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File #: 23-1202 Meeting Date: 6/20/2023
The remaining 49 beds are allocated for exclusive use by Costa Mesa clients, plus the 3 floating beds for emergency use, as needed (e.g. detox, domestic violence risk, etc.).
Mercy House, a local non-profit, runs the day-to-day Shelter operations, which include client intake and exit, case management, janitorial services, 24-hour security and transportation services for up to 72 guests. The Shelter Operator contract with Mercy House is currently funded at $2,000,000 per year. In addition to the contract with Mercy House, the City of Costa Mesa spends $1.2 million for street outreach and other supportive services for both shelter clients and unhoused individuals unable and/or unwilling to enter the shelter to ensure the strongest transition to permanent housing.
Since inception, the City’s homelessness efforts have resulted in 286 individuals transitioning to permanent housing from both the shelter and the City’s outreach efforts.
Bracken’sKitchen, another local non-profit operates the Shelter’scommercial kitchen, which includes the preparation and service of three meals per day for up to 72 guests. The Kitchen Operator contract with Bracken’s Kitchen is currently funded at $327,600 per year.
Over the past 12 months, the Shelter has been at or near maximum capacity with an average waiting list of approximately 30 individuals expressing interest in entering the Shelter upon availability of beds. As a result, both Newport Beach and Costa Mesa propose adding additional beds to increase Shelter capacity and expand service delivery for those experiencing unsheltered homelessness.
ANALYSIS:
The Bridge Shelter Capacity Project proposes adding 16 beds to increase total capacity from 69 to 85 beds. Of the 16 additional beds, five (5) are allocated for use by Newport Beach, and eleven (11) are allocated for use by Costa Mesa with five (5) of those being available for use by Newport Beach for an additional cost when not occupied by Costa Mesa clients. Increasing capacity at the Shelter requires amendments to three (3) agreements:
Newport Beach MOU
The current MOU guarantees Newport Beach access to 20 of the Shelter’s69 beds at a cost of $50,000 per bed or $1,000,000 annually. The proposed Amendment No. One adds five (5) beds for use by Newport Beach clients at an additional cost of $55,000 per bed or $275,000 annually, including the cost of daily meals for Newport clients. Upon approval, Newport Beach will have guaranteed access to 25 beds at a total annual cost of $1,275,000.
Further, up to five (5) of the additional eleven (11) Costa Mesa beds can be available for use by Newport Beach clients if and when they are not occupied by Costa Mesa clients, for an additional cost basis billed at a rate of $155 per bed, per day.
Lastly, the proposed Amendment No. One requires Newport Beach to make a total one-time payment of $50,000 to cover capital costs associated with increasing Shelter capacity (i.e., beds, lockers, storage, etc.). Newport Beach staff plan to take a recommendation to their City Council on June 13, 2023 to approve Amendment No. One to the MOU.
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File #: 23-1202 Meeting Date: 6/20/2023
Mercy House - Shelter Operator Agreement
On July 1, 2021, the City entered into an agreement with Mercy House to provide shelter operator services at the Bridge Shelter for up to 72 guests at an annual cost of $2,000,000.
Mercy House has agreed to a new annual not-to-exceed amount of $2,185,286 to hire two (2) new staff members and increase hours for the on-site Navigation Supervisor to accommodate the additional capacity.
Bracken’s Kitchen - Kitchen Operator Agreement
On April 19, 2022, the City entered into an agreement with Bracken’sKitchen to operate the Shelter’s commercial kitchen for up to 72 guests at an annual cost of $327,600 or $12.50 per person, per day.
Bracken’sKitchen has submitted an updated proposal to operate the Shelter’skitchen for up to 88 guests at an annual cost of $400,600, which is still $12.50 per person, per day. While the updated not -to-exceed contract amount will be increased to $400,600, Bracken’sKitchen only invoices the City for actual meals served, so the total amount expended can be less.
Lastly, increasing capacity at the Shelter is essential as evidenced by a continuous lack of vacancy and a substantial list of unsheltered individuals waiting to secure a bed. To ensure the success of the shelter operator and clients shelter expansion is being approached incrementally. At a future date, staff will return with additional analysis about expanding the shelter further to reach a total of 100 beds.
Approval of amendments to the agreements with Newport Beach, Mercy House, and Bracken’s Kitchen will initiate the addition of 16 beds, increasing the Shelter’s capacity from 69 to 85 beds.
ALTERNATIVES:
The City Council can opt to deny approval of the amendments and maintain the Shelter’scurrent capacity of 69 beds.
FISCAL REVIEW:
There is no impact to the General Fund. Operating costs for the Bridge Shelter are funded through the Housing Authority Fund. The increased costs associated with adding bed capacity at the Bridge Shelter are offset by Newport Beach’s contribution and grant funds available in the Housing Authority’s Budget (e.g. SB 2 funds).
LEGAL REVIEW:
The City Attorney’soffice has reviewed this report and approved it as to form and has approved the proposed amendments to the relevant agreements.
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CITY COUNCIL GOALS AND PRIORITIES:
This item supports the following City Council Goal:
· Diversify, Stabilize and Increase Housing to Reflect Community Needs · Strengthen the Public’s Safety and Improve the Quality of Life CONCLUSION:
Staff recommends the City Council:
1. Approve Amendment No. One to the Memorandum of Understanding with the City of Newport Beach to increase their annual payment by $275,000 for an updated annual contribution of $1,275,000 and a one-time payment of $50,000 to cover capital costs; and appropriate said funds to the Housing Authority Budget.
2. Approve proposed Amendment No. One to the Subrecipient Agreement with Bracken’sKitchen increasing the compensation by $73,000 for a new annual not-to-exceed amount of $400,600.
3. Approve Amendment No. One to the Subrecipient Agreement with Mercy House increasing the compensation by $185,286 for a new annual not-to-exceed amount of $2,185,286.
4. Authorize the City Manager and City Clerk to execute all agreements and any amendments to the agreements within the authorized parameters.
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1 Mercy House Living Center
Amendment One
FIRST AMENDMENT TO
PROFESSIONAL SERVICES AGREEMENT
AMONG THE CITY OF COSTA MESA,
THE COSTA MESA HOUSING AUTHORITY, AND
MERCY HOUSE LIVING CENTERS
FOR
SHELTER OPERATOR SERVICES
This First Amendment (“Amendment”) to a Professional Services Agreement for Shelter Operator Services is made and entered into this 13th day of June, 2023 (“Effective Date”), by and among the CITY OF COSTA MESA, a municipal corporation, COSTA MESA HOUSING AUTHORITY (“Authority”), and MERCY HOUSE LIVING CENTERS (“Contractor”). City and Authority are collectively referred to herein as “City.”
WHEREAS, City and Contractor entered into a professional services agreement for the provision of shelter operator services at the City’s homeless shelter on June 15, 2021; and
WHEREAS, City intends to increase the capacity of the shelter . Due to the increase in capacity and to account for inflation, City further intends to increase compensation to Contractor as set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree to amend the Lease as follows:
1. Section 2.1 of the Agreement is amended to increase Contractors annual compensation commencing on the Effective Date of this Amendment by Two Hundred Eighty Nine Thousand Two Hundred Twenty Dollars and Sixteen Cents ($289,220.16) in consideration of the increased capacity at the shelter and to account for inflation.
Contractor’s maximum annual compensation shall not exceed Two Million Two Hundred Eighty Nine Thousand Two Hundred Twenty Dollars and Sixteen Cents ($2,289,220.16).
2. All terms not defined herein shall have the same meaning and use as set forth in the Agreement, as amended.
3. All other terms, conditions, and provisions of the Agreement , as amended, shall remain in full force and effect.
4. This Amendment may be executed in one or more counterparts, each of w hich shall be deemed an original. All counterparts shall be construed together and shall constitute one Agreement together with this Amendment Number Two and Amendment Number One.
[Signatures appear on following page]
ATTACHMENT 1
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2 Mercy House Living Center
Amendment One
IN WITNESS WHEREOF , the Parties hereto have caused this Amendment to be executed by and through their respective authorized officers, as of the date first above written.
LESSOR
By:________________________________ Date: __________________________
Its:________________________________
CITY OF COSTA MESA
__________________________________ Date: __________________________ Lori Ann Farrell Harrison
City Manager
COSTA MESA HOUSING AUTHORITY
__________________________________ Date: __________________________ Lori Ann Farrell Harrison
Executive Director
ATTEST:
__________________________________
Brenda Green
City Clerk
APPROVED AS TO FORM:
__________________________________ Date: __________________________ Kimberly Hall Barlow
City Attorney
APPROVE AS TO PURCHASING:
__________________________________ Date: __________________________ Carol Molina
Finance Director
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1 ATTACHMENT 2
AMENDMENT NO. ONE TO
MEMORANDUM OF UNDERSTANDING
BETWEEN THE CITY OF COSTA MESA AND
THE CITY OF NEWPORT BEACH
This AMENDMENT NO. ONE TO MEMORANDUM OF UNDERSTANDING
(“Amendment No. One”) is dated as of July 1, 2023 (“Effective Date of Amendment No. One”), and entered into by and among the City of Costa Mesa, a municipal corporation organized and existing under California law (“Costa Mesa”) and the City of Newport Beach, which is a California charter city (“Newport Beach”), (cumulatively the “Parties,” and at times individually a “Party”), with reference to and in consideration of the following:
RECITALS
A. On December 15, 2020, Newport Beach and Costa Mesa entered into a Memorandum of Understanding (“Agreement”) for the provision of temporary housing, and the provision of certain services to individuals experiencing homeless located within the boundaries of the Parties at the property located at 3175 Airway Avenue, in the City of Costa Mesa (“Property”);
B. Newport Beach is currently allocated twenty (20) beds and Costa Mesa is allocated forty- nine (49) beds for use by individuals experiencing homelessness in Newport Beach and Costa Mesa, respectively;
C. Costa Mesa intends to add sixteen (16) beds to increase the total number of beds available to the Parties from sixty -nine (69) to eighty -five (85), of which, eleven (11) beds are allocated for exclusive use by Costa Mesa, five (5) beds are allocated for exclusive use by Newport Beach, with up to five (5) of Costa Mesa’s allocated beds optionally available for use by Newport Beach as provided for herein;
D. The Parties desire to enter into this Amendment No. One to increase Newport Beach’s allocation from twenty (20) to twenty -five (25) beds, memorialize availability and cost of up to five (5) Costa Mesa beds for use by Newport Beach and, accordingly, increase Newport Beach FF&E Payment and Newport Beach Operations Payment to cover the associated costs.
AGREEMENT
Section 4.2 of the Agreement shall be amended in its entirety and replaced with the following:
“4.2 Newport Beach Contribution for Furniture, Fixtures and Equipment. Newport Beach shall make a one- time contribution of Two Hundred Thousand Dollars ($200,000) (ten thousand dollars [$10,000] per bed to which it has use rights as provided for herein) (“Newport Beach FF&E Payment”) for the purpose of purchasing furniture, fixtures and equipment including, beds, desks, mattresses, linens, indoor and outdoor storage equipment, office equipment, tables, chairs, kitchen supplies, and the like (“FF&E”). Additionally, within thirty (30) days of the Effective Date of Amendment No. One, Newport Beach shall make a one- time Newport Beach FF&E Payment of Fifty Thousand Dollars ($50,000) towards the five (5) additional beds allocated to Newport Beach. Costa Mesa shall be solely responsible for paying all other costs for any and all FF&E, as may be necessary or desirable for the Project or provision of Services.” 705
2 Section 4.3 of the Agreement shall be amended in its entirety and replaced with the following:
“4.3 Newport Beach Annual Contribution for Operations Costs. Upon Project Commencement, Newport Beach shall be obligated to pay an annual operational cost of One Million Dollars ($1,000,000) (“Newport Beach Operations Payment”), with Newport Beach Operations Payment to be made in four quarterly installments, within thirty (30) days of the end of each quarter, prorated for the first operational quarter, which is specifically to provide for operational costs of Fifty Thousand Dollars ($50,000) per bed for the twenty (20) beds originally provided in the Agreement, to which Newport Beach has use rights as provided for herein, for the initial Term of the Agreement, and optional term extensions, if mutually agreed to by the Parties, subject to annual increases as provided in Section 4.4 hereof. Additionally, on the Effective Date of Amendment No. One, Newport Beach shall be obligated to pay an additional annual operational cost of Two Hundred Seventy -Five Thousand Dollars ($275,000) (“Newport Beach Additional Operations Payment”), with the Newport Beach Additional Operations Payment t o be made in four quarterly installments, within thirty (30) days of the end of each quarter, prorated for the first operational quarter, which is specifically to provide for operational costs of Fifty-Five Thousand Dollars ($55,000) per bed for the five (5) additional beds allocated to Newport Beach. Lastly, on the Effective Date of Amendment No. One, as provided for in Section 4.7 hereof, Newport Beach shall pay a cost of One Hundred Fifty-Five Dollars ($155) per bed, per day for the actual use of each of the five (5) Costa Mesa beds which may be made available, in Costa Mesa’s sole discretion, for use by a Newport Beach referral . Billing for Newport Beach’s use of these Costa Mesa beds shall coincide with Newport Beach Operations Payment schedule outlined above. The Parties expressly agree that Newport Beach shall not be liable for any operational costs prior to the date the Shelter is fully operational and open to Newport Beach for the housing of Shelter Residents. Newport Beach shall be obligated to make its annual Newport Beach Operations Payment regardless of the level of use of the beds to which it has use rights.”
Section 4. 4 of the Agreement shall be amended in its entirety and replaced with the following:
“4.4 CPI Increase. Commencing one year following the approval date of this Agreement and at the sole discretion of the Costa Mesa City Manager, there shall be an option to increase the Newport Beach Operations Payment by the percentage increase in the Consumer Price Index for the preceding twelve-month period. For purposes hereof “Consumer Price Index” shall mean the Los Angeles -Long Beach-Anaheim Consumer Price Index for All Urban Consumers (CPI-U); provided, however, any increase to the annual contribution shall be a minimum of 2% and a maximum of 4%.”
Section 4.7 of the Agreement shall be amended in its entirety and replaced with the following:
“4.7 Allocation of Beds. Newport Beach will work collaboratively with Costa Mesa to ensure the Central SPA cities are coordinating with the County and that the shelter beds addressed in this Agreement are prioritized to meet the greatest needs of both Parties, with sixty (60) beds for Costa Mesa’s exclusive use and twenty-five (25) beds for Newport Beach’s exclusive use for its referrals. However, at Costa Mesa’s sole discretion, and only after exhausting the Wait List for Costa Mesa interested parties, up to five (5) of Costa Mesa’s beds may be made available to person(s) referred by Newport Beach. The Parties expressly agree that it is the Parties’ intent to transition Shelter Residents to long-term stable housing and Newport Beach’s consent shall be required to continue to house any person referred by Newport Beach at the Shelter for more than six (6) months.”
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3 Section 4.8 of the Agreement shall be amended in its entirety and replaced with the following:
“4.8 No Subletting. Subletting of Beds will not be allowed. Newport Beach shall be allocated use of twenty-five (25) beds for Newport Beach to refer homeless individuals deemed by Newport Beach to be highest priority persons referred to the Project by Newport Beach over time.”
INTEGRATED CONTRACT
Except as expressly modified herein, all other provisions, terms, and covenants set forth in the Agreement shall remain unchanged and shall be in full force and effect.
[SIGNATURE PAGE(S) TO FOLLOW]
707
4 IN WITNESS WHEREOF, the Parties to this Agreement have caused the same to be executed by each of their duly authorized officers as follows:
Dated: June , 2023
APPROVED AS TO FORM.
Kimberly Hall Barlow
City Attorney
ATTEST:
Brenda Green
City Clerk
CITY OF COSTA MESA
By:
Lori Ann Farrell Harrison
City Manager
Dated: June , 2023
APPROVED AS TO FORM.
Aaron C. Harp
City Attorney
ATTEST:
Leilani I. Brown
City Clerk
CITY OF NEWPORT BEACH
By:
Grace Leung
City Manager
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1 Brackens Kitchen, Inc
Amendment Two
AMENDMENT NUMBER TWO TO
PROFESSIONAL SERVICES AGREEMENT
WITH
BRACKEN’S KITCHEN, INC
This Amendment Number Two (“Amend ment”) to Professional Services Agreement is made and entered into this 6th day of June, 2023 (“Effective Date”), by and between the CITY OF COSTA MESA, a muni cipal corporation (“City”) and BRACKEN’S KITCHEN, INC, a California non-profit corporation (“Contractor”).
WHEREAS, City and Contractor entered into an agreement on April 19, 2022, for Contractor to provide food and commercial kitchen management services at the City’s homeless shelter located at 3175 Airway Avenue, Costa Mesa (the “Agreement”); and WHEREAS, City and Contractor entered into Amendment Number One on March 7, 2023, exercising the first of three options to extend the term fo r one additional year, which is set to expire on April 18, 2024; and
WHEREAS, due to an increase in services at the homeless shelter, City seeks to increase the maximum compensation allowed to Contractor in consideration of the additional meals required.
NOW, THEREFORE, for valuable consider ation, the receipt and sufficiency of which is hereby acknowledged, the parties agree to amend the Lease as follows:
1. Section 2.1 of the Ag reement is amended to increase Contractor’s maximum compensation to an amount not to exceed Four Hundred Thousand Six Hundred Dollars ($400,600).
2. All terms not defined herein shall have the same meaning and use as set forth in the Agreement, as amended.
3. All other terms, conditions, and provis ions of the Agreement, as amended, shall remain in full force and effect.
4. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original. All counterparts shall be c onstrued together and shall constitute one Agreement together with the Agreement, Amendment Number One and this Amendment Number Two.
[Signatures appear on following page]
ATTACHMENT 3
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2 Brackens Kitchen, Inc
Amendment Two
IN WITNESS WHEREOF , the Parties hereto have c aused this Amendment to be executed by and through their respective authorized officers, as of the date first above written.
CONTRACTOR
________________________________ Date: __________________________ Signature
________________________________
Name and Title
CITY OF COSTA MESA
__________________________________ Date: __________________________ Lori Ann Farrell Harrison
City Manager
ATTEST:
__________________________________
Brenda Green
City Clerk
APPROVED AS TO FORM:
__________________________________ Date: __________________________ Kimberly Hall Barlow
City Attorney
APPROVED AS TO INSURANCE:
__________________________________ Date: __________________________ Ruth Wang
Risk Management
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3 Bracken’s Kitchen, Inc
Amendment Two
DEPARTMENTAL APPROVAL:
__________________________________ Date: __________________________ Lori Karaguezian
Project Manager
APPROVE AS TO PURCHASING:
__________________________________ Date: __________________________ Carol Molina
Finance Director
711
CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 23-1204 Meeting Date: 6/20/2023
TITLE:
COMMITMENT OF $4,000,000 TO AMERICAN FAMILY HOUSING FOR THE TRAVELODGE NORTH HOUSING PROJECT AS PART OF HOMEKEY ROUND 3
DEPARTMENT: CITY MANAGER’S OFFICE
PRESENTED BY: NATE ROBBINS, NEIGHBORHOOD IMPROVEMENT MANAGER CONTACT INFORMATION: NATE ROBBINS, NEIGHBORHOOD IMPROVEMENT MANAGER (714) 754-5274
RECOMMENDATION:
Staff recommends the City Council:
1. Approve a commitment of $2,500,000 in Low- and Moderate-Income Housing Asset Funds and $1,500,000 in ARPA funds to American Family Housing for conversion of the Travelodge North Motel as a Homekey Round 3 permanent housing project.
2. Authorize the City Manager or their designee to execute a Commitment Letter with American Family Housing in the amounts listed above for the Travelodge North Homekey project.
3. Authorize the City Manager to execute all applicable agreements to bring the Travelodge North Homekey project to fruition.
BACKGROUND:
Homekey Program
On July 16, 2020, the State of California’sDepartment of Housing and Community Development (HCD) announced the availability of $600 million in Homekey Round 1 funding to rapidly acquire and activate housing for people experiencing homelessness and impacted by COVID-19.
On September 9, 2021, HCD announced the availability of $1.45 billion in Homekey Round 2 funds to continue the State’seffort to acquire and activate housing for those experiencing homelessness. The County of Orange (“County”)was awarded $10,150,000 in Homekey Round 2 funds to acquire and convert the Motel 6 South located at 2274 Newport Blvd, Costa Mesa, into 87 units of permanent affordable housing. Subsequently, the Costa Mesa City Council approved a total allocation of $5,850,000 as local matching funds to assist in the conversion of the Motel 6 Homekey Project.
On March 29, 2023, HCD announced the availability of $736 million in Homekey Round 3 funds to expand the State’ssupply of affordable and supportive housing for those experiencing or at-risk of homelessness. Following HCD’s announcement of Homekey Round 3, the County released a
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homelessness. Following HCD’s announcement of Homekey Round 3, the County released a Request For Information (RFI) to procure a list of developers with potential housing projects meeting Homekey eligibility and feasibility requirements. A local nonprofit, American Family Housing (AFH), responded to the RFI with a proposal for the acquisition, conversion, and ongoing operation of the Travelodge North located at 1400 Bristol Street, Costa Mesa, as Permanent Supportive Housing for those experiencing or at-risk of homelessness (“Project”).The County has preliminarily accepted AFH’sproposal and plans to take the Project to their Board of Supervisors for final approval in July 2023.
ANALYSIS:
One of the goals of the Costa Mesa City Council is to diversify, stabilize and increase housing to reflect community needs. While the City boasts a comprehensive system of care for those experiencing and at-risk of homelessness, one of the few remaining gaps is the availability of permanent affordable housing coupled with intensive wrap-around services, otherwise known as Permanent Supportive Housing (PSH). AFH’sproposed project would add 78 total units of housing (76 units of PSH and 2 Manager’sUnits), which would both diversify and increase the City’shousing stock. Additionally, upon completion, all 78 units will be credited toward the City’s6th Cycle Regional Housing Needs Assessment (RHNA) allocation of 11,760 new housing units.
American Family Housing
AFH is a nonprofit organization based out of Midway City with nearly 40 years of experience in the provision of services to those experiencing and at-risk of homelessness, as well as the development and operation of affordable, supportive and bridge housing. AFH currently owns and operates 49 housing projects containing 386 affordable units in Los Angeles and Orange Counties. Three of these projects received Homekey Round 2 awards and are currently in development.
With a staff of 95 employees, over 20 social work interns and a strong base of volunteerism, AFH has the capacity and expertise to successfully complete and operate the Travelodge North Homekey Project.
Project Site
The Travelodge North is located at 1400 Bristol Street, Costa Mesa, at the southwest corner of Red Hill Avenue and Bristol Street, which is roughly 100 yards from the City of Newport Beach. The 3.5- acre parcel is currently improved with 120 motel rooms and includes amenities such as a food service area, large lobby with office space and an on-site restaurant.
The property is situated within minutes of all essential services, including a bus stop, grocery store, pharmacy, medical care, a park and a library. AFH is currently in escrow to purchase the Travelodge North for an acquisition price of $24,000,000, or $200,000 per unit, with an estimated closing date of February 29, 2024.
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Project Scope
AFH is proposing an acquisition and construction project to convert the motel into permanent housing. The Project includes the renovation of all exterior spaces including façade and landscaping improvements, demolition of an existing pool to establish a community courtyard, and path-of-travel upgrades to comply with Americans with Disabilities Act requirements; renovation of all interior spaces including floor-to-ceiling upgrades of all living quarters, installation of kitchenettes, and reconfiguration of existing office space for the provision of on-site services.
Due to the smaller size of the existing rooms (average size is 250 sq. ft), AFH is proposing to demolish 42 of the 120 existing units to create 76 studio and one-bedroom apartments. These renovations will bring all units into compliance with minimum floor space requirements and provide additional square-footage to accommodate the kitchenettes.
Project Budget
The estimated total development cost to complete the Travelodge Homekey Project is $45,386,520 and is funded from the following sources:
As in the table above, AFH is anticipating to receive funding from five different sources:
1. Homekey - The Homekey Program provides formula grant funding based on the number of rooms being acquired. AFH is anticipating an award of $240,000 per unit for a total award of $28,450,000 to acquire and develop the 120-room Travelodge into 76 permanent housing units.
The Homekey Program also provides funding to develop and administer a relocation plan, as needed, to ensure the housing needs of current residents are addressed.
2. City of Newport Beach - City of Newport Beach staff intend to take a recommendation to their City Council in July 2023 to approve an award of $3,000,000 in local matching funds to AFH for conversion and ongoing operation of the Travelodge North as 76 units of PSH. Newport Beach’saward of funds is contingent upon the award of all other sources of funding, as well as due diligence items typical of similar affordable housing projects.
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3. City of Costa Mesa - The City of Costa Mesa (“City”)has funds available to support an award of $4,000,000 to AFH from the following sources:
a. Low- and Moderate-Income Housing Asset Fund (LMIHAF) - The Costa Mesa Housing Authority, as Successor to the former Costa Mesa Redevelopment Agency, has a current, unencumbered balance in the LMIHAF of $2.9 million which can be expended on the development of affordable housing. Staff recommends maintaining a balance in the LMIHAF as a portion of these funds are expended on the ongoing administration and monitoring of City-funded housing. Funds awarded from the LMIHAF will be in the form of a 3% simple interest residual receipts loan to be repaid over the life of the Project from a portion of its positive cash flow.
b. American Rescue Plan Act (ARPA) - The City has a current, unencumbered balance of ARPA funds, which can be expended on the development of affordable housing. ARPA funds awarded will be in the form of a grant and will not be repaid.
As with Newport Beach, all City funds awarded to AFH for the Project are contingent upon the award of all other sources of funding, as well as positive outcomes regarding required pre- development activities (i.e. environmental review and financial feasibility analysis).
4. County of Orange - On March 20, 2023, the County released the 2023 Supportive Housing Notice of Funding Available (NOFA) making available $67.1 million from various sources, including HOME Investment Partnership (HOME) and Mental Health Services Act (MHSA) funds, to promote the development of supportive housing. As part of this NOFA, AFH intends to apply to the County for two development loans from the following sources:
a. HOME Funds - $2,400,000
b. MHSA Funds - $4,421,520
Further, in order to support the ongoing operations of the Project, AFH intends to apply to the County for 48 Project-Based Housing Choice Vouchers, which subsidize the difference between the tenant’s contribution and the determined rent for the specific unit.
The primary benefit of developing affordable housing are the long-term, deed-restricted affordability covenants. Per Homekey requirements, the Project will operate as PSH for a minimum term of 55 years. While the upfront cost to complete the Project is significant, when spread out over a term of 55 years, the total development cost is equivalent to $750,273 per year, or $9,619 per unit, per year.
Project Operations
Keeping in-line with their proven model of success, AFH will assume the role of both property manager and lead service provider. AFH will have staff on-site 24 hours a day to manage the property and address the needs of tenants. Additionally, AFH will partner with service providers specializing in various fields to ensure tenants have access to a full spectrum of resources.
All 76 PSH units will be for occupancy by currently unhoused, extremely-low income individuals earning at or below 30% of the Area Median Income (AMI). As mandated by the Homekey Program, tenant selection for the 48 units subsidized by County Project-Based Vouchers (PBV) will be routed through the Coordinated Entry System (CES), which prioritizes individuals based on length of
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through the Coordinated Entry System (CES), which prioritizes individuals based on length of homelessness and the presence of a diagnosed disability. Further, of the 28 non-PBV units, the cities of Costa Mesa and Newport Beach will have exclusive access to 16 units and 12 units, respectively.
At a later date, AFH will submit to the City for review a Management and Operations Plan detailing every aspect of how they intend to manage and operate the Project.
Upon completion, the Project will be operated as Permanent Supportive Housing for a minimum term of 55 years.
Project Timeline
As with all Homekey projects, State HCD requires units to be available for occupancy within 12 months from the date of award. During Homekey Round 2, the average time from application to award was roughly six (6) months. Should both Newport Beach and Costa Mesa City Councils approve an award of funds to AFH, the County intends to pursue approval from their Board of Supervisors in July 2023, which would place the estimated date of completion sometime in early 2025.
ALTERNATIVES:
The City Council can choose to deny an award of funds to AFH for the Travelodge Homekey Project, which would result in the Project failing to move forward as it would lack sufficient gap financing.
FISCAL REVIEW:
There is no fiscal impact to the City’sGeneral Fund. The City’sLMIHAF funds are restricted by the State and can only be used for low and moderate income housing development which Project Homekey programs are eligible for. Federal ARPA funds can also be used for permanent housing and to serve the needs of high risk individuals including those experiencing homelessness.
LEGAL REVIEW:
The City Attorney’s office has reviewed this report and approved it as to form.
CITY COUNCIL GOALS AND PRIORITIES:
This item supports the following City Council Goal:
· Diversify, Stabilize and Increase Housing to Reflect Community Needs CONCLUSION:
Staff recommends the City Council:
1. Approve a commitment of $2,500,000 in Low- and Moderate-Income Housing Asset Funds and $1,500,000 in ARPA funds to American Family Housing for conversion of the Travelodge North as a Homekey Round 3 affordable housing project.
2. Authorize the City Manager or their designee to execute a Commitment Letter with American
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File #: 23-1204 Meeting Date: 6/20/2023
2. Authorize the City Manager or their designee to execute a Commitment Letter with American Family Housing in the amounts listed above for the Travelodge North Homekey project.
3. Authorize the City Manager to execute all applicable agreements to bring the Travelodge North Homekey project to fruition.
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