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January 7, 2025
ITEM TITLE
Affordable Housing: Extending the Term of an Existing City of Chula Vista Loan and Restrictive Covenants in Connection with the Seniors on Broadway Development
Report Number: 25-0008
Location: 845 Broadway
Department: Housing and Homeless Services
G.C. § 84308: Yes
Environmental Notice : The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act (“CEQA”) State Guidelines. Therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Adopt a resolution approving the extension of an existing loan and restrictive covenants for the Seniors on Broadway affordable housing development, beginning a new 55 -year term, in connection with a planned rehabilitation of the project.
SUMMARY
The Seniors on Broadway development, located at 825 Broadway, provides 41 units for very low -income seniors (the “Project”). It was developed in 2005 by the Metropolitan Area Advisory Committee on Anti - Poverty of San Diego County, Inc., a mission-driven nonprofit organization (“MAAC”).
In 2005, the City of Chula Vista (“City”) approved partial financing totaling $3,511,195 for the Project, structured as a residual receipts loan with a 55-year repayment term. MAAC is now preparing to rehabilitate the Project with accessibility upgrades, roof repair, and other improvements. The lo an extension is being requested in order to satisfy the underwriting standards set forth by the California Tax Credit Allocation Committee (“TCAC”), which will provide financing for the rehabilitation . The City is not providing any new funding at this time.
Staff recommends City Council approval of the proposed extension to facilitate the project's ongoing success.
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ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change to the environment.
Therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA.
Thus, no environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable. The Housing and Homeless Advisory Commission will be provided an update on the Project at their next meeting.
DISCUSSION
Background
On October 14, 2003, City Council approved the development of the Project, located at 825 Broadway between Sierra Way and K Street. The project includes 41 units designated for very low income seniors, plus one manager's unit. The land is owned by the Chula Vista Elementary School District and is adjacent to the Chula Vista Charter School’s recreational field. It was leased to MAAC for a 75-year period.
The Project is restricted by the City to households at the following percentage s of Area Median Income (“AMI”):
Table 1: Seniors on Broadway Income and Rent Restrictions Unit Size Number of Units AMI Limit 2024 Income Limit* 2024 Rent Limit 1 Bedroom 5 30% of AMI $31,850 - $36,400 $852
1 Bedroom 16 45% of AMI $47,750 - $54,600 $1,278
1 Bedroom 20 50% of AMI $53,050 - $60,600 $1,420
Total 41
*Income limit depends on actual size of tenant household.
City Financial Assistance
On February 22, 2005, the City Council approved a loan of $1,043,850 for the construction of the Project, pursuant to Council Resolution No. 2005-061. On September 13, 2005, the City Council, through Resolution No. 2005-315, approved an increase of $2,467,345 in the loan amount, bringing the City’s total contribution to $3,511,195. The funds were drawn from the City’s HOME Investment Partnerships Program (“HOME”) fund, allocated to the City by the United States Department of Housing and Urban Development (“HUD”) for the purpose of constructing affordable housing.
The loan was structured as a residual receipts loan, evidenced by a promissory note and secured by a deed of trust. The outstanding principal and interest were to be paid down through sur plus cash flow over 55 years from the completion of the Project in 2007 . Interest on the loan accrues at 3 % per annum, with payments to be made annually from 50% of the project’s net cash flow after expenses. Any remaining balance is due at the end of the 55-year term.
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Substantial Rehabilitation
The Low Income Housing Tax Credit program (“LIHTC”) is the largest federal program for affordable housing development. The program is administered in California by TCAC. TCAC recently awarded an allocation of tax credits to the Project to carry out a substantial rehabilitation. In connection with the tax credit award, the Project also received an award of tax -exempt bonds from the California Debt Limit Allocation Committee (“CDLAC”). Although the tax-exempt bonds are not issued or administered by the City, the City’s approval is required for their issuance. The City provided its approval on August 13, 2024, with Resolution No. 2027 - 172.
The rehabilitation scope will include roof repairs, accessibility upgrades, window replacement, electrical and plumbing upgrades, asphalt paving repairs, concrete work, carpentry work, cabinet replacement, flooring repairs, paint, and heating and ventilation repairs.
TCAC underwriting standards require that the Project demonstrate a positive cash flow, with all outstanding debts being paid off by the end of the new 55-year term. The current term is set to expire in 2062; this would result in a mid-term balloon payment that the Project cannot absorb. By extending the City’s loan term to align with the term of the new TCAC regulatory agreement, the Project can meet TCAC’s underwriting standards. The City’s affordability restrictions would be extended to be commensurate with the loan term, ensuring long-term City oversight over the Project.
In connection with the rehabilitation, the Project will be transferred from one entity affiliated with MAAC to another, which will require assignment and assumption of the loan documents. Other minor revisions to the loan documents and restrictive covenants may also be negotiated by MAAC and the City Manager or designee.
Council approval is not required for the transfer and minor amendments; a process for approving transfers is already described within the original loan documents, and the original authorizi ng resolutions give the City Manager the authority to revise the loan documents and restrictive covenants that do not materially increase the City’s obligation.
Staff recommends that the City Council approve the proposed extension of the loan term to ensur e the continued success of the Project.
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council members and has found no property holdings within 1,000 feet of the boundaries of the property which is the subject of this action. Consequently, this item does not present a disqualifying real property -related financial conflict of interest under California Code of Regulations Title 2, section 18702.2(a)(7) or (8), for purposes of the Political Reform Act (Cal. Gov’t Code §87100, et seq.).
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
There are no current -year fiscal impacts as a result of this action. All staff time and costs to prepare this report were included in the current fiscal year budget.
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ONGOING FISCAL IMPACT
The proposed action will have no impact on the City’s general fund. Any loan repayments will be recycled into affordable housing programs . While the extension will push out the term of the existing loan by approximately 20 years, it will improve the financial feasibility of the Project and better position it to make annual loan repayments.
ATTACHMENTS
1. Location Map
Staff Contact: Brian Warwick, Housing Manager