EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: April 19, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Jaime M. Fontes, City Manager
BY: Rachel Horst, Housing and Economic Development Manager SUBJECT: Authorization to Open a CalHome Meriwest Account for the CalHome ADU/JADU Loan Program
Recommendation
Adopt a Resolution:
1. Authorizing the Finance Director to open any bank accounts necessary to transact business with Meriwest Credit Union as part of the CalHome ADU/JADU Loan Program; and
2. Authorizing the Finance Director and Housing & Economic Development Manager to authorize the release of funds from any accounts with Meriwest Credit Union.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 6: Create a Healthy and Safe Community
Background
The City was awarded a $2 million CalHome award from the Department of Housing and Community Development (“HCD”) in June 2019. CalHome is a revolving loan program for lowincome homeowners to build or substantially repair accessory dwelling units or junior accessory dwelling units (“ADUs” or “JADUs”).
The CalHome program operates on a reimbursement basis; the City loans funds up-front and later requests reimbursement from HCD.1 The maximum amount per loan is $70,000 JADUs and $80,000 for ADUs.
CalHome Coordination with EPACANDO and Meriwest Credit Union 1 As noted in the October 19, 2021 staff report, staff will use funds from the Affordable Housing Fund (F207), a special revenue fund with sufficient reserves to support CalHome ADU/JADU Loan disbursements prior to reimbursement from HCD, for this purpose.
On October 19, 2021, via Resolution No. 141-2021, the City Council authorized the City Manager to execute an agreement with EPACANDO to act as the City’s “Administrative Subcontractor” for the duration of the CalHome grant period. As indicated in the staff report from October 19, 2021,2 EPACANDO is subcontracting with Meriwest Credit Union (“Meriwest”) for loan underwriting and origination.
The table below shows an updated version of the table from the October 19 staff report, to illustrate the role of the City, EPACANDO, and Meriwest on the CalHome ADU/JADU Loan Program:
Step Description Responsible Party
Loan Application
EPACANDO assists applicant with
loan application preparation for
submittal to Meriwest and City. EPACANDO
City Approval
City approves applicant for loan
amount and prepares for
disbursement. City
Underwriting
Loan application is submitted to
Meriwest for underwriting. EPACANDO/Homeowner
Loan Documents
City and applicant execute
CalHome loan documents. EPACANDO/City/Homeowner
CalHome Disbursement
City places CalHome loan amount
into Meriwest account (will range
from $70-80k). City
CalHome Draw
Requests
EPACANDO monitors progress and
issues draw requests for City
approval based on prescribed
construction milestones. Payments
issued in up to 5 phases. EPACANDO/City/Homeowner
City Draw Request to
HCD
After completion of 3 or more
CalHome loans, City submits draw
request to HCD for reimbursement
of total amount, plus activity
delivery fee. City
The City intends to open a business account with Meriwest for the sole purpose of depositing the CalHome loan funds before they are disbursed (in separate draws) to the recipient of a CalHome Loan.
CalHome ADU/JADU Loan Program Status
EPACANDO and the City launched the CalHome ADU/JADU Loan program in January 2022.
Information is available on the City’s website and EPACANDO’s website, including a recorded webinar and the CalHome application.3In addition, City staff and EPACANDO hold weekly meetings to coordinate outreach to potential CalHome-eligible homeowners with active ADU or 2 Link to the staff report from October 19, 2021:
http://eastpaloalto.iqm2.com/Citizens/Detail_LegiFile.aspx?Frame=&MeetingID=1428&MediaPosition=648.415&ID=1917&CssClass =
3 Please see: CANDO ADU | EPA CAN DO and CalHome Loans for ADUs/JADUs | City of East Palo Alto (cityofepa.org) JADU Building applications.
With up to 20% of the total CalHome grant amount of $2 million set aside for administration (“Activity Delivery Fee”), it was anticipated that the first round of CalHome ADU/JADU Loans will serve a minimum of 20 households. Currently, EPACANDO is working with three applicant households through the underwriting process for a CalHome ADU/JADU Loan.
The purpose of this staff report is to obtain City Council authorization via resolution to open a business account with Meriwest so that loan funds may be disbursed to CalHome ADU/JADU Loan recipients.
Analysis
Section 3.04.060 of the Municipal Code authorizes the Finance Director to place City funds into an account:
The director of finance is authorized to deposit for safekeeping with a trust company or a state or national bank located within this state or with the Federal Reserve Bank of San Francisco or any branch thereof located within this state or with any Federal Reserve Bank or with any state or national bank located in any city designated as a reserve city by the Board of Governors of the Federal Reserve System, the securities in which the city money has been invested pursuant to Section 3.04.020; provided, however, that the director of finance/city treasurer shall take from such trust company or bank a receipt for the securities so deposited and shall not be responsible for such securities delivered to and receipted for by such trust company or bank until they are withdrawn therefrom by the director of finance.
However, Meriwest also requires a resolution from the entity opening the account. This resolution must indicate which staff, by name, are authorized to open an account or otherwise conduct business with this account.
The resolution in Attachment 1 names the Finance Director as the authorized representative who may open a Meriwest account and conduct any business with the account. The Housing & Economic Development Director is named as an authorized party to authorize the release of funds from the Meriwest account.
Next Steps
If the resolution is adopted by the City Council, staff will submit the executed resolution to Meriwest and proceed to open a business account. The first CalHome ADU/JADU Loan application is anticipated to be submitted for underwriting to Meriwest by the end of May.
Fiscal Impact
There is no fiscal impact with the items described in this staff report.
Public Notice
The public was provided notice by making the agenda and report available on the City’s website and on a bulletin board located at City Hall: 2415 University Avenue, East Palo Alto.
Environmental
The action being considered does not constitute a “Project” within the meaning of the California Environmental Quality Act (CEQA), pursuant to CEQA Guideline section 15378 (b)(5), in that it is a government administrative activity that will not result in direct or indirect changes in the environment.
Attachments
1. Resolution