 (c) (3) tax exempt corporation established under the laws of the State of California to improve the living conditions and community standards of low-income families. The primary emphasis of the organization since its formation has continuously been the creation of new housing opportunities and the preservation and improvement of existing housing. SHE utilizes the HOME-CHDO funds and program income generated by the repayment of HOME-CHDO funded housing and development loans for the development of additional affordable housing, such as the 5 single-family homes recently constructed by SHE on NW 5th Avenue and N Court Street.
Rancho Colegio Project: SHE has submitted a proposal and a letter of request for approximately $1,290,000 in City of Visalia HOME CHDO funding, for an 80-unit multi-family affordable housing development on Southeast corner of Esquivel Avenue and North Court Street in Visalia known as “Rancho Colegio”. The Rancho Colegio project will consist of 80 rental units, of which one unit will be reserved for an on-site manager. The project will be comprised of 36 one-bedroom units, 22 two-bedroom units, and 22 three-bedroom units serving seniors, working families, and farmworker households. The project will also include a community building, open recreation space, outdoor playground, and a laundry facility. Rancho Colegio will serve residents at or below 50% of the area median income (AMI) limit and rents will range from $390 to $900 per month. Rancho Colegio will be an all-electric project which includes renewable solar PV to off-set 100% of the residential and common area electrical. The Rancho Colegio Project is eligible for HOME CHDO set-aside and HOME funding.
Project Budget and Other Funding: The total construction budget is estimated at $29 million. In February 2023, the Rancho Colegio project was awarded $10,172,065 in Multifamily Housing Program (MHP) funding and $3,596,644 in Joe Serna, Jr. Farmworker Housing Grant (FWHG) Program funding for a total of $13,768,709 of California Department of Housing & Community Development (HCD) funding under the Multifamily Super NOFA as shown in Attachment “B”. SHE is also applying for 9% tax credit competitive funding to fill the remaining construction gap. These Low-Income Housing Tax Credit (LIHTC) funds are administered by the California Tax Credit Allocation Committee (CTCAC) through the California State Treasurer. The LIHTC program highly encourages local investment in construction of affordable rental housing for low-income households, and SHE is requesting a letter of commitment from the City to show this local investment for their tax credit application.
HOME Funds: SHE is requesting approximately $1,290,000 in HOME funds which will restrict eleven (11) HOME floating assisted units to occupation by households at or below 50% of the AMI level. Staff recommends providing all available FY 2023/24 and FY 2024/25 HOME funds to satisfy this request, contingent upon final award in FY 2024/25 Annual Action Plan as approved in the 5-year Consolidated Plan. Staff estimates and available $630,000 in FY 2023/24, and $660,000 in FY 2024/25 for a total commitment of approximately $1,290,000 in HOME funds. If the HOME funding for 2024-25 comes in less than anticipated, it is recommended that this project be awarded the full amount. The total proposed HOME funding will provide 4% of the total project construction budget, multiplying the investment of these HOME-CHDO funds more than 20 times.
HOME Loan Terms: At the time of the final written agreement, a loan agreement will be executed, referencing all the requirements of HOME funds, including the execution of a Note, which will be provided as a 3% loan and repaid over a 55-year term through residual receipts. A Deed of Trust and a Restrictive Covenant will be recorded against the property to maintain affordability of the units for 55 years. Eleven (11) floating units will be designated as “HOME assisted” and will be monitored by the City during the term of the covenant. In addition to the HOME affordability requirements, Low-Income Housing Tax Credit funding will maintain a 55-year affordability covenant.
Project Process: This project has already completed project design, the site plan review process, and the environmental review process. The tax credit application is due August 9, 2023, and is expected to be awarded November 8, 2023. Tax Credit funding requires construction to begin within 6 months of award. As a result, the project's anticipated construction start date is May 2024 and anticipated completion date is September 2025. The project is aiming to achieve full occupancy by December 2025.
Fiscal Impact:
The HOME funding for this project is $630,000 of projected HOME funds and program income to be received during FY 2023/2024 as approved in the FY 2023/2024 Annual Action Plan. The estimated $660,000 in FY 2024/2025 HOME funds will be requested for appropriation during the adoption of the FY 2024/2025 Annual Action Plan in the Spring of 2024. No General Fund money is included or requested for this project.
Prior Council Action: Click or tap here to enter text.
• April 20, 2020 - Adoption of 5-year (FY 2020/21 - 2024/25) Consolidated Plan. Council approved FY 23/24 and FY 24/25 HOME funds for a HOME-CHDO multi-family housing development project.
• April 17, 2023 - Adoption of FY 2023/24 Annual Action Plan approved estimated $635,625 of HOME program income funds for a HOME-CHDO multi-family project. Any increase or decrease of the HOME annual allocation or program income will be directed to the HOME-CHDO multi-family project.
Other: None.
Alternatives: None.
Recommended Motion (and Alternative Motions if expected):
recommendation
Staff recommends that Council:
1. Authorize the City Manager to execute an agreement, re-certifying Self-Help Enterprises, Inc. (SHE) as a Community Housing Development Organization (CHDO) under the terms, regulations, and requirements of the U.S. Department of Housing and Urban Development (HUD) - HOME Investment Partnership Program (HOME); and
2. Authorize award for approximate $630,000 in FY 23/24 HOME funds contingent upon actual program income received, as a 55-year residual receipt loan, toward construction of an 80-unit multi-family housing development known as Rancho Colegio; and
3. Authorize the City Manager to execute a letter of commitment for Self-Help Enterprises for Rancho Colegio for up to a total amount of $1,290,000; and
4. Authorize the City Manager to negotiate terms, approve any minor or technical revisions, and execute necessary contracts and loan agreements, including provisions required to maintain ownership and use.
end
Environmental Assessment Status: NEPA Completed.
CEQA Review: CEQA Completed.
Attachments: Click or tap here to enter text.
• Attachment A - SHE’s Letter of Request
• Attachment B - HCD Super NOFA Award Letter
• Attachment C - Rancho Colegio Project Summary
• Attachment D - COV Draft Commitment Letter
• Attachment E - SHE CHDO Application & Checklist
• Attachment F - Draft SHE CHDO Agreement