Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: CONSIDER SUBMISSION OF A LETTER OF INTEREST TO
JOIN THE RENEWAL ENTERPRISE DISTRICT JOINT
POWERS AUTHORITY
Date: February 24, 2026
Written by: Damien O'Bid, City Manager
Recommendation
It is recommended that that the City Council adopt a motion authorizing the Mayor to send a letter expressing interest to join the Renewal Enterprise District (RED) Joint Powers Authority, authorize the Mayor to express the same before the RED Board of Directors and authorize the City Manager to take all necessary steps to fully evaluate RED membership and make recommendations to the City Council at a future date.
Background
The Renewal Enterprise District (RED) is a Joint Powers Authority (JPA) created in 2018 by the City of Santa Rosa and Sonoma County to accelerate the development of infill, transit-oriented, and climate-resilient housing. Formed after the 2017 wildfires, the RED aims to address the regional housing crisis by streamlining environmental reviews, leveraging private and public funding, and promoting equitable, high-density development.
In parallel with the RED, the RED Housing Fund (Renewal Enterprise District Housing Fund) was created primarily with seed funding from a portion of the PG&E Wildfire Settlement funds received by the City of Santa Rosa and the County of Sonoma. Structured as a 501(c)(3) public charity and launched in December 2018, the RED Housing Fund has its own Board of Directors and was created to provide low-cost, gap-filling capital to developers, aimed at accelerating "climate-smart," higher-density, multifamily, and affordable housing production in infill locations.
Analysis/Discussion
In the City’s adopted Housing Element, Program 1-7 (provided below) directed staff to explore housing bond financing. Affordable housing projects take many years to develop due to the complex financing ”stack”, including needing to be successful in competitive grant cycles from various public agencies. In Housing Element Program 1-7, the intent is to explore options for lowering project financing costs through the issuance of tax-exempt bonds, potentially paired with public ownership that lowers on-going operating costs through exemption from property taxes. The goal is to fundamentally lower the development and operating costs, primarily of new multi-family projects, such that affordable housing units could be quickly brought on-line, rather than relying on the typical patchwork of grants, tax credits and financing cobbled together over many years. This same methodology could be applied to the purchase of existing multi-family housing buildings, but the initial focus was on new development due to the significant amount of undeveloped or underdeveloped property in the City’s Priority Development Areas.
HE Program 1-7: Essential Housing Bond Financing Program (Source: New Program, addresses local and regional needs and priorities) In partnership with a Joint Powers Authority (JPA) and non-profit asset manager, seek to utilize tax exempt bonds to fund: (1) the acquisition of existing market-rate multi-family buildings and restrict future rents to be affordable to households that earn extremely low to moderate incomes, and/or (2) the construction of new deed-restricted affordable housing. In order for asset managers to access these types of bonds, Cities must join a Joint Powers Authority (JPA) and authorize the JPA to issue these bonds on behalf of the City. The asset manager then purchases the multi-family buildings or initiates new development, using only money from the bond financing, and sets the rents to be affordable to low to moderate income households. Municipal ownership reduces or eliminates the property tax burden and reduces the financing interest costs due to the tax-exempt bond, reducing the carrying cost of the property, and allowing the reduced rents to be realized. • Responsibility: Community Development Department
• Funding: Housing Fund
• Timeframe: Establish JPA structure or join existing JPA by December 2023 • Geography: Citywide, existing and prior multifamily residential zones Options for Joint Powers Agencies (JPAs)
There are various statewide JPAs that could be potential partners for this type of affordable housing financing. For example, the City is a member of the California Statewide Communities Development Authority (CSCDA) JPA. Most recently, the Kessing Ranch development utilized the CSCDAs Statewide Community Infrastructure Program (“SCIP”) through the City’s authority to finance the project impact fees. These types of statewide JPAs require joining the JPA to plug into available programs, but do not typically allow for any governance or program design input and do not require annual fees to be a member of the JPA.
Locally, the City of Santa Rosa and the County of Sonoma jointly formed the Renewal Enterprise District (RED) JPA, as summarized in the background above. Currently, the RED JPA is governed by a Board of Directors (RED Board) consisting of two (2) directors from Santa Rosa and two (2) directors from the County of Sonoma. The current members are Santa Rosa Councilmembers Flemming and Hermosillo and Supervisors Coursey and Banuelos. The Executive Director is Robin Stephani, an independent contractor, and the Treasurer is the Sonoma County Treasurer-Auditor. The RED Board typically meets on the first Wednesday of the month, every other month. The next meeting is scheduled for February 27, 2026, which is a special meeting.
The primary function of the RED Board has been to develop and approve the RED Project Criteria (attached), develop Legislative Principles (attached) and serve as non-voting Advisory Board Members on the RED Housing Fund Board of Directors. These documents advise the investment of the RED Housing Fund. It’s staff’s understanding that the RED Board members also nominate some of the RED Housing Fund directors, although the specifics would need to be confirmed.
The RED Housing Fund was used in part to finance the South Park Commons project completed by Freebird Development Company with a low interest loan. As can be seen in the tables below taken from the most recent financial statements posted from the RED Housing Fund, most of the original $20M in loaned funds are committed to various affordable and market rate projects, but notably with $7M coming due in 2027.
Areas eligible for RED programs would typically be restricted to Priority Development Areas (PDAs), including the recently adopted Transit Oriented Development (TOD) infill area.
Aside from the potential interest to assist with the 120 East Cotati Avenue affordable housing project, the RED Board has established initial 2026 -27 priorities that could benefit the City and the region, including:
• Revising the RED Project Criteria to align with the Plan Bay Area 2050 to facilitate funding awards.
• Adding new members to the Joint Powers Authority
• Advocacy at the Bay Area Regional and State Level related to Opportunity Zones and other potential funding
• Pursuing emerging funding strategies such as Essential Function Bonds1, Master Leasing coupled with a Guarantee Fund, and Transportation Infrastructure Finance and Innovation Act (TIFIA) financing.
• Capital raising for JPA members and grants aimed at implementation of the Emerging Funding Strategies.
After the initial two (2) years of operation, the RED JPA opened for admission to new members, which can only be cities in Sonoma County. To date, no other cities have joined, which is likely attributable to the uncertain benefit from the initial investment by Santa Rosa and the County, as well as the annual costs (currently $50,000) and voting structure of the RED Board for amending the by-laws or project criteria, which currently requires a 2/3 vote of the directors in office plus unanimous consent of the Board members from the two founding members. In staff’s opinion, annual contributions should be scaled using a proxy that approximates relative budget sizes and amendment of the by-laws or JPA should only require a 2/3 vote, which is already a high threshold. Another factor to consider is if the vote is 2/3 of the members present or 2/3 of all board members, as this can be an issue if members fail to appear in person or remotely for Board votes.
Informally, City staff have been in conversation with the RED JPA staff to express these expected obstacles to joining. The RED JPA staff have been very receptive to potential changes to address these concerns, as they are looking to regionalize the JPA for the overall benefit of the communities in Sonoma County. Another potential initial option discussed was joining as an advisory (non-voting) member of the RED Board, as a type of low-commitment trial period to understand the potential benefits and time commitments.
Given the potential for regional collaboration, pooling resources and potentially opening up new funding opportunities, staff is recommending taking the initial step of expressing interest in joining, pending resolution of the governance, funding allocation and membership cost issues.
As outlined in the New Member Protocol (attached), the initial step would be to draft a letter expressing interest in joining and addressing the RED Board to express the same (see draft letter attached). If the City Council authorizes this initial step, it would authorize the Mayor to send 1 Essential Function Bonds are tax-exempt municipal bonds issued by state and local housing authorities to finance the acquisition, construction, or rehabilitation of affordable, publicly owned workforce housing and community facilities, as described in Housing Element Program 7-1, above. the initial letter expressing interest and delegate the Mayor to address the RED Board at an upcoming meeting. Additionally, it would authorize City staff to begin working with the RED JPA staff to make the necessary governance or other changes needed to move forward. If the RED JPA moves forward with an Advisory Member role, the City Council may also be asked to appoint a member to this role, and if the City of Cotati ultimately adopts the resolution and signs onto the RED JPA, there would be a need to appoint a City Council member and alternate to this regional body. Regardless, staff view this as a potentially good local option for regional collaboration and opportunity for innovation and new funding sources. Also, it does not foreclose the City’s ability to also leverage other available resources, such as the CSCDA, as described earlier.
Financial Considerations
In accordance with the RED JPA By-Laws, the two founding members (Santa Rosa and County of Sonoma) provide annual dues of $50,000 each. In preliminary discussions with the RED JPA, it was communicated that to join, the City of Cotati would likely need a proxy metric (such as population) that approximates relative budget sizes to determine annual dues, but the preference was to structure the RED JPA to be self-sustaining by collecting interest or service revenue on investments. As such, no contributions of funds are required at this time.
While most of the RED Housing Fund loans are not coming due in the near future, approximately $7M could be available in 2027, subject to the lending requirements of Sonoma County and the City of Santa Rosa.
The RED Housing Fund’s current lending capital is comprised of a $10 million loan from the City of Santa Rosa, a $10 million forgivable loan from the County of Sonoma, and a $1 million loan from Enterprise Community Loan Fund to further support additional projects in the pipeline. Lastly, the Fund was awarded a $1 million grant under the California State Department of Housing and Community Development's Local Housing Trust Fund (“LHTF”) Program to be used for additional lending capital.
The capital from the City of Santa Rosa is currently required to eventually repay in full. The capital provided by the County of Sonoma is represented as a loan payable on the RED Housing Fund’s balance sheet, as the RED Housing Fund is required to adhere to specific financial covenants as a condition for forgiveness. The loan is forgiven in equal, $500,000 annual installments over the loan’s twenty-year term if the RED Housing Fund abides by the covenants set forth in its loan agreement.
The RED JPA currently has no significant programs, with revenue comprised only from member assessments and expenditures related to the contract executive director, County auditor fees and similar. However, as described earlier, the RED JPA intends to become much more active moving forward into Fiscal Year 2026-27 and beyond.
Environmental Issues
Where it can be determined with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA review.
This general rule can be applied to activities which could be subject to the CEQA process, but which logic dictates should not be subject to CEQA review. Therefore, based on the information provided above, the proposed resolution is exempt from CEQA pursuant to Section 14.03.021 of the CEQA Guidelines in that there is no possibility that the activity may have a significant impact on the environment.