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HomeMy WebLinkAbout2009-07-14 Item No. 14 CITY OF . LA E 9 LSI NODE � ` DREAM EXTREME,. REPORT TO CITY COUNCIL TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: ROBERT A. BRADY CITY MANAGER DATE: JULY 14, 2009 SUBJECT: CITY LOAN OF HOPE VI MAIN STREET GRANT FUNDS BACKGROUND The HOPE VI Main Street Grant Program is designed to strengthen public - private partnerships to provide decent, safe, sanitary, and affordable housing, with primary attention to rental housing, for very low income and lower income households in downtown districts. The City of Lake Elsinore ( "City ") has been awarded a $1,000,000 grant (the "HOPE VI Main Street Grant ") from the Department of Housing and Urban Development ( "HUD ") for the Pottery Court Affordable Housing Project (the "Project "). On May 26, 2009, the Redevelopment Agency (the "Agency ") and Pottery Court Housing Associates, L.P. (an affiliate of Bridge Housing) (the "Developer") entered into a Disposition and Development Agreement (the "DDA ") for the Project, which provides for the sale of 4.3 acres of Agency property near Pottery Street and the outflow channel (the "Property"); a purchase money loan to the Developer of $4,061,000 (the "Agency Loan "); and development of approximately one - hundred eleven (111) affordable housing units. However, the DDA only represents part of the Project's funding commitments. In addition to a County loan of HOME funds, a construction loan, and an investor's equity contribution to be obtained through the syndication of Tax Credits, the Project will also require the proceeds of a City loan by way of the HOPE VI Main Street Grant funds. DISCUSSION The Developer has requested that the City contribute the $1,000,000 HOPE VI Main Street Grant toward the estimated $23,000,000 Project budget. Specifically, these CC July 14, 2009 Item No. 14 Page 1 of 6 Report to City Council — City Loan of HOPE IV MAIN STREET GRANT FUNDS July 14, 2009 Page 2 funds will be used to reimburse the Developer of eligible predevelopment activities such as relocation of tenants, architect and engineering costs, planning costs and permits. Upon conveyance of the Project site by the Agency to the Developer pursuant to the DDA, the City Loan will be secured by a deed of trust which will be recorded against the Pottery Court property. The Developer has also agreed to the following loan terms: • Use of funds will be consistent with the requirements of the City's original grant agreement with HUD • 3% simple interest • Loan payable from residual receipts (revenues less operating cost and debt service) on a pro rata basis with the Agency and County loans • Any remaining outstanding balance due in 55 years In order to expedite the proposed development funding, staff is recommending the City approve the attached Resolution committing up to $1,000,000 of HOPE VI Main Street Grant funds to the Developer for the Project and delegate to the City Manager the authority to enter into a loan agreement and related ancillary documents specifying the terms and conditions of the loan consistent with this report. FISCAL IMPACT There is no impact to the City's General Fund. The City Loan of up to $1,000,000 will be funded by the HOPE VI Main Street Grant. RECOMMENDATION That the City Council approve Resolution No. 2009- authorizing a commitment of $1,000,000 from the HOPE VI Main Street Grant for a loan to the Developer and authorize the City Manager the authority to enter into a loan agreement and related ancillary documents. Prepared by: Barbara Leibold City Attorney Approved by: Robert A. Brady / City Manager '�, Attachment: Resolution No. 2009 - CC July 14, 2009 Item No. 14 Page 2 of 6 RESOLUTION NO. 2009- RESOLUTION OF CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, AUTHORIZING A LOAN OF HOPE VI MAIN STREET GRANT FUNDS TO POTTERY COURT HOUSING ASSOCIATES, L.P. FOR AN AFFORDABLE HOUSING PROJECT KNOWN AS POTTERY COURT WHEREAS, the City is a municipal corporation organized and existing under the laws of the State of California. The City has been awarded a One Million Dollar ($1,000,000) grant (the "HOPE VI Main Street Grant ") from the United States Department of Housing and Urban Development ( "HUD ") pursuant to the federal HOPE VI Authorization which was appropriated by the Consolidated Appropriations Act, 2008 (Pub. L. 110 -161) under the heading "Revitalization of Severely Distressed Public Housing ( "HOPE VI Program ") for purposes of strengthening public - private partnerships to provide decent, safe, sanitary, and affordable housing, with primary attention to rental housing, for very low income and lower income households in the City, and particularly for the Project (as defined below); and WHEREAS, the City has entered into a Grant Agreement dated May 21, 2009 with HUD setting forth specific terms and conditions relating to the use of the funds; and WHEREAS, by action of the City Council pursuant to Chapter 2 of the California Community Redevelopment Law (Health & Safety Code §§ 33000 et seq.) ( "Redevelopment Law ") the City has established the Redevelopment Agency of the City of Lake Elsinore (the "Agency "), whose purposes include increasing, improving and preserving the community's supply of housing affordable to and occupied by low and moderate income households pursuant to §§ 33334.2, 33334.3, 33334.6 and 33413 of the Redevelopment Law; and WHEREAS, Pottery Court Housing Associates, L.P. ( "Developer") is a California limited partnership, whose general partner is an experienced affordable housing developer, and whose purpose is to construct, operate and manage the Project (as defined below); and WHEREAS, on May 26, 2009, the Agency and Developer entered into that certain Disposition and Development Agreement (Pottery Court) (the "DDA "), which provides for (1) the disposition by the Agency to the Developer of approximately 4.3 acres of real property located within the boundaries of Rancho Laguna Redevelopment Project Area No. I and generally bounded by Pottery Street and Sumner Avenue between the outflow channel of Lake Elsinore and Langstaff Street (the "Property "); (2) the loan from the Agency's Low and Moderate Income Housing Fund to the Developer in an amount not to exceed Four Million Sixty One Thousand Dollars ($4,061,000) ( "Agency Loan "); and (3) the development of approximately one - hundred eleven (111) units restricted to occupancy by very low income households at an affordable rent, two (2) manager units, and community space which will provide a study room, a music practice room, a great room for parties, a full kitchen, a pool, BBQs and one tot lot all in CC July 14, 2009 Item No. 14 Page 3 of 6 CITY COUNCIL RESOLUTION NO. 2009- PAGE 2 OF 4 accordance with the Project Description attached as Attachment No. 3 to the DDA, the Development Proposal submitted to HUD under the Grant Agreement and Tentative Parcel Map 36193 and Residential Design Review No. 2009 -02 approved by the City Council of City on June 23, 2009 (the "Project "); and WHEREAS, on June 9, 2009, Developer submitted an application for an allocation of nine percent (9 %) Low Income Housing Tax Credits pursuant to Section 42 of the Internal Revenue Code and /or California Revenue and Taxation Code sections 17057.5, 17058, 23610.4, and 23610.5 and California Health and Safety Code section 50199 et seq. for the Project (the "TCAC Application "). Developer anticipates the Tax Credit syndication proceeds will be in the amount set forth in the Preliminary Project Budget, and WHEREAS, Developer requires financial assistance from City in order to cover certain eligible predevelopment costs that Developer will incur in connection with the Project; and WHEREAS, the City desires to provide financial assistance to Developer for certain eligible predevelopment costs in the form of a City Loan in the aggregate amount not to exceed One Million Dollars ($1,000,000) (the "City Loan "); and WHEREAS, Agency currently owns the Property and has agreed to convey the Property to Developer subject to and in accordance with the DDA. The City Loan proceeds will not be used by Developer for acquisition of the Property from Agency; and WHEREAS, Developer and City agree that the City Loan will facilitate the development of the Project which is in the vital and best interest of the City, is necessary for the protection of the health, safety and welfare of the City's residents, and is in accord with the public purposes and provisions of applicable federal, state and local laws and requirements. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The foregoing recitals are true and correct and are incorporated as substantive findings of the City by this reference. SECTION 2. The Agency hereby authorizes the City Manager to provide a loan from the HOPE VI Main Street Grant in an amount not to exceed $1,000,000 to Developer, to be used for costs and expenses approved by the City Manager, or his designee, which are customarily incurred and shall have been actually incurred by Developer for the predevelopment and development of Pottery Court. SECTION 3. The City Loan shall require that the use of funds will be consistent with the requirements of the Grant Agreement, provide for 3% simple interest, provide for annual payments of residual receipts (revenues less operating cost and debt service) on a pro rata basis with the Agency and County loans, and require that any CC July 14, 2009 Item No. 14 Page 4 of 6 CITY COUNCIL RESOLUTION NO. 2009- PAGE 3 OF 4 remaining outstanding balance be payable due in 55 years, or on such other favorable repayment terms and schedule as the City Manager determine are in the best interests of the City and Pottery Court. SECTION 4. As a condition of the City Loan, the City will require that the loan be secured by a Deed of Trust which will be recorded against the Pottery Court property upon the property transfer from the Agency to the Developer pursuant to the DDA. SECTION 5. That the making of the City Loan shall be contingent on and subject to such other appropriate terms and conditions as the City Manager may establish. SECTION 6. All loan documents shall be reviewed and approved by the City Attorney for form and legality prior to execution. SECTION 7. Subject to all applicable laws, including all notice and hearing requirements relating to Pottery Court, the City Council hereby authorizes the City Manager to execute a loan agreement along with any ancillary documents, administer the City Loan, and take any other action with respect to the loan and Pottery Court consistent with this Resolution and its basic purpose. SECTION 8. This Resolution shall take effect from and after the date of its passage and adoption. PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council of the City of Lake Elsinore, California, this 14th day of July 2009. ROBERT E. MAGEE, MAYOR CITY OF LAKE ELSINORE ATTEST: DEBORA THOMSEN CITY CLERK APPROVED AS TO FORM: BARBARA ZEID LEIBOLD CITY ATTORNEY CC July 14, 2009 Item No. 14 Page 5 of 6 CITY COUNCIL RESOLUTION NO. 2009 - PAGE4OF4 STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF LAKE ELSINORE ) I, DEBORA THOMSEN, City Clerk of the City of Lake Elsinore, California, hereby certify that Resolution No. was adopted by the City Council of the City of Lake Elsinore at a regular meeting held on the 14 day of July 2009, and that the same was adopted by the following vote: AYES: NOES: ABSTAIN: ABSENT: DEBORA THOMSEN CITY CLERK CC July 14, 2009 Item No. 14 Page 6 of 6