201 S. Anaheim Blvd.
Suite #1003
Anaheim, CA 92805
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CITY COUNCIL AGENDA REPORT
City of Anaheim
HOUSING & COMMUNITY DEVELOPMENT
DEPARTMENT
DATE: DECEMBER 5, 2023
FROM: HOUSING & COMMUNITY DEVELOPMENT DEPARTMENT
SUBJECT: APPROVE A COOPERATION AGREEMENT FOR THE
FINAMORE PLACE APARTMENT PROJECT FORMERLY
KNOWN AS MANCHESTER/ORANGEWOOD AFFORDABLE
RENTAL HOUSING DEVELOPMENT
ATTACHMENT (Y/N): YES ITEM # 13
GOVERNMENT CODE § 84308 APPLIES: NO
RECOMMENDATION:
That the City Council, by Motion:
1. Approve a Cooperation Agreement by and between the City of Anaheim (City) and the Anaheim Housing Authority (Authority), substantially in the form attached hereto, to transfer $1,500,000 in CalOptima Health funds, and authorize the Director of Housing and Community Development, or her designee, to execute and administer the Agreement on behalf of the City; and
2. Authorize de minimis changes that do not substantially change the terms and conditions of the Cooperation Agreement as determined by the Office of the City Attorney.
DISCUSSION:
On January 29, 2019, the Anaheim Housing Authority (Authority) issued a Preliminary Award Letter (Award Letter) to Jamboree Housing Corporation (Developer) authorizing the commitment of local funds in support of the Finamore Place Apartments (formerly the Manchester/Orangewood Affordable Rental Housing Development) located at 915 E.
Orangewood Avenue (Project). The Project was completed in February 2023 and is now fully leased and operational providing 102 rental units for families and individuals who are exiting homelessness.
The Developer financed the Project with a combination of funding sources including $24,535,908 derived in Tax Credit Equity, $16,737,433 from a private lender, $1,500,000 from the Orange County Housing Trust Fund (OCHT) and a City loan of up to $3,724,328, sourced from HOME Investment Partnership Funds (HOME) program and Low Moderate Income Housing Asset Funds. In addition, the Authority provided a 55- year ground lease valued at $10,200,000 and contributed $551,696 in Park Fee Credits to the Project. The ground lease, loan and credits are being paid back to the Authority from Cooperation Agreement - Finamore Place Apartments (CalOptima Funds) December 5, 2023
85% of the Project’s residual receipts. The Authority also committed an allocation of 20 Section 8 Project Based Vouchers to the Project. The City provided fee waivers and energy star rebates of $282,294. Total development costs for the Project at that time the Project obtained its funding commitments were $51,622,154. In March 2020, the authority executed an affordable housing agreement for the Project, implementing the approved terms and conditions of the Project funding, ground lease and affordability requirements. The repayment terms of the Project funding included a three (3%) percent simple interest.
In April 2022, the Developer reached out to the Authority requesting an increase in the funding commitment for the Project by an additional $3,000,000 due to significant cost overruns experienced by the Project during construction in excess of $11,000,000. Staff and the Authority’s expert financial consultant reviewed and confirmed the cost overruns experienced by the Project. Overruns have been attributed to a variety of issues including labor shortages and material cost increases during the COVID-19 pandemic.
Additionally, a project subcontractor filed for bankruptcy during construction further exacerbating the project’s financial issues.
Due to other funding commitments, staff was not supportive of providing funding for the entire $3,000,000 request from limited Housing Authority resources. However, staff agreed to work with Jamboree to identify other funding opportunities and when Cal Optima released a Notice of Funding Opportunity (NOFO) on June 22, 2023 for capital projects, staff worked with Jamboree to prepare and submit an application. Cal Optima funding, as represented in the NOFO, prioritizes projects that had already identified the majority of the funding needed to complete a development and could demonstrate the ability to increase the number of people connected to permanent housing. On October 20, 2023, staff was notified that the City’s $1,500,000 funding application was successful.
Under a separate agenda item, the Authority will be considering a First Amendment to the Affordable Housing Agreement outlining the terms and conditions of the additional loan for the Project in the amount of up to $2,750,000. The additional loan amount will consist of $1,250,000 in Low and Moderate Income Housing Asset funds and $1,500,000 from CalOptima Health funds awarded to the City. The Developer is requesting consideration for a modification in how funds are usually loaned to a project, that is, requesting that the CalOptima funds in this transaction be loaned interest free. Generally, the Authority applies a 3% interest to all Authority loans however in this case, staff is supportive of the request as funds from CalOptima are granted to the City, there is no repayment obligation and the grant funds have been earmarked for this development specifically. Allowing for the CalOptima funds to be loaned out in this matter assures that funds will be recouped by the Authority at a later date to be used for other affordable housing purposes and also helps to minimize the amount of debt placed upon the property. All other funds loaned to the development will maintain an interest rate of 3%.
Staff requests that the City Council approve the Cooperation Agreement between the City and the Authority to transfer up to $1,500,000 of CalOptima Health funds from the City to the Authority so that the Authority can loan such funds to the Developer for the Project.
Cooperation Agreement - Finamore Place Apartments (CalOptima Funds) December 5, 2023
IMPACT ON BUDGET:
There is sufficient appropriation in the Housing and Community Development Department’s Fiscal Year 2023/24 budget.
Respectfully submitted,
Grace Ruiz-Stepter
Housing & Community Development Director
Attachment:
1. Cooperation Agreement (CalOptima Health Funding)