Agenda packet — East Palo Alto City Council, July 18, 2023 (part 1 of 2)

East Palo Alto City Council July 18, 2023 Agenda Page 1 of 5

EAST PALO ALTO CITY COUNCIL

REGULAR MEETING AGENDA
July 18, 2023, 6:30 PM
EPA Government Center
2415 University Ave, First Floor
East Palo Alto, CA 94303
NOTICE
This meeting will be held virtually and in-person at the Council Chambers located on 2415 University Ave, First Floor East Palo Alto, CA 94303. The virtual portion of this City Council meeting will be conducted in accordance with City of East Palo Alto Resolution adopted pursuant to Assembly Bill 361.

The public may participate in the City Council Meeting via Zoom Meeting or by attending in-person in the Council Chambers at 2415 University Ave, First Floor East Palo Alto, CA 94303. Community members may provide comments by emailing [email protected], submitting a speaker card at the meeting or using the “RAISE HAND” feature when the Mayor or City Clerk call for public comment. Emailed comments should include the specific agenda item on which you are commenting.

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International numbers available: https://zoom.us/u/aMWYF4KT East Palo Alto City Council July 18, 2023 Agenda Page 2 of 5

1. CALL TO ORDER AND ROLL CALL

2. APPROVAL OF THE AGENDA
(Government Code Section 54957.7(a))

3. APPROVAL OF CONSENT CALENDAR

1. University Avenue/Beech Street Property Exchange
Recommendation: Adopt a resolution (Attachment 1):

1. Finding the City-owned 0.36-acre property at 2277 University Avenue in East Palo Alto is “exempt surplus” land, which may be disposed in accordance with Government Code section 54221(f)(1);

2. Authorizing City Manager to transmit the adopted resolution to the State Department of Housing and Community Development to seek concurrence of the subject property’s qualification as “exempt surplus” land pursuant to Government Code section 54230.5 (b)(1); and

3. Authorizing the City Manager to take all action in preparation for the disposal of the subject property pursuant to the Memorandum of Understanding (MOU) between the City of East Palo Alto and County of San Mateo and respectively signed on March 25, 2022, and April 19, 2022, including without limitation, conducting all due diligence activities such as the preparation of title reports, Phase I and II soil reports, geotechnical reports, appraisal reports, etc.

2. Ravenswood Business District / 4 Corners Specific Plan – Second Contract Amendment to Developer Reimbursement Agreements
Recommendation: That the City Council:

1. Accept the staff report regarding the status on the Ravenswood Business District/Four Corners Transit Oriented Development Specific Plan Update; and

2. Adopt a Resolution authorizing the City Manager to amend the Raimi + Associates (R+A) Contract and the related Developer Reimbursement Agreements to increase by $180,000 for a new not-to-exceed total of $2,015,137 for professional services.

3. Award of Contract for Spanish Interpretation Services Recommendation: Adopt a Resolution:

1. Ratifying payment to Culture Bridges, LLC in an amount of $1,123.75 for Spanish interpretation services through June 30, 2023

2. Awarding a contract to Culture Bridges, LLC and authorizing the City Manager to negotiate and execute a three-year contract, in a form approved by the City Attorney, with an annual not-to-exceed amount of Fifty Thousand Dollars ($50,000), for citywide Spanish-language interpretation services.

4. Monthly Cash Treasury Report for May 2023
Recommendation: Accept and file the Cash Treasury Report for the month of May 2023.

5. Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow
Recommendation: Authorize the City Manager to negotiate and execute a Memorandum of Understanding with Bay Area Community Resources, in a form approved by the City Attorney, in an amount not-to-exceed $28,000 in matching funds to East Palo Alto City Council July 18, 2023 Agenda Page 3 of 5 hire a Sustainability Service Corps Fellow to assist in finalizing and implementing the East Palo Alto Climate Action Plan 2030

6. CSG Staff Augmentation Sixth Contract Amendment
Recommendation: Adopt a resolution authorizing the City Manager to execute a sixth amendment to the Staff Augmentation contract with CSG Consultants, Inc. (CSG), in a form approved by the City Attorney, to increase the contract amount by $200,000 for a new not-to-exceed total of $640,000 for professional engineering services pertaining to capital improvement plan design, review, staff augmentation, survey, subdivision and parcel map review

7. Final Design for the University/Weeks 12-Inch Water Main Project; and the Woodland Watermain Project
Recommendation: Adopt two Resolutions:

1. A resolution approving the design and the funding strategy including the related funds transfer of the University and Weeks Street 12-Inch Water Main Project and authorizing the City Manager to advertise the project for construction bids.

2. A resolution approving the design and the funding strategy including the related funds transfer of the Woodland Avenue Waterline and City of Palo Alto Interconnect project and authorizing the City Manager to advertise the project for construction bids.

8. Capital water system improvement payments to Veolia
Recommendation: Adopt a resolution authorizing the City Manager to reimburse Veolia for city-wide capital water system improvements from the Water Capital Fund.

9. Minutes of the June 20, 2023 Meeting
Recommendation: Adopt the minutes of the June 20, 2023 Meeting.

10. City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks
Recommendation:

1. Adopt a Resolution (Attachment 1):
a. Authorizing the City Manager to accept $8,000,000 from the State of California pursuant to 2022-23 California Budget Bill (Chapter 249, Statutes of 2022, AB 179), Section 19.56 (“State Funds”) and execute all documents necessary for receipt and administration of the State Funds; and
b. Authorizing the City Manager to execute an amendment to the Disposition, Development and Loan Agreement (DDLA) with MP 965 Weeks Street Associates, L.P. (Developer) related to the 965 Weeks Affordable Housing Development (Colibri Commons, the “Project”), substantially in the form attached, subject to changes approved by the City Attorney, providing the Developer with additional loan funds in the amount of $6.5 million from the State Funds as a zero-interest loan; and
c. Authorizing the City Manager to administer $1.5 million of the State Funds for water improvements to be made by the City to benefit the Project and adjacent properties; and
d. Authorizing the City Manager to approve amendments and to take such other actions as are necessary to effectuate the purposes of the DDLA and the Ground Lease including, but not limited to, negotiate and execute subordination agreements, lease riders, intercreditor agreements, and escrow instructions; and East Palo Alto City Council July 18, 2023 Agenda Page 4 of 5 e. Authorizing the City Manager to negotiate and execute a First Source Hiring Agreement.

2. Adopt a Resolution (Attachment 2):
a. Finding the City-owned property at 965 Weeks to be “exempt surplus” land to be disposed of pursuant to Government Code Section 54221(f)(1) and authorizing the City Manager to transmit the adopted resolution to the State Department of Housing and Community Development to seek concurrence of the subject property’s qualification as “exempt surplus” land pursuant to Government Code section 54230.5 (b)(1).

3. Adopt a Resolution (Attachment 3)
a. Authorizing the City Manager to accept an award of Affordable Housing Sustainable Communities (AHSC) funds from the State of California in the amount of $19,787,125 ($8,087,125 in grant funds and a $11,700,000 in a loan for 965 Weeks) and to negotiate and execute all agreements necessary for the receipt of such funds, including, but not limited to standard agreements, disbursement agreements, deeds of trust, subordination agreements and such other documents.

11. A Proclamation Celebrating Deborah Lewis-Virges and Clyde Lewis-Virges for Pastor Appreciation Day

12. A Proclamation Recognizing Mr. George Smith Sr.

4. CLOSED SESSION - NONE

5. PUBLIC COMMENT
Members of the public wishing to address the City Council on items not listed on the agenda may do so under this item. Each speaker is limited to two minutes. The Mayor has the discretion to adjust speaking times. In accordance with State Law, no action or discussion may take place on any item not appearing on the posted agenda. The Council may respond to statements made or questions asked or may request Staff to report back at a future meeting concerning the matter.

The exceptions under which the City Council may discuss and/or take action on items not appearing on the agenda are contained in Government Code Section 54954.2(b)(1)(2)(3).

6. INFORMATIONAL REPORTS

7. SPECIAL PRESENTATIONS

1. City Hall Feasibility Study

8. PUBLIC HEARINGS

1. Inclusionary Housing In-Lieu Fee Update
Recommendation: Adopt a resolution updating the Inclusionary Housing In-Lieu Fees for Fiscal Year 2023-24, an amount of $259,600 for Ownership/For-Sale and $289,000 for Rental, or some other alternative approved by Council.

9. POLICY AND ACTION

1. East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update Recommendation: Provide direction concerning whether and when to return with an ordinance titled “East Palo Alto Opportunity to Purchase Act” (“EPA OPA” or “Ordinance”) and clarify desired Ordinance components.

10. COUNCIL REPORTS

11. ADJOURNMENT
East Palo Alto City Council July 18, 2023 Agenda Page 5 of 5 This AGENDA is posted in accordance with Government Code Section 54954.2(a) This Notice of Availability of Public Records: All public records relating to an open session item which are not exempt from disclosure pursuant to the Public Records Act, that are distributed to the majority of the City Council will be available for public inspection at the City Clerk’s Office, 2415 University Avenue, East Palo Alto, CA at the same time that the public records are distributed or made available to the City Council. Such documents may also be available on the East Palo Alto website www.cityofepa.org subject to staff’s ability to post the documents prior to the meeting. Information may be obtained by calling (650) 853-3100.

The City Council meeting packet may be reviewed by the public in the Library or the City Clerk's Office. Any writings or documents pertaining to an open session item provided to a majority of the City Council less than 72 hours prior to the meeting, shall be made available for public inspection at the front counter at the City Clerk's Office, 2ND Floor, City Hall, 2415 University Avenue, East Palo Alto, California 94303 during normal business hours.

Information distributed to the Council at the Council meeting becomes part of the public record. A copy of written material, pictures, etc. should be provided for this purpose.

East Palo Alto City Council Chambers is ADA compliant. Requests for disability related modifications or accommodations, aids or services may be made by a person with a disability to the City Clerk's office at (650) 853-3127 no less than 72 hours prior to the meeting as required by Section 202 of the Americans with Disabilities Act of 1990 and the federal rules and regulations adopted in implementation thereof.

DECLARATION OF POSTING
This Notice is posted in accordance with Government Code §54954.2(a) or §54956. Members of the public can view electronic agendas and staff reports by accessing the City website. Under penalty of perjury, this Agenda was posted to the public at least 72 hours prior to the meeting.

POSTED: July 14, 2023
ATTEST:

James Colin
City Clerk
Future Meetings:

Meeting Date Time
Special Meeting July 25, 2023 6:00 p.m.

Regular Meeting September 5, 2023 6:30 p.m.

Regular Meeting September 19, 2023 6:30 p.m.

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Salifu Yakubu, Senior Planner
Elena Lee, Planning Manager
Amy Chen, Community & Economic Development Director
SUBJECT: University Avenue/Beech Street Property Exchange Recommendation
Adopt a resolution (Attachment 1):

1. Finding the City-owned 0.36-acre property at 2277 University Avenue in East Palo Alto is “exempt surplus” land, which may be disposed in accordance with Government Code section 54221(f)(1);

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Priority No. 2: Enhance Economic Vitality
Priority No. 4: Improve Public Facilities and Infrastructure Priority No. 6: Create a Healthy and Safe Community
Background

3.1 Packet Pg. 6
Introduction
The City of East Palo Alto (City) owns 2277 University Avenue (Assessor’s Parcel Number 063-302-460) (“City Property”) and County of San Mateo (County) owns a piece of real property in the City, 1266 Beech Street (Assessor’s Parcel Number 063- 600-060) (“County Property”), that the two public entities are interested in exchanging so that properties can be used for legitimate government purposes. The City is desirous of expanding the Martin Luther King (MLK) Park onto the adjoining Beech Street property while the County would facilitate the development of affordable housing on the University Street property.

To advance these interests, the City adopted a resolution (Attachment 2) on March 15, 2022, authorizing the City Manager to enter into an MOU with the County to explore the real property exchange. This paved the way for City and County staff to engage in several consultation meetings, culminating in the signing of an MOU (Attachment 3) on March 25, 2022, and April 19, 2022, by the City and County respectively to undertake certain due diligence measures to assess the feasibility and potential exchange of the subject real properties. Apart from the Phase I and II soil reports prepared for a separate but related MLK Park master planning process, the applicable due diligence measures would be undertaken after the State Department of Housing and Community Development concurs that the two properties are “exempt surplus” land.

The purpose of this staff report is to facilitate the property exchange by recommending that the Council adopt a resolution finding and declaring the City-owned 0.36-acre property at 2277 University Avenue as “exempt surplus” land pursuant to the Surplus Land Act (SLA) as amended by Assembly Bill 1486 and other subsequent bills and transmit that resolution to obtain a concurrence from the State Department of Housing and Community Development (HCD). The County staff are scheduled to make similar recommendations for the County-owned Beech Street property to the Board of Supervisors on July 25, 2023.
2277 University Avenue Real Property
The subject real property at 2277 University Avenue is owned “in fee simple” by the City. The

0.36-acre property is located on the west side of University Avenue, mid-block between Bell and Runnymede Streets, and mostly surrounded by a single-family residential neighborhood, except for a multi-family building just to the south (2263 University Avenue), the Menlo Park Fire District building at the southeast corner of University Avenue and Runnymede Street, and the 1.42-acre Community Church of East Palo Alto site at 2201 University Avenue. The subject property is improved with a 1930’s era single-story residential structure which was converted into a non-residential use by the David E. Lewis Community Re-entry Center. The David E.

Lewis Center, which has been in operation since 2007, is a collaborative program sponsored by the City of East Palo Alto and the County of San Mateo.

The 2277 University Avenue property was previously owned by the East Palo Alto County Waterworks District (EPACWD). The EPACWD was dissolved by Resolution 925 of the Local Agency Formation Commission (LAFCO) of San Mateo County on July 3, 2001, and its services transferred to the cities of East Palo Alto and Menlo Park. As the successor in interest to the EPACWD, the City (Grantor) granted the subject property to itself (Grantee) by way of a Grant Deed on February 26, 2014, and a Certificate of Acceptance, pursuant to Government Code 27281, signed on March 4, 2014.

3.1 Packet Pg. 7
The subject property is zoned MUC-1 Mixed Use Corridor -1, which allows mixed use developments at 22-65 dwelling units per acre at a floor area ratio not to exceed 1.75, with residential uses only allowed above the ground floor. Its General Plan land use designation is also Mixed-Use Corridor, which also allows the same kinds of uses including multi-family residential, attached single family residential, retail, services, office, hotel/ lodging, public, assembly and other similar uses.

County’s Interest in 2277 University Avenue Property
The County has expressed interest in utilizing the City-owned property for affordable housing and the City has therefore added the site as a potential development site in its 2023-2031 Housing Element. To be consistent with the City’s General Plan and Development Code, new development would have to be mixed-use with at least twothirds being residential and include 20% affordable housing units, which would make it eligible for density bonuses of 35% (with reduced parking) or 80% (without parking) with various concessions and waivers pursuant to the State Density Bonus Law and the City’s Affordable Housing Ordinance. These bonuses could yield a maximum of 33 to 44 dwelling units respectively.
1266 Beech Street Property
Coincidentally, the County owns “in fee simple” a 1.85-acre property located at 1266 Beech Street in East Palo Alto. This vacant property is surrounded by single-family residential dwellings, with the City-owned 5.4-acre Martin Luther King (MLK) Park to the south. The County property and the Park have the same Park/ Recreation/Conservation and Parks and Recreation General Plan land use designation and Zone respectively.

City’s Interest in 1266 Beech Street Property
On October 26, 2020, the City Planning Commission held a meeting where the Commission and members of the community in attendance expressed a strong desire to expand and improve the MLK Park by acquiring the County’s Beech Street property.

Subsequently, the City Council, at open session meetings expressed interest in the acquisition as part of the larger discussion regarding the MLK Park master plan, and adopted a resolution on July 20, 2021, selecting Verde Design to complete the master plan.

In July 2021 and subsequently on February 2, 2022, City and County representatives met to discuss the potential exchange of the 2277 University Avenue and 1266 Beech Street properties for their respective uses for affordable housing and parks. As these discussions progressed the City Council adopted a resolution on March 15, 2022, authorizing the City Manager to enter into an MOU, which was ultimately signed by the City and County on March 25, 2022 and April 19, 2022 respectively, regarding a potential real property exchange.

Analysis
The Surplus Land Act (SLA)1 is a statute (Government Code Sections 54220-54234) that all local agencies (including cities and counties) must follow prior to disposal of 1 https://www.hcd.ca.gov/community-development/docs/SLA_Guidelines_final.pdf

3.1 Packet Pg. 8
surplus real property. It requires the local agency to offer the property to affordable home developers and certain entities before the general public, unless the land qualifies as exempt surplus land. There are four (4) categories of exemptions to the SLA as follows (relevant exemptions are in bold):

1. Certain actions were taken by the local agency to dispose of the property prior to September 30, 2019 (Grandfathering Exemption).

2. Disposition can be streamlined because the surplus land is proposed for development that includes certain percentages of affordable housing (Streamlining Exemption).

3. The surplus land is dedicated for other public uses (Public Use Exemption).

4. The surplus land is not suitable for housing development (Unsuitable Parcel Exemption)
Government Code Section 54221(f)(1)(C) provides that real property that a public agency is exchanging with another public agency for agency use is exempt surplus land. Government Code Section 54221(f)(1)(D) provides that real property that a public agency is transferring to another public agency is exempt surplus property. The University Avenue property is proposed to be exchanged with the County Beech Street property qualifying the property for the exemptions pursuant to Section 54221(f)(1)(C).

Additionally, the City is proposing to dispose of the University Avenue property to the County, a public agency, qualifying the property as exempt surplus property pursuant to Government Code Section 54221(f)(1)(D).

The County has indicated that it intends to use the University Avenue property for affordable housing, an agency use.

In exchange for transferring 2277 University Avenue to the County of San Mateo, the City of East Palo Alto would receive the County’s property at 1266 Beech Street. This exchange would allow the seamless integration of 1266 Beech Street into an expanded and enhanced MLK Park and complement the City’s need for improved park uses and services. Based on these facts the property at 1266 Beech Street can be found eligible for Exemption under Category 3b pursuant to Government Code section 54221(f)(1)(C).

The County will also have to comply with the SLA with a similar process prior to the transfer of 1266 Beech Street to the City. As mentioned above, the County is planning to discuss the Beech Street property at the July 25, 2023, Board of Supervisors meeting.

Next Steps
Staff recommends that the City Council adopt the resolution (Attachment 1) finding the City-owned 0.36-acre property at 2277 University Avenue in East Palo Alto to be Exempt Surplus Land pursuant to Government Code section 54221(f)(1). Subsequent to adoption, staff will transmit a copy of the resolution to the California State Department of Housing and Community Development (HCD) no later than 30 days prior to the disposition of the subject property pursuant to Government code section 37364.

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The development of the MLK master plan by Verde Design is in process and contemplating the potential integration of the Beech Street property in its conceptual design scenarios. The Mitigated Negative Declaration document that has already been prepared for it, consistent with the California Environmental Quality Act (CEQA), includes some of the due diligence measures such as Phase I and II soil reports required by the aforementioned MOU. The Phase I and II reports have been completed, and no incidence of soil or ground water contamination was found. The MLK master plan, when approved by the City Council, would be a long-range comprehensive planning and policy document for the development and expansion of the park and treatment of the park’s interface with its surroundings. The development of the Beech Street property and its seamless incorporation into the MLK park would be fast-tracked should the property exchange be successful.

The property exchange would proceed after the City and County properties are successfully declared “exempt surplus” lands. However, prior to the City acquiring the Beech Street property the City Planning Commission would be required to make a finding of property conformity with the General Plan, and the Council would approve a property exchange agreement, which staff anticipates for the December 5 Council hearing.

Fiscal Impact
The adoption of the resolution and its transmittal to HCD has no fiscal impacts on the City. Any potential costs associated with the required due diligence measures identified earlier in the report are captured under the ongoing MLK Park master planning effort.

Environmental
The proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment.

Attachments

1. Resolution

2. EPA Reso authorizing CM to enter MOU with County

3. MOU-Between EPA and SMC_Potential Property Swap

3.1 Packet Pg. 10
Resolution No. XX-2023 1 of 3
RESOLUTION NO. XX – 2023

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO
FINDING THE CITY-OWNED PROPERTY AT 2277 UNIVERSITY AVENUE TO BE EXEMPT

SURPLUS LAND TO BE DISPOSED OF, AND AUTHORIZING THE CITY MANAGER TO

TRANSMIT THIS RESOLUTION TO THE STATE DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT SEEKING CONFIRMATION OF THE PROPERTY’S ELIGIBILITY AS EXEMPT

SURPLUS LAND AND TO COMPLETE DUE DELIGENCE ACTIVITIES IN PREPARATION FOR

THE DISPOSAL OF THE SUBJECT PROPERTY PURSUANT TO THE MEMORANDUM OF

UNDERSTANDING BETWEEN THE CITY OF EAST PALO ALTO AND COUNTY OF SAN MATEO WHEREAS, the 0.36-acre property located at 2277 University Avenue (Property) in the City of East Palo Alto is owned in fee simple by the City of East Palo Alto (City) by way of a Grant Deed certified on February 26, 2014 and accepted by the City, pursuant to Government Code 27281 on March 4, 2014; and
WHEREAS, the Property has a General Plan land use designation of Mixed-Use Corridor and a Zoning designation of MUC-1 Mixed-Use Corridor; and
WHEREAS, the General Plan and Zoning designations of the Property allow mixed-use developments at 22 – 65 dwelling units per acre at a floor area ratio not to exceed 1.75 with allowed uses including multi-family residential, single-family attached residential, retail, services, office, and various other uses; and
WHEREAS, two-thirds of the Property can be used for development of affordable housing and earn eligibility for 35% density bonus (with limited parking) or 80% density bonus (without parking) pursuant to the State Density Bonus Law and the City’s Affordable Housing Ordinance; and WHEREAS, the County of San Mateo has expressed an interest in acquiring the Property with a goal of utilizing it for the development of a 100% affordable housing project; and WHEREAS, the County owns a vacant 1.85-acre property at 1266 Beech Street (Beech Street Property) which adjoins the City’s Martin Luther King (MLK) Park; and WHEREAS, the Beech Street Property has General Plan and Zoning designations of Park/Recreation/Conservation and Parks and Recreation respectively, which are the same designations on the adjoining 5.4-acre MLK Park; and
WHEREAS, the City is desirous of acquiring the Beech Street Property for the purpose of seamlessly integrating it into the neighboring MLK Park to enhance the planning, improvement, and utility of the park; and
WHEREAS, on May 18, 2021, the City Council adopted the Facilities Master Plan, inclusive of the specific goal to discuss potential acquisition of the Beech Street Property for the purposes of expanding MLK Park; and

3.1.a
Packet Pg. 11
Attachment: Resolution (2727 : University Avenue/Beech Street Property Exchange) Resolution No. XX-2023 2 of 3
WHEREAS, in July 2021, City and County representatives met to discuss several items of joint interest, including the potential acquisition of the Beech Street Property, and the City representatives offered to conduct analysis on the City-owned property, as a means of facilitating further consideration of a possible exchange; and
WHEREAS, on February 2, 2022, City and County representatives met again and agreed to enter into an MOU regarding future use of the Beech Street Property and a possible exchange of their respective properties; and
WHEREAS, the City adopted a Resolution, Number 30-2022, on March 15, 2022 authorizing the City Manager to enter into a Memorandum of Understanding (MOU) with the County to explore the potential for certain real property exchange between the City and County; and WHEREAS, the City and County signed a Memorandum of Understanding on March 25, 2022, and April 19, 2022 respectively, allowing their various staffs to pursue opportunities regarding the potential exchange of the Property and Beech Street Property for their mutual benefit; and WHEREAS, since the Property is being acquired by the County for the siting of affordable housing and the City has accordingly added the site as a potential development site in its 2023-2031 Housing Element, it can be found to be exempt from the Surplus Land Act pursuant to Government Code section 54221(f)(1)(C) and 54221(f)(1)(D) in that the City is proposing to exchange the Property with the County property for an agency use and the City is proposing to dispose of the Property to a public agency; and
WHEREAS, since the Beech Street Property is being acquired, as noted by both the City Planning Commission and the City Council, to expand and improve the Martin Luther King Jr. Park, and the City has taken steps to effectuate that end, including adopting a resolution to enter into an MOU with the County to that effect and adopting a master plan that includes such a use, it can be found to be exempt from the Surplus Land Act pursuant to Government Code section 54221(f)(1)(C); and WHEREAS, based on the foregoing, the City Manager recommends that the City Council find the Property exempt from the Surplus Land Act pursuant to Government Code section 54221(f)(1), and permit the City Manager to transmit this resolution to the State Department of Housing and Community Development (HCD) to seek concurrence of the Property’s qualification as exempt surplus land and pursue due diligence measures in preparation for the disposal of the Property.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY:

1. Finds the foregoing recitals are true and correct, and are incorporated by this reference into this action;

2. Finds the City-owned 0.36-acre property at 2277 University Avenue in East Palo Alto to be “exempt surplus” land to be disposed of pursuant to Government Code section 54221(f)(1)(C) and/or (D) based on the information in the Staff report accompanying this resolution;

3. Authorizes the City Manager to transmit the adopted resolution to the State Department of Housing and Community Development to seek concurrence of the subject property’s qualification as “exempt surplus” land pursuant to Government Code section 54230.5 (b)(1);

3.1.a
Packet Pg. 12
Attachment: Resolution (2727 : University Avenue/Beech Street Property Exchange) Resolution No. XX-2023 3 of 3

4. Authorizes the City Manager to take all action in preparation for the disposal of the subject property pursuant to the Memorandum of Understanding (MOU) between the City of East Palo Alto and County of San Mateo and respectively signed on February 25, 2022, and April 19, 2022, including without limitation, conducting all due diligence activities such as the preparation of title reports, Phase I and II soil reports, geotechnical reports, appraisal reports, etc.; and

5. Finds that the proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational, or administrative activity that will not result in direct or indirect changes in the environment.

PASSED AND ADOPTED this 18th day of July 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney

3.1.a
Packet Pg. 13
Attachment: Resolution (2727 : University Avenue/Beech Street Property Exchange) RESOLUTION NO. 30-2022

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

AUTHORIZING THE CITY MANAGER TO ENTER INTO A MEMORANDUM OF UNDERSTANDING

BETWEEN THE COUNTY OF SAN MATEO AND CITY OF EAST PALO ALTO TO EXPLORE A

REAL PROPERTY EXCHANGE
WHEREAS, on January 23, 2021, the City Council held their annual Priority Setting Retreat to identify key goals and objectives for Fiscal Year 2021- 2022, which included acknowledging the community interests, the City Council added a workplan priority to proactively design the Martin Luther King ( MILK) Park; and
WHEREAS, on March 16, 2021, the City Council adopted a Resolution establishing priorities for FY 2021- 2022, which included the design of MILK Park; and WHEREAS, on May 18, 2021, the City Council adopted the Facilities Master Plan, inclusive of the specific goal to discuss potential acquisition of the County owned property located at 1266 Beech Street (Property) for the purposes of expanding MLK Park; and WHEREAS, in July 2021, City and County representatives met to discuss several items of joint interest, including the potential acquisition of the Property, and City representatives offered to conduct analysis on the 2277 University Avenue parcel, as a means of facilitating further consideration of a possible exchange; and
WHEREAS, on February 2, 2022, City and County representatives met again and agreed to enter into a Memorandum of Understanding ( MOU) regarding future use of the Property and a possible exchange of parcels.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO hereby authorizes the City Manager to enter into a Memorandum of Understanding Exhibit A), subject to minor modifications approved by the Interim City Attorney, between the County of San Mateo (County) and City of East Palo Alto (City) to explore a real property exchange.

PASSED AND ADOPTED this 15th day of March 2022, by the following vote:

AYES: Romero, Abrica, Gauthier, Lopez, Wallace -Jones
NOES:

ABSENT:

ABSTAIN:

D
Jarrles' Colin, Acting City Clerk
Ruben Abrica, Mayor
APPROVED AS TO FORM:

Valerie J. Armenid Interim City Attorney

3.1.b
Packet Pg. 14
Attachment: EPA Reso authorizing CM to enter MOU with County (2727 : University Avenue/Beech Street Property Exchange)

MEMORANDUM OF UNDERSTANDING BETWEEN COUNTY OF SAN MATED AND CITY OF EAST PALO

ALTO REGARDING A POTENTIAL REAL PROPERTY EXCHANGE
This MEMORANDUM OF UNDERSTANDING (" MDU"), entered into this day of , 2022 (the Effective Date"), by and between the County of San Mateo ("County") and the City of East Palo Alto City") ( each a " Party", and collectively, the " Parties") sets forth the respective responsibilities of each Party related to the Parties' consideration of a potential real property exchange.

RECITALS
WHEREAS, County is the owner of certain real property located at 1266 Beech Street, in the City of East Palo Alto, State of California, consisting of approximately 1. 85 acres, designated as San Mateo County Assessor' s Parcel Number 063- 600-060, hereinafter referred to as the " County Property;" and
WHEREAS, City is the owner of certain real property in the City of East Palo Alto, State of California, consisting of approximately 0.36 acres, located at 2277 University Avenue, between Runnymede Street and Bell Street, designated as San Mateo County Assessor' s Parcel Number 063- 302460, hereinafter referred to as the " City Property"; and
WHEREAS, City wishes to construct or cause the construction an expansion of Martin Luther King, lr.

Park (" MLK Park") on the County Property to serve the recreation needs of the local area (" Proposed City Use"); and
WHEREAS, County wishes to cause the construction of affordable housing on the City Property by issuing a request for proposals (" RFP") and selecting an affordable housing developer to which County would ground lease the City Property for the construction and operation of affordable housing (" Proposed County Use"); and
WHEREAS, the Zoning and General Plan land use designations of the City Property support ahighdensity residential use at the site, and City supports the Proposed County Use of constructing highdensity affordable housing at the site; and WHEREAS, the Parties are committed to exploring a potential exchange of the County Property and the City Property to facilitate the Proposed City Use of County Property and Proposed County Use of City Property (" Property Exchange"); and
WHEREAS, California Government Code section 25365( a) authorizes counties, by afour-fifths vote of the Board of Supervisors, to exchange real property with a city upon the terms and conditions as are agreed upon, where the real property to be acquired is required for County use; and WHEREAS, California Government Code section 37351 authorizes cities to exchange real property as is necessary or proper for municipal purposes; and
WHEREAS, pursuant to the terms and conditions set forth herein, each Party wishes to complete due diligence activities to determine whether or not the Property Exchange is desirable.

MOU between County of San Mateo and City of East Palo Alto 1 3.1.b
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Attachment: EPA Reso authorizing CM to enter MOU with County (2727 : University Avenue/Beech Street Property Exchange) THEREFORE, the Parties agree to be bound by the following terms in this MOU:

1. Term and Termination
Subject to compliance with all terms and conditions, the term of this MOU shall be from , 2022 through , 2023 (" MOU Term"). This MOU may be terminated by either Party upon thirty (30) days written notice.

2. Due Diligence Tasks

2. 1 Overview. The Parties shall use reasonable, good faith efforts to accomplish the due diligence tasks set forth in this Section during the MOU Term.

2. 2 Intent of MOU. Through this MOU, the Parties are intending to commit to undertaking certain due diligence activities to determine whether the Property Exchange is viable. Subsequent to the completion of due diligence activities, each Party shall assess its respective interest in the Property Exchange.

2. 3 Delivery of Materials. Each Party agrees to exchange non -privileged information and documents in its possession, which may be useful in evaluating the Property Exchange, with the other Party, This includes, but is not limited to, site acquisition history, site funding history, site development history, site proposed development history, site use history, site maintenance and rehabilitation history, and a history of code enforcement actions, nuisances and/ or any known illegal activities at the site.

2. 4 Appraisals. Upon mutual agreement between City and County with respect to the selection of an appraiser, an appraisal of the County Property and City Property shall be conducted to determine the valuation of each site. Should the appraisals reflect a difference in the valuation of City Property and County Property, City and County shall discuss possible ways to negotiate the Property Exchange with an existing difference in valuation.

2. 5 Environmental Review. During the MOU Term, County and City shall review existing environmental documentation related to the City Property and the County Property, such as environmental assessments and feasibility studies, to determine whether (1) City' s Proposed Use and County' s Proposed Use are achievable based on existing environmental conditions of the County Property and City Property, and ( 2) additional environmental reports are necessary for County Property and/ or City Property in order to comply with the California Environmental Quality Act (" CEQA"), the National Environmental Policy Act (" NEPA"), and any other applicable laws or regulations.

2. 6 Financial Feasibility. County and City shall engage in efforts to determine whether Proposed County Use and Proposed City Use are financially feasible.

2. 7 Existing Uses. County and City to investigate whether there would be any impacts, such as residential or economic displacement, if the Proposed County Use and the Proposed City Use were put into effect, and to the extent such impacts exist, how they will be addressed and/ or mitigated.

MOU between County of San Mateo and City of East Palo Alto

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Attachment: EPA Reso authorizing CM to enter MOU with County (2727 : University Avenue/Beech Street Property Exchange)

2. 8 Title Reports. County shall cause a reputable title company to issue a preliminary title report for County Property, and City shall cause a reputable title company to issue a preliminary title report for City Property. County and City shall review title report for City Property and title report for County Property to identify any impacts on Proposed City Use and Proposed County Use.

2. 9 County and City Costs Associated with the MOU. Each Party shall be responsible to pay its respective costs and expenses (including legal fees, consultant costs and staff time) incurred in undertaking due diligence tasks set forth in this section and fulfilling its respective obligations under this 11OU, including but not limited to the costs of property appraisals, title reports, and the use of economic consultants used to evaluate the financial feasibility of a proposed use of the properties that are the subject of this MOU.

2. 10 Schedule of Performance. Subsequent to the execution on this MOU, the Parties agree to develop schedule for completing due diligence tasks set forth in this section, including establishing a date for identifying an appraiser, date(s) for obtaining appraisals of the City Property and the County Property, and date(s) for completing an environmental review of the City Property and the County Property.

3. General Provisions

3. 1 Authorizations. The County Manager of the County of San Mateo and the City Manager of the City of East Palo Alto, or their respective designees, are authorized to modify the MOU and its terms, resolve conflicts, and/ or otherwise grant approvals on behalf of their respective agencies, provided such approvals are not otherwise vested in the authority of the agency' s governing board. All such modifications and approvals shall be in writing and signed by both Parties.

3. 2 Mutual Indemnification. Pursuant to Government Code Section 895.4, each Party agrees to fully indemnify, defend, and hold the other Party (including its appointed and elected officials, officers, employees, and agents) harmless and free from any damage or liability imposed for injury (as defined by Government Code Section 810.8) or liability occurring by reason of the negligent acts or omissions or willful misconduct of the indemnifying Party, its appointed or elected officials, officers, employees, or agents, under or in connection with any responsibility, authority, or jurisdiction delegated to such Party under this MOU. Neither Party, nor any appointed or elected official, officer, employee, or agent thereof, shall be responsible for any damage or liability occurring by reason of the negligent acts or omissions or willful misconduct of the other Party, its appointed or elected officials, officers, employees, or agents, under or in connection, with any authority, responsibility, orjurisdiction delegated to such other Party under this MOU.

3. 3 Choice of Law; Venue. The formation, interpretation and performance of this MOU shall be governed by the laws of the State of California. Venue for all litigation relative to the formation, interpretation and performance of this MOU shall be in San Mateo County Superior Court.

MOU between County of San Mateo and City of East Palo Alto 3 3.1.b
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Attachment: EPA Reso authorizing CM to enter MOU with County (2727 : University Avenue/Beech Street Property Exchange)

3. 4 Notices. Any notice to be given to the Parties shall be in writing and shall be served, either personally or by mail, to the following:

In case of the County, to:

Name/ Title: Michael Callagy, County Manager
Address: 400 County Center, 15i Floor, Redwood City, CA 94063 In the case of the City, to:

Name/ Title: Jaime M. Fontes, City Manager
Address: 2415 University Avenue, East Palo Alto, CA 94303 Such notices shall be served by depositing them addressed as set out above, postage prepaid, in the U. S. mail, reliable overnight courier, or by personal delivery. The date of mailing, or in the event of personal delivery, the date of delivery shall constitute the date of service.

3. 5 Construction. All section headings are for reference only and shall not be considered in construing this MOU.

3. 6 Severability. If any provision of this MOU shall be held to be invalid, void or unenforceable, the validity, legality or enforceability of the remaining portions of this MOU shall not in any way be affected or impaired thereby.

3. 7 Entire Aereement. This MOU sets forth the entire agreement between the Parties, and supersedes all other oral or written provisions. This MOU may be modified only as provided in Section

3. 1, " Authorizations."

3. 8 Cooperative Drafting This MOU has been drafted through a cooperative effort of all the Parties, and all the Parties have had an opportunity to have the MOU reviewed and revised by legal counsel. No Party shall be considered the drafter of this Agreement, and no presumption or rule that an ambiguity shall be construed against the Party drafting the clause shall apply to the interpretation or enforcement of this MOU.

3. 9 Representation re Authority of Parties/ Si>;natories. Each person signing this MOU represents and warrants that he or she is duly authorized and has legal capacity to execute and deliver this MOU.

Each Party represents and warrants to the other that the execution and delivery of the MOU and the performance of such Party' s obligations hereunder have been duly authorized and that the MOU is a valid and legal agreement binding on such Party and enforceable in accordance with its terms.

3. 10 No Third -Party Beneficiaries. Except as expressly set forth herein, nothing contained in this MOU is intended to or shall be deemed to confer upon any person, other than the Parties, any rights or remedies hereunder.

3. 11 Debt Limitation. The Parties are subject to laws or policies which limit their ability to incur debt in future years. Nothing in this MOU shall constitute an obligation of future legislative bodies of the County or City to appropriate funds for the purpose of this MOU.

MOU between County of San Mateo and City of East Palo Alto

3.1.b
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Attachment: EPA Reso authorizing CM to enter MOU with County (2727 : University Avenue/Beech Street Property Exchange)

3. 12 Conflict of Interest. Each of the Parties shall avoid all conflicts of interest in the performance of this MOU and shall immediately notify the other Parties should a conflict of interest arise that would prohibit or impair its ability to perform under this MOU.

3. 13 Disputes. The Parties agree that, with regard to all disputes or disagreements arising under this MOU that are not resolved informally at the staff level after a good faith attempt, the Parties may, at their sole and mutual discretion, agree to engage in mediation, and the costs of any such mediation shall be divided equally between the Parties.

3. 14 Non -Discrimination. The Parties will not discriminate, in any way, against any person based on sex, pregnancy, childbirth or related medical conditions, race, veteran status, religion, color, national origin or ancestry, physical or mental disability, medical condition, marital status, age, gender (including gender identity and gender perception), sexual orientation, use of family medical leave, genetic testing, or any other basis protected by federal or state law. This policy shall apply to all employment practices.

3. 15 Counterparts. This MOU may be executed in counterparts, each of which will be deemed an original and all of which together will constitute a complete agreement. Moreover, this MOU may be signed by electronic signature and copies of original signatures shall be treated the same as the originals.

AGREED:

Michael Callagy, County Manager
County of San Mateo
Jaime M. Fontes, City Manager,
City of East Palo Alto
MOU between County of San Mateo and City of East Palo Alto 5 DATE
DATE

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Attachment: EPA Reso authorizing CM to enter MOU with County (2727 : University Avenue/Beech Street Property Exchange)

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Attachment: MOU-Between EPA and SMC_Potential Property Swap (2727 : University Avenue/Beech Street Property Exchange)

3.1.c
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Attachment: MOU-Between EPA and SMC_Potential Property Swap (2727 : University Avenue/Beech Street Property Exchange)

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Attachment: MOU-Between EPA and SMC_Potential Property Swap (2727 : University Avenue/Beech Street Property Exchange)

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Amy Chen, Community & Economic Development Director Elena Lee, Planning Manager
SUBJECT: Ravenswood Business District / 4 Corners Specific Plan – Second Contract Amendment to Developer Reimbursement Agreements
Recommendation
That the City Council:

1. Accept the staff report regarding the status on the Ravenswood Business District/Four Corners Transit Oriented Development Specific Plan Update; and

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
• Promote Housing, Economic and Workforce Development
• Ensure Our Financial and Organizational Health
Executive Summary
Staff is providing background and an explanation to the City Council regarding a budget amendment to the R+A contract and related Developer Reimbursement Agreements. This amendment is needed to complete the update to the existing Plan’s standards and policies, advance key Plan items towards successful implementation, and to complete all legally required Supplemental Environmental Impact Report (SEIR)/California Environmental Quality Act (CEQA) analysis.

3.2 Packet Pg. 23
Background
At the City Council Study Session on February 25, 20201, the City Council recommended exploring a focused update to the RBD/Four Corners TOD Specific Plan (“Specific Plan”).

Although the overall vision of the plan would generally remain the same, the Specific Plan update analyzes the impacts of allowing an increased amount of office development and housing in the Specific Plan area. The key objectives for the Specific Plan update are to:
• Evaluate the relative impacts and benefits of allowing more office/R&D (research and development) square footage and define policies that address 1) traffic and trip reduction; 2) wet utility infrastructure, 3) fiscal revenues; 4) gentrification or indirect displacement and housing affordability, and 5) local jobs; • Develop a clear framework and program to promote community needs and receive community benefits;
• Articulate urban design standards and zoning standards that create a new, “complete” neighborhood; and
• Maintain the vision of the existing plan of “transforming the area into a vibrant, walkable, mixed-use destination with a significant increase in employment, institutional uses, and moderate increase in housing.”
• An additional key objective related to Plan implementation has been identified during the course of the update process: define financing options for construction and maintenance of key infrastructure improvements.

On September 15, 2020, the City Council authorized the City to enter into a contract with Raimi + Associates (R+A), in an amount not to exceed $1,326,829 to provide the analysis, community engagement, and environmental review necessary for the City Council to consider an amendment to the Ravenswood Business District (RBD) Specific Plan and potentially increase the amount of development approved in the EIR. The staff report linked online2 details the phases of the analysis and the scope of work. The table below summarizes the RBD budget with R+A:

Table 1
Total Base Cost $990,129
10% Contingency $99,000
(Loop Road SEIR + Computer Infrastructure Models) Total Optional Cost $237,700
Base + Contingency + Optional $1,326,829
On October 6, 20203, the City Council authorized the City to enter into Developer Reimbursement Agreements (DRA) with certain developers within the RBD to fund a share of the associated costs for the environmental review portion of the R+A contract. Although certain developers are funding a portion of the R+A contract, the City Council maintains full land use authority regarding decisions about the RBD and entering into developer reimbursement agreements does not commit the City to amend the RBD or any project approvals.

3.2 Packet Pg. 24
As previously directed by the City Council, it is expected that developers who required an amendment to the RBD Specific Plan for their projects to advance will be obligated to fund a share of the associated costs for: 1) the environmental review portion of the R+A contract; and 2) reimbursement of the City’s initial investment in data refresh, engagement, and amendments to the Specific Plan.

With that direction from City Council, the following cost split was included as two parts of the original R+A consulting contract that was executed on January 11, 2021 in an amount not to exceed $ 1,326,829. The term of the agreement commenced on September 15, 2020 and the contract was approved for three years. The table below describes the two parts of the initial R+A contract:

Table 2
Part Entity Activities Cost
Estimate
Mechanism
A City of East
Palo Alto
Data refresh,
analysis, community
engagement
$490,164 Paid initially by City
General Fund, later
reimbursed through
approved projects
B Large RBD
Developers
Environmental
Review
$737,665 (with
optional
tasks)
Paid directly through preexisting Developer
Reimbursement Account
(DRA)
Contingency $99,000 May be applied to either
part of the contract
Total Approved $1,326,829
To date, the City Council has held eight meetings or special study sessions to discuss the Specific Plan Update. At the November 18, 2021 meeting4, City Council directed staff to study two potential maximum office/R&D development scenarios:
• Scenario 1 would allow up to 2.82 million square feet of office/R&D space and up to 1,350 housing units.
• Scenario 2 would allow up to 3.35 million square feet of office/R&D space and up to 1,600 housing units.

With these recommendations from City Council, staff have revised the R + A scope of work and budget and on January 18, 20225, City Council authorized the City Manager to amend the R+A agreement and increase the contract by $508,308. The following table summarizes the first approved contract amendment:

3.2 Packet Pg. 25
Table 3
Contracts Activities Cost
Estimate
Mechanism
Initial Data refresh, analysis,
community
engagement
Environmental
Review
Contingency
$1,326,829 Paid initially by City General
Fund, later reimbursed
through approved projects
Paid directly through preexisting Developer
Reimbursement Account
(DRA)
1st
Amendment
Analysis of two
scenarios and more
public engagement
$508,308 Paid initially by City General
Fund, later reimbursed
through approved projects
Amended Total $1,835,137
The purpose of this staff report is to describe the need for 2nd contract amendment to complete the update to the existing Plan’s standards and policies, advance key Plan items towards successful implementation, and to complete all legally required Supplemental Environmental Impact Report (SEIR)/California Environmental Quality Act (CEQA) analysis.

Analysis
As mentioned above, based on Council direction and community input, the Specific Plan and SEIR analyzes two potential maximum office/R&D development scenarios:
• Scenario 1 would allow up to 2.82 million square feet of office/R&D space and up to 1,350 housing units.
• Scenario 2 would allow up to 3.35 million square feet of office/R&D space and up to 1,600 housing units.

Before the SEIR receives its final certification, the City Council will need to select which scenario (or a hybrid alternative) will become the final development capacity reflected in the Final SEIR and approved under CEQA. Direction may be given at a future study session, but the ultimate selection of which scenario would be made at the time of SEIR certification and action on the project at a hearing prior to the final certification hearing.

Budget Amendment
Staff is proposing an amendment in the amount of $180,000 be added to the Developer Reimbursement Agreements that support the Specific Plan Update. This amendment is needed to finish the update of the existing Plan’s standards and policies, advance key Plan items towards successful implementation, and complete legally required SEIR/CEQA analysis.

The table below shows the tasks that comprise this amendment and the consultant responsible.

3.2 Packet Pg. 26
Table 4
Final Budget Amendment Estimate Total
Meetings and Coordination
Project Coordination & Meetings (R+A) $ 15,500
Council/Planning Commission Study Sessions (R+A) $ 20,000 Traffic Engineering Support (Hexagon) $ 20,000
Utility Engineering Support (Schaaf + Wheeler) $ 16,400 EIR Coordination (David J Powers) $ 15,000
$ 86,900
Specific Plan Updates
Admin Draft Work on Specific Plan Policies (R+A) $ 25,000 TDM Implementation Guidelines (Hexagon) $ 12,000
$ 37,000
CEQA/SEIR Analysis
Air Quality Work (David J Powers) $ 4,900
AQ/GHG/Noise Support (Illingworth & Rodkin) $ 6,400
Additional VMT Modeling (Hexagon) $ 6,000
WSA (Schaaf + Wheeler) $ 26,700
Biological Analysis (HT Harvey) $ 2,800
$ 46,800
Subtotal $ 170,700
Sub Management $ 7,700
Office/Accounting $ 1,600
TOTAL $ 180,000
The amendment scope is broken down into three categories: 1) Meetings and coordination, 2) Specific Plan Updates, and 3) CEQA/SEIR Analysis.
1) Meetings and Coordination
• Project Coordination and Meetings (R+A) – The prime consultant, R+A, coordinates monthly check-ins with the developer group, meets with outside agencies including the San Francisquito Creek Joint Powers Authority, and is the lead coordinator for the Specific Plan update.
• Council/Planning Commission Study Sessions (R+A) – There have been seven study sessions to date since the start of the Specific Plan update in September 2020.

This amended budget for R+A will support upcoming study sessions including this coming July 25 session. R+A will help produce staff reports and presentations for these Council sessions. Future study sessions are anticipated this Fall, which could also be joint meetings with the Planning Commission.
• Traffic Engineering Support (Hexagon) – Hexagon will attend coordination meetings, City Council Study Sessions, and provide continued transportation engineering support to the project.
• Utility Engineering Support (Schaaf + Wheeler) – There has been discussions

3.2 Packet Pg. 27
around early phase wet utility improvements. Schaaf & Wheeler will prepare for and attend up to four virtual meetings with the project team that may include meetings with individual land developers to discuss our analyses and results from our technical studies. Schaaf & Wheeler will prepare for and attend up to two group virtual meetings with the project team to discuss technical study results. • EIR Coordination (David J Powers) – Meetings with City staff and R+A team to discuss EIR approach and technical studies, coordination regarding the water supply assessment, tribal consultation meetings, and discussions regarding the approach to construction impacts.
2) Specific Plan Updates
• Admin Draft Work on Specific Plan Policies (R+A) – The complexity of the Admin draft of the Specific Plan has required additional time to be dedicated towards solving project-level issues, such as the street design for Bay Road. This was not anticipated by the project team during the original scoping process or the previous budget amendment scoping. Key chapters of the Specific Plan, including new chapters on Community Benefits and Parks/Open Space, need to be developed or updated. • TDM Implementation Guidelines (Hexagon) – A citywide Transportation Demand Management (TDM) Ordinance was adopted in EPA on June 1, 2021. It was anticipated that developers in the RBD would need to come together to develop a tailored strategy to reduce transportation demand in and out of the RBD. Hexagon will work with the R+A team and City staff to develop a stand-alone TDM Implementation Guidelines for the RBD. The guidelines will provide additional context/background, and will explain in more detail the TDM requirements including how the TDM Program will be implemented and monitored.
3) CEQA/SEIR Analysis
• Air Quality Analysis (David J Powers) – The SEIR was scoped to include a programlevel analysis of construction impacts related to air quality since at the time the scope was prepared, construction details were not available to complete a project-level construction analysis. Based on a revised approach recently discussed with the City, the SEIR will now include project-level analyses of the construction air quality impacts of two future development projects within the Plan area. Other future projects in the Plan area would be required to complete a project-specific construction analysis under a separate scope. The project-specific construction analysis will require additional coordination with the developers regarding construction assumptions and a more detailed construction analysis in the SEIR. (Note that the project-specific construction analyses to be included in the Specific Plan Update SEIR would be prepared under a separate scope/contract with the individual project developers). Future developments would be able to tier from this analysis (assuming construction is consistent with the assumptions used in the SEIR). Illingworth & Rodkin will support the project-level air quality analysis, complete additional noise analyses based on revisions to the cumulative traffic volumes, and attend project meetings as provided by the budget. • Additional Vehicle Miles Traveled (VMT) Modeling (Hexagon) – In order to accurately reflect impacts, Hexagon must calculate existing and total VMT to analyze the potential Air Quality/Greenhouse Gas impacts of the two development scenarios. To model the total VMT in the Plan area (which includes existing development), Hexagon must calculate the existing VMT for the Specific Plan area, so that only the AQ and GHG emissions resulting from the net increase in VMT are disclosed.

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• Water Supply Assessment (WSA) (S+W) – The project’s original scope included a more general “water supply assessment” which was completed by S+W as part of the Utilities Impact Study (and concluded at a high level that there is sufficient water supply for both RBD scenarios). However, this effort did not meet all the statutory requirements of State law SB 610, which applies to any 'project' with more than 500 units or equivalent non-residential impact. Much of the background work needed for the official WSA is complete but there is additional analysis that is needed to be CEQA compliant (such as analysis of single and multiple dry year conditions, and details on the City's water rights contracts).
• Biological Analysis (HT Harvey). The Biological Resources Report for the Specific Plan Update will be updated to account for the analysis of potential impacts of the Loop Road, based on the latest information regarding the road’s location and design, on sensitive habitat.

Next Steps and Timeline
As mentioned at the last RBD Study Session held on April 25, 2023, another study session discussion of the proposed TDM strategies and policies for the Specific Plan Area will be held on July 25, 2023. The Public Draft of the updated Specific Plan is scheduled to be released in the Fall. The public draft of the Supplemental Environmental Impact Report (DSEIR) related to this project is scheduled to be released in late October for a 45-day review period. After the close of public comments, the Planning Commission (PC) will convene and City staff will request PC’s recommendation on the Final SEIR and updated Specific Plan (tentatively scheduled for early December). Following the Planning Commission, the City Council hearings on the adoption of the Plan and certification of the SEIR will begin (estimated for early 2024).

Fiscal Impact
To fund the remaining work on the Specific Plan Update, City staff is pursuing this amendment to the R+A contract and the related DRA’s. The total amendment of $180,000, will be divided amongst the three participating developers (Sand Hill, Harvest, and Emerson). Therefore, there would be no fiscal impact to the City for this amendment.

As a reminder, the R+A contract is split into two parts: Part 1) Data Refresh, Analysis, Community Engagement, and Part 2) CEQA Environmental Review. The City has funded Part 1 work, while developers have funded Part 2 work.

The City Council appropriated $1,097,472 in funds to cover Part 1 of the R+A contract ($490,164 initially, and the $99,000 contingency) and then added $508,308 amendment on January 18, 2022. Three developers (Sand Hill, Harvest, and Emerson) have contributed installments towards the reimbursement of the environmental review portion (Part 2) of the R+A contract. Any project that benefits from a future update to the RBD Specific Plan will be required to reimburse the City for Part 1 on a basis proportional to that project’s entitled square footage. All past Developer contributions to Part 2 will be included in (and credited against) the calculation of a project’s total Plan Preparation Fee.

The table below outlines this proposed budget amendment and the initial contract and 1st amendment.

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Table 5
Contracts Activities City Developers Totals
Initial
Contract
• Part 1: Data
refresh, analysis,
community
engagement
$490,164
• Part 2:

Environmental
Review
$737,665
• Contingency $99,000
Initial Contract
Totals
$589,164 $737,665 $1,326,829
1st
Amendment
• Analysis of two
scenarios and
more public
engagement
$508,308
1st Amendment
Totals
$1,097,472 $737,665 $1,835,137
2nd
Amendment
• Meetings and
coordination
• Specific Plan
Updates
• CEQA/SEIR
Analysis
$180,000
2nd Amendment
Totals
$1,097,472 $917,665 $2,015,137
To codify the developer obligations in regards to this 2nd RBD Specific Plan amendment, City staff in conjunction with the City Attorney will update the City’s standard Developer Reimbursement Agreement (DRA) and issue revised installments before any of this scope can be initiated. To mitigate the City’s risk of incurring costs associated with the RBD Specific Plan update, applicable reimbursements will be due in accordance with the City’s project approval process. The Conditions of Approval (COA) will require the developer to pay the proportionate reimbursement amount of the City’s investment, as calculated per the above example, within ten (10) business days of the project approval.

Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at City Hall located at 2415 University Avenue, East Palo Alto. Additionally, the public was provided electronic advance notice of the study session through a notification sent from the City’s email contact database which contains hundreds of resident and stakeholder emails.

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Environmental
The proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment. No action or decision on the Project will occur at this study session. As discussed above, a draft Supplemental Environmental Impact Report is under preparation for the proposed Specific Plan update.

When the DSEIR public comment period begins later this year (approximately in October 2023), a Notice of Availability (NOA) will be distributed as required by CEQA law, and the document will be posted on the project website. After the 45-day public comment period ends, the City will consider and respond to substantive comments received on the draft SEIR and compile a response to comments document. Once the responses and revisions are complete, a final SEIR will be released, consisting of the response to comments document and the draft SEIR. The final SEIR will be considered by the City Council for certification in compliance with CEQA.

Attachments

1. Resolution

3.2 Packet Pg. 31
RESOLUTION NO. ___

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

AUTHORIZING THE CITY MANAGER TO EXECUTE A SECOND AMENDMENT TO THE CONTRACT WITH RAIMI + ASSOCIATES TO PROVIDE CONSULTANT

SERVICES ASSOCIATED WITH THE RAVENSWOOD BUSINESS DISTRICT/FOUR

CORNERS TRANSIT ORIENTED DEVELOPMENT SPECIFIC PLAN AREA AND

AMEND DEVELOPER REIMBURSEMENT AGREEMENTS FOR REIMBURSEMENT

OF COSTS OF REVIEW OF DEVELOPMENT POTENTIAL IN PLAN AREA WHEREAS, the City of East Palo Alto ("City") is experiencing a significant increase in development activity and City staff sought additional capacity to help analyze the current development activity and the Ravenswood Business District/Four Corners Transit Oriented Development Specific Plan Area (RBD); and WHEREAS, Raimi + Associates has extensive experience working in and with the community of East Palo Alto and was a key member of the team that helped produce the City' s General Plan, and due to Raimi + Associates' detailed knowledge and experience with the City, the City Manager recommended that the City Council waive the formal bidding procedures so that the City may enter into contract with Raimi + Associates; and
WHEREAS, on September 15, 2020, the City Council of the City of East Palo Alto ("City Council") authorized the City Manager to enter into a contract with Raimi + Associates, in an amount not to exceed $ 1,326,829, to provide the analysis, community engagement, and environmental review necessary for the City Council to consider an amendment to the Ravenswood Business District ("RBD") Specific Plan; and
WHEREAS, on October 6, 2020, the City Council authorize Developer Reimbursement Agreements with certain developers within the RBD to fund a share of the associated costs for the environmental review portion of the Raimi + Associates contract; and
WHEREAS, on January 11, 2021, a contract was executed between the City of East Palo Alto and Raimi + Associates, in an amount not to exceed $ 1,326,829. The term of the agreement commenced on September 15, 2020 and was approved for three years; and
WHEREAS, on November 18, 2021, the City Council hosted a study session on Actions Related to the Ravenswood Business District Specific Plan Update and directed City staff and the consultants to study two scenarios in the Environmental Impact Report and

3.2.a
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Attachment: Resolution (2728 : Ravenswood Business District / 4 Corners Specific Plan – Second Contract Amendment to Developer Reim) add additional engagement, and thus these tasks will necessitate additional budget to be added to the Raimi + Associates contract.

WHEREAS, on January 18, 2022, the City Council authorized the City Manager to execute amendment to the Raimi + Associates contract, with an original not-toexceed contract amount of $1,326,829 and increase the contract by $508,308, to a new not-to-exceed total of $1,835,137 for professional services. This amendment and increase was applied to the City portion of the agreement and follows the same terms and provisions of the original agreement. In the future, if projects are approved, developers would be required to repay the City for the costs incurred due to the RBD update including this amendment increase.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY:

1. Finds the foregoing recitals are true and correct, and are incorporated by this reference into this action; and

2. Authorizes the City Manager to execute amendment to the Raimi + Associates contractto increase by $180,000 for a new not-to-exceed total of $2,015,137 for professional services. This amendment and increase would apply to the Developer portion of the agreement.

3. Authorizes the City Manager to execute any other amendments related to Developer Reimbursement Agreements, as necessary.

PASSED AND ADOPTED this 18th day of July 2023 by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED:

Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney

3.2.a
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Attachment: Resolution (2728 : Ravenswood Business District / 4 Corners Specific Plan – Second Contract Amendment to Developer Reim)

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: Award of Contract for Spanish Interpretation Services Recommendation
Adopt a Resolution:

1. Ratifying payment to Culture Bridges, LLC in an amount of $1,123.75 for Spanish interpretation services through June 30, 2023

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
• Promote Health & Public Safety
• Ensure Our Financial and Organizational Health
Background
On October 17, 2021, the City entered into a contract with Culture Bridges, LLC with a not-toexceed amount of $10,000. The first Council meeting with simultaneous translation was held on October 19, 2021. Following an informal bidding process, that contract was amended once in July of 2022 to its current not-to-exceed amount of $27,000.

On November 2, 2021, staff presented the Council with a report on simultaneous Spanishlanguage translation over Zoom.

While in the past, the annual not-to-exceed contract value for these services has been lower, it has been Council’s direction and staff’s intention to increase the meetings for which this service is provided. Council has directed staff to broaden the scope of the interpretation services to all Rent Stabilization Board meetings and other Board and Commission meetings

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at staff’s discretion. Beyond all Council meetings, staff will be considering exercising its discretion to provide more board, commissions and community meetings will have this service available to them under the new contract.

Analysis
Ratification of Payment
As noted above, the City’s existing contract is with Culture Bridges, LLC. However, earlier this year, staff determined that there were insufficient funds remaining on that contract for services rendered during that Fiscal Year.

As discussed more fully below, staff further determined that it would be best to issue a Request for Proposals (RFP) to find a long-term Spanish-language interpretation partner.

However, before the results of the RFP could be awarded, the contract with Culture Bridges was exhausted.

Given the shortfall in funding, the staff is are requesting that the Council ratify $1,123.75 for the additional in services overruns for the month of June 2023. We expect a similar amount for July and will return in September for final payment for those services.

Proposal Review
City staff released the RFP through an advertisement on March 23, 2023, The City received 5 proposals in response to the RFP. Following the initial review of the proposals, three bidders were moved forward for interviews and sample simultaneous interpretation. Following the interviews, staff is proposing Cultural Bridges, LLC as the City’s long-term simultaneous Spanish interpretation partner. During the interview process, staff determined that while the other applicants demonstrated sufficient interpretation performances and one provided a bid that was slightly lower, Cultural Bridges, LLC demonstrated a higher capacity and experience with topics related to municipal government.

The City Clerk has worked with Culture Bridges during the current contract term and have has been satisfied with their work for the following reasons:

Cost effectiveness; this contractor conveyed the ability to provide a high work quality, with efficient and effective use of funds;
Excellent responsiveness and consistent high quality customer service; and Lack of complaints and verifiable quality assurance standards.

Based on the foregoing and given the price,1 staff recommends that the Council find that Culture Bridges, LLC is the lowest responsible bidder pursuant to Section 2.84.080(H) of the East Palo Alto Municipal Code, including based on their ability, capacity and skill and their quality of past performance for the City.

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Should the Council decide not to approve the awarding of the contract, staff can provide more information regarding other applicants and can re-open the Request for Proposals to search for an alternative interpretation services provider. Continuation of Culture Bridges, LLC as the City’s interpretation service provider is expected to deliver a high level of service to the community at a fair price.

Fiscal Impact
The budget for Fiscal Year 2023-24 includes the requested annual amount of $50,000. For future years, this amount will need to be evaluated and included in the annual budget if interpretation services continue to be needed.

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.

Attachments

1. Resolution

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1 of 1
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO
RATIFYING PAYMENT TO CULTURE BRIDGES, LLC IN AN AMOUNT OF $1,123.75 FOR SPANISH INTERPRETATION SERVICES THROUGH JUNE 30, 2023, AND AUTHORIZING THE CITY MANAGER

TO NEGOTIATE AND EXECUTE A THREE-YEAR CONTRACT, IN A FORM APPROVED BY THE CITY ATTORNEY, WITH AN ANNUAL NOT-TO-EXCEED OF FIFTY THOUSAND DOLLARS ($50,000), FOR CITYWIDE SPANISH INTERPRETATION SERVICES WITH CULTURE BRIDGES, LLC.

WHEREAS, current interpretation services contract for the City of East Palo Alto expires on December 31, 2022, and has been effectively providing services to the City since 2021; and WHEREAS, the City of East Palo Alto issued a request for proposals (RFP) based on a scope of services necessary to provide simultaneous interpretation at City Council meetings; and WHEREAS, the City of East Palo Alto received five proposals; Culture Bridges, LLC was very competitive in price, as it was within $5 of the lowest bidder in terms of price alone, and meets the definition of the lowest responsible bidder because the City Clerk has worked with Culture Bridges during the current contract term and have been satisfied with their work for the following reasons:
• Cost effectiveness; this contractor conveyed the ability to provide a high work quality, with efficient and effective use of funds;
• Excellent responsiveness and consistent high quality customer service; and • Lack of complaints and verifiable quality assurance standards.; and WHEREAS, staff has negotiated an annual cost of this service up to an amount of $50,000.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY:

1. Finds the foregoing recitals are true and correct, and are incorporated by this reference into this action; and

2. Ratifies payment to Culture Bridges, LLC in an amount of $1,123.75 for Spanish interpretation services through June 30, 2023; and

3. Awards a contract to Culture Bridges, LLC and authorizes the City Manager to negotiate execute a contract with Culture Bridges LLC, in a form approved by the City Attorney, for Citywide Spanish-language simultaneous interpretation services for a term of three years, at a compensation rate of $50,000 per year for a total not-to-exceed of $50,000.

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Attachment: Resolution (2735 : Award of Contract for Spanish Interpretation Services) 1 of 1
PASSED AND ADOPTED this 18th day of Jul 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

Ruben Abrica, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê

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Attachment: Resolution (2735 : Award of Contract for Spanish Interpretation Services)

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Tomohito Oku, Finance Director
Bo-Kyoung Kim, Financial Services Manager
SUBJECT: Monthly Cash Treasury Report for May 2023
Recommendation
Accept and file the Cash Treasury Report for the month of May 2023.

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Ø Ensure Our Financial and Organizational Health
Background
Pursuant to Section 53646 of the Government Code of the State of California, the City Treasurer may submit a quarterly report to the City Council regarding the funds and investments of the City. Further, City Investment Policy Section XVIII requires monthly reporting of investment transactions, as specified. Because the City participates in State and County investments pools and does not independently broker or engage outside investment advisors to transact investments, the monthly reporting provides a snapshot of overall cash receipts, transfers, and disbursements on a monthly basis.

Analysis
The Monthly Cash Treasury Report (“Report”) covers cash and investments of the City in the three cash and investment accounts: Wells Fargo Bank, San Mateo County Pool, and the California State Local Agency Investment Fund. The Report does not include petty cash, or the California State Community Infrastructure Program (SCIP) bond proceeds held by a trustee in the name of the City. For investment purposes, City cash is pooled, except for bond proceeds held by a trustee. The City does not have, nor is it legally required to have, separate bank accounts for each individual fund. However, all cash is segregated in the City’s accounting records. Monthly cash transactions for the monthly period ending May 31, 2023, are as follows:

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Account Beginning Balance Receipts Disbursements
Quarterly
Interest
Allocation
Inter-Account
Transfers Ending Balance
Wells Fargo Bank 3,172,622.69 2,626,205.26 (2,692,519.10) - (100,000.00) 3,006,308.85 LAIF 48,075,277.30 - - - 10,000,000.00 58,075,277.30
San Mateo County Pool 79,317,658.84 3,278,228.87 - - (9,900,000.00) 72,695,887.71 Total 130,565,558.83 5,904,434.13 (2,692,519.10) - - 133,777,473.86 The Wells Fargo cash balance reflects the book value balance (i.e., total outstanding checks not cashed are deducted from the account balance). The month-to-date cash and investment balance decreased by approximately $0.2M compared to the balance as of April 30, 2023.

May receipts, a total of approximately $2.6M, primarily consist of Developer deposits ($0.7M), Tax distribution ($0.5M), Business Tax collection for April ($0.2M), TOT ($0.2M), Veolia ($0.1M), and other various receipts.

May disbursements total $2.7M, primarily consist of payroll costs ($1.1M), Recology services for Q3 ($0.7M), Freyer & Laureta ($0.1M), Raimi Associates ($0.1M), SCA of CA ($0.1M), and other recurring operating expenditures.

City staff made a strategic decision to transfer a portion of the investment fund from San Mateo County Pool to LAI to achieve greater liquidity and investment diversification while operating at a prudent level of risk.

The table below reflects recent treasury yield comparisons up to five-year notes since that is the maximum maturity the City may invest:

May-23 Apr-23 May-22
6-month Treasury Bill 5.23 4.86 1.60
2-year Treasury Note 4.40 4.04 2.53
5-Year Treasury Note 3.74 3.51 2.81
Local Agency Investment Fund (LAIF) average monthly effective yields were 2.993% in May which increased by 0.12% from April 2023. San Mateo County monthly gross earnings for May were 3.072% compared to 3.130% in April 2023. The County Pool earnings estimates for FY 22-23 are at 2.2%.

Staff believes the City has investment liquidity and anticipated revenues to meet the City’s anticipated expenditure requirements for the ensuing six months.

The following table shows a breakdown of cash and investment balance by fund type.

Deposit Value Market Value
General Fund (Inc. Petty cash of $10,800) $ 30,337,881 $ 30,337,881 General Sub-Funds (Commited/Reserved) $ 19,204,293 $ 19,204,293 City Funds Restricted and Committed $ 80,891,974 $ 80,891,974 Successor Agency Trust $ 3,354,120 $ 3,354,120
Unrealized Gain on Investment Pools $ - $ (2,469,847)
$ 133,788,269 $ 131,318,422
Summary May 31, 2023

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The book market value totals $131,318,422, including an unrealized loss of $2,469,847, reflecting treasury yields during the calendar year. All except for General Fund balance is restricted by either City Council or external parties for specific purposes. Unrestricted cash and investment balance under General Fund ($30,337,881) may be used at Council discretion.

Fiscal Impact
None. This report is informational.

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.

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EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Humza Javed, Public Works Director
SUBJECT: Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow
Recommendation
Authorize the City Manager to negotiate and execute a Memorandum of Understanding with Bay Area Community Resources, in a form approved by the City Attorney, in an amount not-toexceed $28,000 in matching funds to hire a Sustainability Service Corps Fellow to assist in finalizing and implementing the East Palo Alto Climate Action Plan 2030 Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Promote Health and Public Safety
Background
On March 1, 2022, staff provided the City Council with an update on the City’s efforts to update the 2011 East Palo Alto Climate Action Plan (2011 EPA CAP) and prepare the East Palo Alto Climate Action Plan 2030 (EPA CAP 2030). The updated CAP aims to outline a framework of feasible solutions to accomplish the greenhouse gas (GHG) emission reductions outlined by the State.

The City has taken the following actions since March 1, 2022:
· On March 3, 2022, Climate Resilient Communities reviewed the Draft EPA CAP 2030 in its entirety and provided comments.
· On March 16, 2022 the Public Works and Transportation Committee reviewed the Draft EPA CAP 2030 and provided comments.
· On April 25, 2022, the Planning Commission reviewed the Draft EPA CAP 2030 and

3.5 Packet Pg. 42
provided comments.
· On April 19, 2023, the Public Works and Transportation Commission reviewed the updated Draft EPA CAP 2030
· On July 10, 2023, the Planning Commission provided comments and approved the updated Draft EPA CAP 2030
Staff also provided presentations on the Draft EPA CAP to several community groups and received oral comments over the course of the last year.

Staff anticipates returning to the City Council for a final review of the draft Climate Action Plan in late summer/fall 2023. Subsequent to the adoption of the document, a number of implementation items need to occur.

Since 2022, the City has worked with Bay Area Community Resources (BACR) to host a Fellow. The Sustainability Service Corps program is part of AmeriCorps, a national, federallyfunded community service program. BACR collaborates with public and nonprofit organizations across California to recruit, train, and place Sustainability Service Corps Fellows at public and nonprofit organizations, where they support greenhouse gas reduction programs or other sustainability projects such as implementing programs that save energy, water or waste; educating students in classrooms or online; developing greenhouse Gas Inventories, Climate Action Plans, and other capacity-building documents; and outreach to raise community engagement.

Over the course of the last year, the Fellow working with the City has collaborated with various City departments and community stakeholders to develop the Draft EPA CAP 2023. The City seeks to bring on a new Fellow to complete the EPA CAP 2030 and assist with certain implementation items. Fellows will ideally devote a minimum of 24 hours per week to directly working on emissions, water, waste, or energy reduction projects. The term of service starts the first week of September and ends no later than August 31, 2023.

Analysis
To partner with BACR to host a Fellow, the City needed to prepare a job description and post it prior to the end of June 2023. The application period closes in August, then the City and BACR will conduct interviews and hire a Fellow. The Fellowship will begin the first week of September 2023.

This Fellowship removes access barriers by only requiring a high school diploma/GED as an educational requirement, status as a US citizen or legal permanent resident, and residency in California. Fellowship opportunities enable community members to engage in meaningful Climate Action work for a limited duration and receive a Segal Education Award up to $6,895 in return for their service, while receiving a monthly stipend of $2,727 and additional pay of $10,000 as an end of the program award. A $28,000 match is required from the host agency to support implementation of the program.

Exposure to climate action planning and implementation will ensure the Fellow will be engaged

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in public outreach, education, research, and developing an understanding of the many cobenefits the community will enjoy through emissions reductions and other goals to be fully outlined through the EPA CAP 2030.

The Fellow will be exposed to public engagement efforts beyond the Climate Action Plan, including Coastal Cleanup Day, other community cleanup events, MLK Day Tree Planting, Earth Day, National Rivers Cleanup Day, and Bike to Work Day, among other public events.

This exposure will also enable the Fellow to be exposed to nonprofit partnerships, other governmental agencies, and other regional Climate Action Plan collaboratives the City engages in.

By hiring this Fellow, the City will temporarily enhance Climate Action capacity while the Fellow and Public Works team seeks funding opportunities for further capacity building, while preparing an implementation plan for the 2030 CAP upon adoption.

Fiscal Impact
A budget of $28,000, funded through the City’s General Fund, is included in the adopted FY 2023/2024 annual Public Works Budget.

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.

Attachments

1. Resolution

2. MOU

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1 of 2
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

AUTHORIZING THE CITY MANAGER TO NEGOTIATE AND EXECUTE A MEMORANDUM OF UNDERSTANDING WITH BAY AREA COMMUNITY RESOURCES FOR FISCAL YEAR 2023-2024 IN AN AMOUNT NOT-TO-EXCEED $28,000 IN MATCHING FUNDS FOR A CLIMATE CORPS

AMERICORP FELLOW TO ASSIST IN UPDATING THE PLANNING AND IMPLEMENTATION OF THE 2030 COMMUNITY CLIMATE ACTION PLAN
WHEREAS, Bay Area Community Resources (BACR) collaborates with public and nonprofit organizations across the state of California to recruit, train, and place Climate Corp AmeriCorps Fellows at public and nonprofit organizations; and
WHEREAS, the City of East Palo Alto has applied for a Climate Corp AmeriCorps Fellow to support the work of developing and planning an implementation plan for the anticipated 2030 Community Climate Action Plan; and
WHEREAS, the City of East Palo Alto is dedicated to supporting development of Climate Action professionals and seeks to benefit from staff augmentation through the fellowship program; and WHEREAS, BACR is committed to training and supporting the Fellow with a comprehensive training program, a variety of benefits and financial incentives and rewards; and WHEREAS, the City Council wishes to benefit from the inclusion of a Climate Corp AmeriCorp fellow to support the planning and implementation of an updated Climate Action Plan; and WHEREAS, the City intends to support the Climate Corp AmeriCorp Fellow by providing supervision, direction, and meaningful inclusion in the development of an updated Climate Action Plan and Implementation Plan as well as other sustainability events.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY authorizes the City Manager to:

1. Finds the foregoing recitals true and correct, and are incorporated by this reference into this action;

2. Authorize the City Manager to negotiate and execute Memorandum of Understanding with Bay Area Community Resources, in form approved by the City Attorney (Exhibit A), in an amount not-to-exceed $28,000 in matching funds to hire a Climate Corps AmeriCorps Fellow to assist in updating and implementation of the 2030 Community Climate Action Plan.

PASSED AND ADOPTED this 18th day of July 2023, by the following vote:

AYES:

NOES:

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Attachment: Resolution (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) 2 of
2 ABSENT:

ABSTAIN:

Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Collin, City Clerk John D. Lê, City Attorney

3.5.a
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Attachment: Resolution (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) Memorandum of Understanding (MOU) between
Bay Area Community Resources and City of East Palo Alto September 1, 2023 – August 31, 2024
SUBJECT: Sustainability Service Corps
This MEMORANDUM OF UNDERSTANDING is hereby made and entered into by and between Bay Area Community Resources, hereinafter referred to as “BACR” and City of East Palo Alto, hereinafter referred to as “Host Agency”. Collectively, BACR and Host Agency are hereinafter referred to as the “Parties.”
ARTICLE I – BACKGROUND AND OBJECTIVES
BACR has contracted with AmeriCorps (formerly Corporation for National and Community Service – CNCS) through California Volunteers to implement the Sustainability Service Corps program. BACR is collaborating with public and nonprofit organizations across the state of California to recruit, train, and place Sustainability Service Corps Fellows, hereinafter referred to as “Fellow(s)”, at public and nonprofit organizations, where they will support greenhouse gas reduction programs or other sustainability projects, such as implementing programs that save energy, water, or waste; educating students in classrooms or online; developing Greenhouse Gas Inventories, Climate Action Plans, and other capacitybuilding documents; and conducting outreach to raise community engagement. Fellows will ideally devote an average minimum of 24 hours per week to directly working on emissions, water, waste, or energy reduction projects.

The following recitals describe the purpose of this MOU:
● BACR and Host Agency agree to partner to implement projects with the support of Fellows.
● Fellows can only serve on contracted and allowable service activities outlined in the job description which is co-created by BACR and Host Agency. ● The nature of the program necessitates Host Agency participation in timely outcome reporting, supervision, and support for the Fellow(s).
● Host Agency desires to host Fellow(s), and BACR desires to provide Fellow service to Partner. This document is to establish the basic guidelines and expectations between the Host Agency and BACR.

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Attachment: MOU (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) ● The Host Agency and BACR enter into this MOU in order to memorialize the terms of BACR's performance of the services and the Partner's obligations with respect thereto.

The objectives of the program are as follows:
● Host Agency will be able to report measurable reductions in greenhouse gas (GHG) emissions, energy, water, or waste at the end of the Fellowship. ● Fellows may support the Host Agency through efforts in community outreach, capacity building climate resiliency projects, and K-12 youth education. ● Fellows will be able to develop a practical skill set and expertise in the realm of climate change management at the community level.
● Host Agency communities will be able to increase community participation towards further GHG reductions through volunteer opportunities that are created and/or increased through the participation of the Fellow.

The Parties will work together to promote the partnership and its benefits to the projects and community at large.

Per Federal Guidelines and BACR policies, the Sustainability Service Corps Program must follow equal opportunity employment requirements and be accessible to persons with disabilities by providing reasonable accommodation. In support of this:
● BACR and Host Agency will comply with Equal Opportunity Employment guidelines. ● BACR and Host Agency will endeavor to make reasonable accommodations to known physical or mental limitations of qualified Fellows with disabilities unless the accommodation would impose an undue hardship on the program operations. ● BACR and Host Agency will endeavor to accommodate the sincere religious beliefs of Fellows to the extent such accommodation does not pose an undue hardship on the Host Agency's operations.
● BACR and Host Agency will not allow any form of retaliation against individuals who raise issues of equal employment opportunity or reasonable accommodation.

ARTICLE II – FELLOWSHIP TERM
The Fellows’ term of service with the Host Agency is for a period of 11 months. The term of service starts as soon as September 1, 2023 but no later than October 2, 2023, and ends no later than August 31, 2024. While working for the Host Agency, the Fellow(s) will complete a minimum of 1,700 hours total to receive an end of program Segal Education Award of $6,895.00 and a California for All Education Award of $3,105.00.

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Attachment: MOU (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) It is expected that the Fellow(s) will devote 80-90% of their time (1,360-1,530 hours) to “Service” (projects agreed upon with the Host Agency and detailed in the Scope of Work, see Article III) and 10-20% of their time (170-340 hours) to “Training” (structured and independent professional development opportunities including mandatory Sustainability Service Corps trainings and events). No more than 20% of time will be spent on “Training”.

If a Fellow is unable to complete the expected number of hours by the end date in the Fellow’s contract (i.e. Member Service Agreement) due to any unforeseen circumstances during their term they may, at the discretion of BACR and the agency, be allowed time to complete their hours at the agency, or at another approved agency where there are service opportunities available. The last day Fellows are eligible to earn hours for the 2023-2024 program year will be August 31, 2024.

ARTICLE III – BACR SCOPE OF SERVICES
BACR agrees to perform the following services:
● Be the official employer-of-record for the Fellow(s) which includes providing a living stipend of $2,727.27/month, as well as coverage options for healthcare, childcare, and student loan deferment.
● Recruit, screen, and select the Fellow(s). BACR will lead, and Host Agency will assist, in the recruitment and selection of the Fellow(s), including, without limitation, developing a position description, conducting interviews, and participating in the final selection of the Fellow(s). The Fellow(s) must be a permanent resident of California by the time mandatory background checks are conducted before the start of the Fellowship. ● Train Fellow(s) with a comprehensive training program. Fellows are expected to attend mandatory events and complete assignments in a timely manner. BACR will ensure that the training program does not exceed the agreed upon total number of “Training” hours as defined in Article II. The training program includes:
○ Resources
■ A training manual of AmeriCorps and Sustainability Service Corps program policies, best practices, and conduct expectations; ■ Access to professional networks and coaching.
○ In-Person Events
■ A four-day orientation before “Service” begins with the Host Agency; ■ A mid-year retreat;
■ An end-of-year graduation celebration.
○ Online Trainings
■ Monthly, virtual, three-hour workshops facilitated by BACR with a focus on professional development and transferable skill-building. Host Agency will be provided with a full schedule prior to the start of the program;

3.5.b
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Attachment: MOU (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) ■ Enrollment in the University of California’s Climate Stewards Certification program, a three-month course featuring six biweekly classes (three hours each), coursework, assigned readings, and field trips. ○ Independent Professional Development
■ Customizable, self-directed opportunities designed by the Fellow(s) and the Parties to support the Fellow(s) professional development and career pursuits;
■ Access to a modest professional development budget from BACR. ● Support Fellow(s) and Host Agency via required meetings and assignments, including:
○ A Regional Supervisor (a representative from BACR) assigned to the Host Agency whose main function is to support both the Host Agency and the Fellow during the term of service through monthly verbal check-in meetings, email support, professional development resources, and conflict resolution, if necessary; ○
○ Monthly, virtual supervision meetings attended by the Fellow(s), the Site Supervisor (a person assigned by the Host Agency to direct the Fellow(s) in their projects), and the Regional Supervisor;
○ Two Fellowship Performance Reviews including surveys completed by the Host Agency and Fellow and debrief conversations facilitated by the Regional Supervisor;
○ A specific Scope of Work plan developed by the Fellow with the Host Agency that aligns with the GHG reduction initiatives provided by the Host Agency within the first month of service;
○ Defined metrics for the Fellow to measure and track the progress of resource waste reduction, K-12 education, capacity building, or community outreach throughout the placement, developed collaboratively by the Parties. ● Define and implement any corrections to Fellow’s plan determined to be necessary based on feedback collected from Fellow and Host Agency.

BACR reserves the right to remove Fellow(s) from Host Agency should the placement become unsuitable or unsafe for Fellow(s), or Partners violate the terms of this MOU. BACR will make reasonable attempts to address and mitigate concerns with Partners as appropriate.

ARTICLE IV – HOST AGENCY REQUIREMENTS, RESPONSIBILITIES, AND

EXPECTATIONS
In order to provide a clear and well-defined service experience for participating Fellow(s), Host Agency agrees to:
● Provide at least one specific GHG reduction initiative that the Fellow(s) can work on during their term of service. Initiatives must be well-defined, approved for

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Attachment: MOU (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) implementation and include specific emissions, water, waste, or energy reduction, and/or education, community outreach, or capacity-building targets, or have the capacity to define specific project targets. Host Agency will work with BACR to finalize a mutually agreed-upon Scope of Work no later than one month after the Fellow(s) begins work. ● Assign a Site Supervisor who will be available:
○ To devote at least one hour per week of direct one-on-one time with Fellow(s).

This time is different from time spent working together on projects; the one-onone time should be structured with an agenda that helps the Fellow(s) organize their priorities, discuss any challenges, and explore professional development opportunities);
○ Direct the Fellow(s)’ projects on a daily basis and provide specific guidance and tasks as they complete their projects;
○ Complete monthly verbal reporting to BACR in Regional Supervisor check-in meetings, indicating whether progress is being made on the initiatives; ○ Provide feedback on the Fellow(s)’ performance: two times a year, fill out and submit an evaluation form to provide feedback on Fellow activities, performance, and offer data on specific resource or GHG reduction metrics; ○ Attend the Partner Orientation (August) and Mid-Year Call (via webinar); ○ Review and acknowledge BACR’s program policies and best practices for supervision.
● Allow the Fellow(s) to attend mandatory trainings and participate in program events as described above, even if they conflict with “Service” activities. Written permission must be requested by the Site Supervisor to the Regional Supervisor in advance of the event if the Fellow(s) must be absent.
● Allow BACR to share results from this program through grant reporting and other means as BACR deems appropriate.
● Create an inviting and safe workplace culture for the Fellow(s) that values their personal safety, mental health, and personal and professional development goals, regardless of their own beliefs, identities, and backgrounds.
● Follow BACR’s disciplinary procedure for the Fellow(s), if necessary, which includes verbal warnings (up to two issued by the Site Supervisor to the Fellow(s) and reported to the Regional Supervisor), a written Performance Improvement Plan signed by all Parties (includes clear expectations and consequences for improvement within a minimum of two weeks), and a final review by BACR before terminating the Fellow(s). ● Ensure that Fellow(s) do not do the following while charging time to the AmeriCorps Program, accumulating service or training hours, or otherwise performing activities supported by the AmeriCorps Program:
○ Engage in any activity that is illegal under local, state or federal law; ○ Engage in activities that pose a significant safety risk to others;

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Attachment: MOU (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) ○ Engage in any of the Prohibited Activities outlined in the Policies & Procedures handbook, including, but not limited to:
■ Attempting to influence legislation;
■ Organizing or engaging in protests, petitions, boycotts, or strikes; ■ Assisting, promoting, or deterring union organizing;
■ Impairing existing contracts for services or collective bargaining agreements;
■ Engaging in partisan political activities, or other activities designed to influence the outcome of an election to any public office; ■ Participating in, or endorsing, events or activities that are likely to include advocacy for or against political parties, political platforms, political candidates, proposed legislation, or elected officials; ■ Engaging in religious instruction, conducting worship services, providing instruction as part of a program that includes mandatory religious instruction or worship, constructing or operating facilities devoted to religious instruction or worship, maintaining facilities primarily or inherently devoted to religious instruction or worship, or engaging in any form of religious proselytization;
■ Providing a direct benefit to a business organized for profit; a labor union; a partisan political organization; or a nonprofit organization that fails to comply with the restrictions contained in section 501(c)(3) of the Internal Revenue Code of 1986 except that nothing in this section shall be construed to prevent participants from engaging advocacy activities undertaken at their own initiative; and
■ An organization engaged in the religious activities described in paragraph (g) of this section, unless AmeriCorps assistance is not used to support those religious activities;
■ Conducting a voter registration drive or using AmeriCorps-funded time to conduct a voter registration drive;
■ Providing abortion services or referrals for receipt of such services; and ■ Such other activities as the AmeriCorps may prohibit. ○ AmeriCorps members may support fundraising and resource-gathering for direct support of your program's service activities, but with restrictions:
■ Examples of fundraising activities AmeriCorps members may perform include, but are not limited to, the following:
● Seeking donations of books from companies and individuals for a program in which volunteers teach children to read;
● Support research and writing of a grant proposal to a foundation to secure resources to support the training of volunteers;

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Attachment: MOU (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) ● Securing supplies and equipment from the community to enable volunteers to help build houses for low-income individuals; ● Securing financial resources from the community to assist in launching or expanding a program that provides social services to the members of the community and is delivered, in whole or in part, through the members of a community-based organization; ● Seeking donations from alumni of the program for specific service projects being performed by current members.
■ AmeriCorps members may not:
● Raise funds for living allowances or for an organization's general (as opposed to project) operating expenses or endowment; ● Write a grant application to the Corporation or to any other Federal agency.
● Spend more than 10% of their term of service performing fundraising activities.
○ Individuals may exercise their rights as private citizens and may participate in the activities listed above on their initiative, on non-AmeriCorps time, and using nonAmeriCorps funds. However, the AmeriCorps logo must not be worn while doing so.
● Support and encourage the promotion of National Service through the following:
○ Posting AmeriCorps and National Service information at all service sites ○ Posting a list of the above Prohibited Activities at all service sites ○ Ensuring Fellows wear appropriate uniforms or AmeriCorps pin as required by BACR
○ Allowing Fellows to leave the program site to participate in pre-arranged National Service identity activities and monthly training days.
○ Allowing Fellows to spend up to a maximum of 20% of their total hours on thematic professional development activities (including regular monthly programmatic training days).
● [Desired, but not required] to provide program-wide support by either ○ Facilitating at least one all-day training event for all Fellows or, ○ Speaking during a session at one all-day training event for all Fellows ARTICLE IV – TERM OF AGREEMENT
This MOU will become effective on the date of final signature and shall continue in full force and effect through August 31, 2024.

ARTICLE V – KEY OFFICIALS

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Attachment: MOU (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) The individuals listed below are identified as key personnel considered essential to the projec t being performed under this Memorandum of Understanding.

For BACR
Job Title: Director of National Service
Name: Adolfo Rivera
Address: 11175 San Pablo Ave, El Cerrito, CA 94530
Phone Contact: (510) 559-5550
Email Contact: [email protected]
For Host Agency:

Job Title Public Works Director
Name Humza Javed
Address 1960 Tate Street
Phone Number (650) 853-3130
Email Contact [email protected]
No change in key officials will be made by either BACR or Host Agency without written notification thirty days in advance of the proposed change. The notification will include a justification in sufficient detail to permit evaluation of the impact of such a change on the scope of work.

ARTICLE VI – PAYMENT
Host Agency will provide BACR with $28,000 per Fellow, and requests one (1) Fellows for the coming program year for a total payment amount of $28,000 to support the implementation of the program. Host Agency will receive invoices one month prior to the scheduled payment date.

This payment will be made according to the following schedule:
● Payment 1:
o Due: November 30, 2023
o Amount: $14,000
● Payment 2:
o Due: January 31, 2024
o Amount: $7,000
● Payment 3:
o Due: March 31, 2024
o Amount: $7,000
ARTICLE VII – TERMS
It is mutually agreed by all Parties to this MOU that:

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Attachment: MOU (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) MOU:
● The Parties will review the effectiveness of the MOU after each participating year and evaluate potential modifications that more adequately address the purpose of this MOU. ● In the event that a Party no longer approves implementation of any of the provisions referenced in this MOU, the individual Parties agree to promptly confer to determine what, if any, modifications to this MOU should be made to address the issue(s) of concern.
● In the event that a Party no longer desires to be a part of this MOU or any modification(s), then the individual Party in their sole discretion may terminate their relationship within this MOU. Written notice must be provided by the Party desiring to withdraw from the MOU at least thirty (30) days prior to termination.

Fellow Recruitment, Hiring, and Termination:
● If the Host Agency ultimately fails to select a Fellow from a list of applicants deemed qualified by BACR, Host Agency will pay BACR a $2,500 fee (included in the total cost) for the recruiting effort promptly following receipt of an invoice from BACR. ● The Parties will explore reasonable next steps for recruitment in the event that BACR is unable to place a qualified Fellow at the Host Agency by the final possible start date.

Next steps include a shorter term of service with corresponding lower payment amount (dependent on availability), postponement to future term of service, or whatever solution is deemed most beneficial to the Parties.
● In the event that the Fellow(s) is hired to begin after the start of the program, the full match will still be required. All full-time AmeriCorps Members receive the same benefits and are expected to finish the term of service regardless of their start date so the cost remains the same.
● Host Agency agrees to not hire the Fellow as a full-time employee until and unless the Fellow completes their entire term of service described in this MOU. If the Host Agency hires the Fellow before the end of the program year, Host Agency is subject to a $2,500 fine for the time and resources spent on recruiting, training, and supporting the Fellow. If there is extra space in the program, BACR agrees to recruit another Fellow to complete the term of service if Host Agency desires, in which case the Host Agency must still pay BACR for the services described in this MOU and according to the payment schedule outlined in Section VI (Payment). In the event a replacement Fellow is available, but the Host Agency does not desire a replacement Fellow, effectively ending the term of service, Host Agency is subject to a $2,500 fine for exiting the contract before the agreed upon end date and a $2,500 fine for the time and resources spent on recruiting and training the Fellow, amounting to a total fine of $5,000. The Host Agency will not be reimbursed for payments already made to BACR.
● In the event that the Fellow(s) leaves the program for any reason aside from being hired as a full-time employee of the Host Agency, prior to the end date in the Fellow’s contract

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Attachment: MOU (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow) (i.e. Member Service Agreement), a prorated amount will be issued for match funds up until April 30, 2024. Prorated amounts are determined by the following equation: Total partner match divided by number of total stipend payments planned for the Fellow(s) multiplied by actual number of stipend payments distributed. The match is used throughout the year for AmeriCorps Member stipends, benefits, training, and programmatic costs; all Agency match funds will have been absorbed by the program by the April 30, 2024 deadline so no prorated amount will be issued after that date.

Responsibility
● Each Party agrees that it will be responsible for its own acts and the results thereof and shall not be responsible for the acts of the other Party and the results thereof. Each Party, therefore, agrees that it will assume all risk and liability to itself, its agents or employees, for any injury to persons or property resulting in any manner from the conduct of its own operations, and the operation of its agents or employees under this MOU, for any loss, cost, damage, or expense resulting at any time from any and all causes due to any act or acts, negligence, or the failure to exercise proper precautions, of or by itself or its agents or its own employees, while occupying or visiting the premises under and pursuant to the MOU.

ARTICLE VIII – AUTHORIZING SIGNATURES
IN WITNESS HEREOF, the parties hereto have executed this MOU on the date(s) set forth below.

Bay Area Community Resources
___________________________________ ______________________ Adolfo Rivera Date
Director of National Service
City of East Palo Alto
___________________________________ ______________________ Melvin E. Gaines Date
City Manager

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Attachment: MOU (2722 : Agreement with Bay Area Community Resources for Climate Action Plan Update and Implementation Fellow)

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Humza Javed, Public Works Director
SUBJECT: CSG Staff Augmentation Sixth Contract Amendment Recommendation
Adopt a resolution authorizing the City Manager to execute a sixth amendment to the Staff Augmentation contract with CSG Consultants, Inc. (CSG), in a form approved by the City Attorney, to increase the contract amount by $200,000 for a new not-to-exceed total of $640,000 for professional engineering services pertaining to capital improvement plan design, review, staff augmentation, survey, subdivision and parcel map review Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Implement the Transportation and Mobility Plan
Promote Health and Public Safety
Background
The Public Works Department utilizes contracts for professional engineering services such as capital improvement plan design, review, survey, and subdivision and parcel map review, and periodically staff augmentation services during staff vacancies.

On January 22, 2018, the City issued a request for qualifications for staff augmentation to continue City priorities while the City recruited staff to fill vacancies. The City received responses from CSG and Freyer & Laureta. City Council approved Resolution No. 4937 on February 6, 2018, authorizing the City Manager to enter into a contract with CSG for staff augmentation and professional services to deliver key city capital priorities and ensure they remain on schedule during staffing interruptions.

Since the execution of the original contract, staff has executed five amendments increasing the not-to-exceed amounts and extending the contract term to continue to provide various services as identified below.

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Analysis
The City currently has two vacancies in the Engineering division while there are over twentyfive million dollars ($25 million) of capital projects under design/construction phases. At least half a dozen of the projects are grant funded with set schedules and timeframes. In order to ensure city staff is able deliver projects in a timely manner, it is imperative staffing resources are available.

Since 2018, CSG has been providing general engineering support to the Public Works Department as follows: staff augmentation during staffing vacancies, capital improvement project design, constructability reviews, NPDES on-call assistance, general survey services, and subdivision and parcel map review in accordance with Senate Bill 35 (SB 35) for subdivision and parcel map compliance. These streamlined reviews are required by a licensed surveyor which the City does not have.

Over the course of FY 2023/2024, the work to be undertaken under this contract will be focused on the following items:
· Design development and preparation of plans, specifications and estimates (PS&E) for the Bus Stop Shelter Improvements Project (Project ST-25). This is an AHSC funded project in the City’s adopted Capital Improvement Plan. The City will be able to capture the CSG design costs for this project through the AHSC grant. · Design development and preparation of plans, specifications and estimates (PS&E) for the East Bayshore Improvements Project (Project ST-28). This project is included in the City’s adopted Capital Improvement Plan and the City was recently awarded $400k in Measure W funds to implement the design completion of this project. The City will be able to capture the CSG design costs for this project through the Measure W grant. · The City needs a licensed surveyor to complete technical map reviews for a number of development projects. This is critical, especially for expedited projects in accordance with the SB35 deadlines. CSG is the current map reviewer under the MFRA/DRA process and can provide Staff Augmentation services as a City Surveyor under their staff augmentation contract. The costs for these map revies will eventually be reimbursed by applicants through the City’s adopted fee schedule.

Fiscal Impact
Staff recommends appropriating funds from the CIP fund for the Project ST-25 and the Project ST-28 and the General Fund for the technical map review in the amount of $135K and $65K, respectively; however, this will eventually be reimbursed through the AHSC grant, Measure W grant, and through the Master Fee Schedule for subdivision and parcel map review, as identified in the staff report above.

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Environmental
The proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment.

Attachments

1. Resolution

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1 of 1
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

AUTHORIZING THE CITY MANAGER TO EXECUTE A SIXTH AMENDMENT TO THE STAFF AUGMENTATION CONTRACT WITH CSG CONSULTANTS, INC., TO INCREASE THE CONTRACT AMOUNT BY $200,000 FOR A NEW NOT-TO-EXCEED TOTAL OF $640,000 FOR

PROFESSIONAL ENGINEERING SERVICES PERTAINING TO CAPITAL IMPROVEMENT PLAN

DESIGN, REVIEW, STAFF AUGMENTATION, SURVEY, SUBDIVISION AND PARCEL MAP REVIEW
WHEREAS, CSG Consultants, Inc. (CSG) has been providing on-call engineering support services to the City of East Palo Alto Public Works Department since 2018; and WHEREAS, CSG’s services include staff augmentation during staffing vacancies, capital improvement project design, constructability reviews, general survey services, and subdivision and parcel map review in accordance with Senate Bill 35 (SB 35) for subdivision and parcel map compliance; and
WHEREAS, the Public Works Department currently has two vacancies in the Engineering Division with over $25 million in capital improvement projects under various phases of design/construction; and
WHEREAS, a sixth contract amendment with CSG is requested in the amount of $200,000 to assist with engineering support/survey services under the existing staff augmentation contract; and WHEREAS, the work to be performed under this contract in FY 23/24 will be reimbursed through grants and fees collected by various applicants through the adopted Master Fee Schedule.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY:

1. Finds the foregoing recitals are true and correct, and incorporated by this reference into this action; and

2. Authorizes the City Manager to execute a sixth amendment to the Staff Augmentation contract with CSG Consultants, Inc., in a form approved by the City Attorney, to increase the contract amount by $200,000 for a new not-to-exceed total of $640,000 for professional engineering services pertaining capital improvement plan design, review, staff augmentation, survey, subdivision and parcel map review.

PASSED AND ADOPTED this 18th day of July 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

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Attachment: Resolution (2723 : CSG Staff Augmentation Sixth Contract Amendment) 1 of 1
Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney

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Attachment: Resolution (2723 : CSG Staff Augmentation Sixth Contract Amendment)

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Humza Javed, Public Works Director
SUBJECT: Final Design for the University/Weeks 12-Inch Water Main Project; and the Woodland Watermain Project
Recommendation
Adopt two Resolutions:
1) A resolution approving the design and the funding strategy including the related funds transfer of the University and Weeks Street 12-Inch Water Main Project and authorizing the City Manager to advertise the project for construction bids. 2) A resolution approving the design and the funding strategy including the related funds transfer of the Woodland Avenue Waterline and City of Palo Alto Interconnect project and authorizing the City Manager to advertise the project for construction bids.

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Improve Water Infrastructure
Background
Due to the need to meet potential emergency water supply shortfalls and the future water demand envisioned in the City General Plan and the Ravenswood Specific Plan over the next 20 years, the City pursued additional water supplies. The City was able to increase the availability of water through the development of groundwater wells. The City was also able to secure water supply allocations from the Cities of Mountain View and Palo Alto. With the increase in water supply allocation, essential improvements to the City’s water distribution system are needed to provide additional flow, storage, redundancy, and reliability. These improvements are intended to protect the health and safety of East Palo Alto residents.

Fire flow data at various locations in the City, including the southside (Willow and Woodland

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Neighborhood) and the Ravenswood Business District, are currently at unacceptable levels for new development. Critical housing projects, such as the City’s own 965 Weeks Street, is also impacted. Constructing new watermains to supply more water flow to these areas is critical to addressing the fire flow requirements as required by the Fire Code.

In October 2022 the City Council adopted the Water System Master Plan (WSMP) which identified priority water projects as well as a funding strategy for near term priority water projects. The priority 1A projects as identified in the WSMP are to be implemented within the next five years. The projects brought forth with this report are all priority 1A projects. Following is a description of the projects:
12-Inch Water Main Project along University Avenue
This project includes installation of a 12” water main from the City's upgraded water intertie with San Francisco Public Utilities Company (SFPUC) at O’Brien Street and University Avenue. The proposed water main continues southerly along University Avenue up to Donohoe Street in East Palo Alto. This new water main will connect to the existing water main at multiple locations providing additional flow along Michigan Avenue, Bay Road, Weeks Street, Runnymede Street, and Bell Street. The 12-inch water main will bypass sections of the city that currently have adequate water flow and deliver a large volume of water to areas in need. The scope of the proposed work will include trenching, 12-inch C-900 PVC piping, traffic control and surface repair. The total length of the project is approximately one mile. 12-Inch Water Main Project along Weeks Street
This project includes replacing the existing 8” cast iron water main with a new 12” PVC water main from Cooley Avenue to Pulgas Avenue. This new water main would connect to the new 12” watermain on University Avenue (see project above). This new watermain would provide additional flow capacity to critical projects such as the 965 Weeks affordable housing project as well as other projects in RBD. The scope of the proposed work will include trenching, 12- inch C-900 PVC piping, traffic control and surface repair. The total length of the project is approximately 2,600 linear feet.

Staff is seeking authority to formally bid both of the foregoing projects as one bid package in order to get better bid pricing for the projects.

Woodland Ave. Waterline and Palo Alto Interconnect project This project includes installation of 12” PVC watermain on Woodland Avenue across University Avenue. The project also includes a new interconnection with the City of Palo Alto. The scope of the proposed work will include trenching, 12-inch C-900 PVC piping, traffic control and surface repair. The total length of the project is approximately 500 linear feet. The City has completed its Agreement with Palo Alto for this project and the City of Palo Alto has signed off on the design.

Analysis
Freyer & Laureta, Inc. (F&L) provided engineering design services for both water transmission main projects. The design package for both projects is at 100% completion level and the projects are ready to be issued for bid. The project design packages are located on the City website at the following link:
<https://www.cityofepa.org/publicworks/project/university-avenue-and-weeks-street-12-water3.7 Packet Pg. 63
transmission-main-project>
<https://www.cityofepa.org/publicworks/project/woodland-avenue-waterline-and-city-palo-altointerconnect-project> Fiscal Impact
The projects are estimated as follows:

Cost Estimate
Project Amount
WS-04B/WD-04C/P-3 - 12” Water
Transmission Main Project along University
Avenue
$5,230,000
P 21-A - Replace existing 8” main on Weeks
Street between Cooley Avenue and Pulgas St
with new 12” PVC main
$2,200,000
WS-01/P-1: Woodland Avenue Waterline
and City of Palo Alto Interconnect Project
$400,000
Total $7,830,000
Each project will be brought back to City Council for contract award and these numbers will be updated at that time.

The following table updates the funding strategy approved by the Council in October 2022.

Funding Strategy
Source Amount
State Earmark $1,500,000
Measure HH $1,000,000
RDA Housing Successor $1,000,000
State Budget earmark (Formerly General
Fund reserve)
$2,000,000
Water Impact Fees $300,000
Water Capital Fund $965,000
Past ARPA Allocation $700,000
Additional ARPA saving funds $400,000
Total $7,865,000
The changes from the previously presented funding strategy consist of the following items.

1. The $2M State budget earmark replaces the General Fund contribution to the projects which will require a transfer back from Water Capital Fund to the General Fund for $2M.

2. The $400K additional ARPA saving funds is added to the funding strategy which will require a transfer from the ARPA funds committed balance in the General Fund to Water Capital Fund.

3. The $450K Water Impact Fees is reduced to $300K.

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Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo Co. Library located at 2415 University Avenue, East Palo Alto.

Attachments

1. Resolution - University Ave. and Weeks St. 12" Watermain Project

2. Resolution - Woodland Ave. Watermain and Palo Alto Intertie Project

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RESOLUTION NO. __________

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO
APPROVING THE DESIGN OF THE UNIVERSITY AVENUE AND WEEKS STREET 12-INCH WATER MAIN PROJECT; AND AUTHORIZING THE CITY MANAGER TO ADVERTISE THE PROJECT FOR

CONSTRUCTION BIDS
WHEREAS, the City’s 2022 Water System Master Plan identified priority water infrasture projects to be completed within five years; and
WHEREAS, the University Avenue and Weeks Street 12-Inch Water Main Projects are both priority projects identified in the Water System Master Plan, and are crucial to bring additional flow capacity throughout the City; and
WHEREAS, the 100% design plans for the University Avenue and Weeks Street 12-Inch Water Main Projects are complete; and
WHEREAS, upon approval of the design of the projects, staff will bid the projects as one bid package in order to get better bid pricing and streamline the construction phase.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY:

1. Finds the foregoing recitals are true and correct, and are incorporated by this reference into this action; and

2. Approves the design and the funding strategy including the related transfer of the University Avenue and Weeks Street 12-Inch Water Main Project; and

3. Authorizes the City Manager to advertise the project for construction bids.

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Attachment: Resolution - University Ave. and Weeks St. 12" Watermain Project (2724 : Final Design for the University/Weeks 12-Inch Water 2 of 2
PASSED AND ADOPTED this 18th day of July 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney

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Attachment: Resolution - University Ave. and Weeks St. 12" Watermain Project (2724 : Final Design for the University/Weeks 12-Inch Water 1 of 2
RESOLUTION NO. __________

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

APPROVING THE DESIGN OF THE WOODLAND AVENUE WATER MAIN AND CITY OF PALO ALTO INTERCONNECT PROJECT; AND AUTHORIZING THE CITY MANAGER TO ADVERTISE

THE PROJECT FOR CONSTRUCTION BIDS
WHEREAS, the City’s 2022 Water System Master Plan identified priority water infrasture projects to be completed within five years; and
WHEREAS, the Woodland Avenue water main and City of Palo Alto interconnect project is a priority project identified in the Water System Master Plan; and WHEREAS, the 100% design plans for the Woodland Avenue water main and City of Palo Alto interconnect project is complete; and
WHEREAS, the City has completed its agreement with the City of Palo Alto in order to construct this project.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY:

1. Finds the foregoing recitals are true and correct, and are incorporated by this reference into this action; and

2. Approves the design and the funding strategy including the related transfer of the Woodland Avenue water main and City of Palo Alto interconnect project; and

3. Authorizes the City Manager to advertise the project for construction bids.

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Attachment: Resolution - Woodland Ave. Watermain and Palo Alto Intertie Project (2724 : Final Design for the University/Weeks 12-Inch Water 2 of 2
PASSED AND ADOPTED this 18th day of July 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney

3.7.b
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Attachment: Resolution - Woodland Ave. Watermain and Palo Alto Intertie Project (2724 : Final Design for the University/Weeks 12-Inch Water

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Humza Javed, Public Works Director
SUBJECT: Capital water system improvement payments to Veolia Recommendation
Adopt a resolution authorizing the City Manager to reimburse Veolia for city-wide capital water system improvements from the Water Capital Fund.

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Improve the City’s Water Infrastructure
Background
The City has a lease agreement with Veolia to operate and maintain the City’s water system through April 9, 2026. The lease agreement allocates up to $110,000 annually for system maintenance and repair costs. According to the lease agreement, any costs above the allocation are considered water system improvements for which Veolia must be reimbursed.

Analysis
In addition to Veolia staff, there are a number of subcontractors (including C2R and Telstar) that perform work on behalf of Veolia for the City of East Palo Alto water system operation and maintenance. This work includes repairing water leaks, upgrading water valves/boxes, replacement of fire hydrants, Gloria Way well maintenance, and maintenance of the various sampling stations citywide, etc.

In FY 2021/2022, Veolia paid its subcontractors for additional capital improvements including improving various sampling stations citywide (to bring them up to compliance and current standards), as well as replacing deteriorated fire hydrants. These costs are above and beyond the annual $110,000 allocation and Veolia has requested a reimbursement for these items.

Staff has verified the additional work and the breakdown is as follows:

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C2R 11/8/2021 Water Service Capital Ave $8,223.89
C2R 10/22/2021 Hydrant Removal Bradley Way $13,295.34
C2R 9/20/2021 Raise Water Valve Box Bay Rd and Fordham $1,769.95 C2R 2/21/2022 Hydrant Removal and Installation Woodland and Clarke $13,295.34 C2R 2/21/2022 Hydrant Removal and Installation at Ralmar $13,295.34 C2R 2/21/2022 Hydrant Removal and Installation at Ikea $13,295.34 C2R 2/21/2022 Sample Station O'Brien $1,500.00
C2R 2/21/2022 Sample Station Sacramento $1,500.00
C2R 3/7/2022 Repair Leak Alberni St $6,870.00
C2R 1/13/2022 Raise Water Valve Box at Bell St $1,769.95 C2R 1/13/2022 Sample Station Wisteria $1,500.00
C2R 1/13/2022 Sample Station Forham St $1,500.00
C2R 1/13/2022 Hydrant Removal and Installation Camellia Way $13,295.34 C2R 4/12/2022 Hydrant Removal and Installation Pulgas $11,500.00 C2R 4/12/2022 Hydrant Remova and Installation Woodland Ave $11,500.00 C2R 5/17/2022 Hydrant Removal and Installation Pulgas Ave $9,500.00 C2R 6/16/2022 Raise and Install G5 Box Per Specifications Holland St. $1,996.27 C2R 5/6/2022 Excavation/backfill of New Flow Meter/box at 1200 O'Brien $13,850.00 C2R 6/16/2022 Repair at Runnymeade and Clarke $37,476.44 C2R 5/26/2022 Sawcut AC/Demo/Excavate to Locate/Repair Leak on McNair $17,291.60 C2R 6/24/2022 Hydrant Removal and Installation at Runnymede Ct. $13,295.34 C2R 6/24/2022 Mobilize/traffic Control to sawcut/excavate/raise G5 Box $1,996.27 C2R 6/24/2022 Emergency Repair of Leaking Service Saddle 677 Tulane Rd $14,932.14 $249,819.00
In FY 21/22 Veolia paid $249,819 to its subcontractors for water system improvements in the City. Because this amount exceeds the $110,000 allocation, Veolia needs to be reimbursed for the additional $139,819 according to the lease agreement.

The allocation of $110,000 for water system operation and maintenance in the lease agreement was set in 2001 (over 22 years ago), and this amount is insufficient to operate and maintain the water system in 2023. Moreover, these costs also include capital improvements to the system. Based on the additional work, Veolia requests an annual “true-up” to get reimbursed for the additional amounts.

Invoices for the items above are also included as Attachment 2 to this staff report.

Fiscal Impact
Staff recommends appropriating funds in the amount of $139,819 from Water Capital Funds which holds an adequate fund balance to cover the expenditures.

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Environmental
The proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment. Significantly, the proposed action (reimbursement decision for repairs already made) does not involve the underlying repairs; such repairs, are nevertheless exempt pursuant to CEQA Guidelines sections 15269(b) and (c) because it either involves emergency repairs to publicly or privately owned service facilities necessary to maintain service essential to the public health or consist of specific actions taken that are necessary to prevent or mitigate an emergency.

Attachments

1. Resolution

2. Attachment 2 - Veolia Invoices

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1 of 1
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

AUTHORIZING THE CITY MANAGER TO COMPENSATE VEOLIA FOR CITY-WIDE CAPITAL

WATER SYSTEM IMPROVEMENTS
WHEREAS, the City has a lease agreement with Veolia to operate and maintain the City’s water system through April 9, 2026; and
WHEREAS, the lease agreement allocates up to $110,000 annually for system maintenance and repair costs; and
WHEREAS, in FY 21/22 Veolia paid $249,819 to its subcontractors for water system improvements in the City; and
WHEREAS, according to the lease agreement, Veolia needs to be reimbursed for the additional $139,819 for FY 21/22 capital water system improvements in the City.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY:

1. Finds the foregoing recitals are true and correct, and are incorporated by this reference into this action; and

2. Authorizes the City Manager to reimburse Veolia for city-wide capital water system improvements in an amount not to exceed cost of $139,819 from the Water Capital Fund; and

3. Finds that the action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment.

PASSED AND ADOPTED this 18th day of July 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

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Attachment: Resolution (2725 : Capital water system improvement payments to Veolia) 1 of 1
James Colin, City Clerk John D. Lê, City Attorney

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Attachment: Resolution (2725 : Capital water system improvement payments to Veolia) ---------------
$139,819 HJ

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Attachment: Attachment 2 - Veolia Invoices (2725 : Capital water system improvement payments to Veolia)

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Attachment: Attachment 2 - Veolia Invoices (2725 : Capital water system improvement payments to Revised amount $139,81
Removed charge on 7/7/23
9 HJ

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Attachment: Attachment 2 - Veolia Invoices (2725 : Capital water system improvement payments to Veolia)

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EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: Minutes of the June 20, 2023 Meeting
Recommendation
Adopt the minutes of the June 20, 2023 Meeting.

Background
The City Council will consider adopting the minutes of the June 20, 2023 Meeting.

Attachments

1. 6-20-2023 Draft Minutes

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East Palo Alto City Council June 20, 2023 Minutes Page 1 of 3

EAST PALO ALTO CITY COUNCIL

REGULAR MEETING MINUTES
JUNE 20, 2023
EPA Government Center
2415 University Ave, First Floor – City Council Chamber East Palo Alto, CA 94303

1. CALL TO ORDER AND ROLL CALL
The meeting was called to order by Mayor Lisa Gauthier at 6:30 p.m.

Attendee Name Title Status Arrived
Carlos Romero Councilmember Present
Ruben Abrica Councilmember Present
Lisa Gauthier Mayor Present
Antonio Lopez Vice Mayor Remote
Martha Barragan Councilmember Present

2. APPROVAL OF THE AGENDA
Motion to approve the council meeting agenda:

Motion: Carlos Romero
Second: Lisa Gauthier
Passed unanimously.

3. APPROVAL OF CONSENT CALENDAR
Councilmember Romero pulled items 3.2 and 3.3 for discussion.

Motion to approve the consent calendar except for items 3.2 and 3.3 Motion: Carlos Romero
Second: Ruben Abrica

1. Professional Services Contract for NPDES Compliance Services

2. FY 2022-23 Military Equipment Annual Report - Consideration of Equipment Use and Disposal

3. Consideration of Granting Consent to The City of Burlingame to Form The San Francisco Peninsula Tourism Marketing District (SFPTMD)

4. Monthly Cash Treasury Report for April 2023

5. Minutes of the June 12, 2023 Meeting
Motion to approve item 3.2
Motion: Carlos Romero
Second: Lisa Gauthier
Passed unanimously.

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Packet Pg. 123 Attachment: 6-20-2023 Draft Minutes (2736 : Minutes of the June 20, 2023 Meeting) East Palo Alto City Council June 20, 2023 Minutes Page 2 of 3 Motion to approve item 3.3
Motion: Carlos Romero
Second: Lisa Gauthier
Passed unanimously.

4. CLOSED SESSION - NONE

5. PUBLIC COMMENT
- Q Smith

6. STAFF INFORMATIONAL REPORTS

1. East Palo Alto 2023 Community Survey Highlights
Catherine Lew, Curtis Below and Rohnda Ammouri provided a presentation on the Community Survey Highlights.

Public Comment:
- Adrienne Bryant
- Q Smith
- Gail Wilkerson
- Jeannie Lewellen

7. SPECIAL PRESENTATIONS – NONE

8. ADJOURN CITY COUNCIL REGULAR MEETING TO THE JOINT SUCCESSOR AGENCY

BOARD SPECIAL MEETING
Tomohito Oku, Finance Director provided a presentation on the Successor Agency Budget.

9. JOINT SUCCESSOR AGENCY BOARD SPECIAL MEETING

1. Adoption of Fiscal Year 2023-24 Successor Agency Budget Motion: Ruben Abrica
Second: Carlos Romero
Passed unanimously.

10. ADJOURN JOINT SUCCESSOR AGENCY BOARD SPECIAL MEETING and RECONVENE

CITY COUNCIL REGULAR MEETING

11. PUBLIC HEARINGS

1. FY2023-24 Budget Adoption
Tomohito Oku, Finance Director provided a presentation on the Budget Adoption Motion: Carlos Romero
Second: Lisa Gauthier
Passed unanimously.

2. Establishing the Fiscal Year 2023-24 Appropriation Limit Motion: Antonio Lopez

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Packet Pg. 124 Attachment: 6-20-2023 Draft Minutes (2736 : Minutes of the June 20, 2023 Meeting) East Palo Alto City Council June 20, 2023 Minutes Page 3 of 3 Second: Lisa Gauthier
Passed unanimously.

3. Inclusionary Housing Alternative Compliance Option for 1201 Runnymede (APN 063-271-090)
Motion: Carlos Romero
Second: Lisa Gauthier
Passed unanimously.

12. POLICY AND ACTION

1. Status of Business Discovery and Amnesty Program Related to Business Licenses Public comment:
- Adrienne Bryant
- Gail Wilkerson
- Q. Smith
Council requested that staff to follow up with a report in September.

2. 2023 Southeast San Mateo Community-Based Transportation Plan Humza Javed, Public Works director, Suzy Kalkin and Bruce Brubaker from C/CAG provided a presentation on the SMC Community Based Transportation Plan.

Motion: Carlos Romero
Second: Antonio Lopez
Passed unanimously.

13. COUNCIL REPORTS
Mayor Gauthier provided an update on the SamTrans on demand ride share, the 40th Anniversary event, the Senior Committee’s work on updating the City to be an age-friendly city, and President Biden’s visit to the City.

14. ADJOURNMENT
The meeting was adjourned at 11:16 p.m.

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Packet Pg. 125 Attachment: 6-20-2023 Draft Minutes (2736 : Minutes of the June 20, 2023 Meeting)

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Amy Chen, Community & Economic Development Director Karen Camacho, Housing & Economic Development Manager
SUBJECT: City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks
Recommendation

1. Adopt a Resolution (Attachment 1):
a. Authorizing the City Manager to accept $8,000,000 from the State of California pursuant to 2022-23 California Budget Bill (Chapter 249, Statutes of 2022, AB 179), Section 19.56 (“State Funds”) and execute all documents necessary for receipt and administration of the State Funds; and
b. Authorizing the City Manager to execute an amendment to the Disposition, Development and Loan Agreement (DDLA) with MP 965 Weeks Street Associates, L.P. (Developer) related to the 965 Weeks Affordable Housing Development (Colibri Commons, the “Project”), substantially in the form attached, subject to changes approved by the City Attorney, providing the Developer with additional loan funds in the amount of $6.5 million from the State Funds as a zero-interest loan; and c. Authorizing the City Manager to administer $1.5 million of the State Funds for water improvements to be made by the City to benefit the Project and adjacent properties; and
d. Authorizing the City Manager to approve amendments and to take such other actions as are necessary to effectuate the purposes of the DDLA and the Ground Lease including, but not limited to, negotiate and execute subordination agreements, lease riders, intercreditor agreements, and escrow instructions; and e. Authorizing the City Manager to negotiate and execute a First Source Agreement.

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Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
• Promote Housing, Economic and Workforce Development
Background
Colibri Commons Affordable Housing Project
965 Weeks Street is a 2.52-acre property (“Property”) acquired by the former East Palo Alto Redevelopment Agency in 2009 using Low- and Moderate-Income Housing funds. The Property was determined to be a housing asset of the former Redevelopment Agency and, in accordance with the Redevelopment Dissolution law, transferred to the City as the Housing Successor to the Former Redevelopment Agency. In July 2018, the City issued a Request for Proposals (RFP) for the development of affordable housing on the Property. Some of the key components of the RFP, as directed by City Council, included:
• Develop the Property with multi-family affordable apartments and maximize density on the site.
• Support a mix of incomes ranging from Extremely Low Income (ELI) to Low Income (LI).

Area Median Income (AMI) targets should be consistent with the Facebook Agreement. • Include a mix of unit types, such as studios and units for larger families: not more than 20% of the units should be one (1) bedrooms or studios and at least 20% of the units should be three (3) bedroom units.
• Implement a local (“live/work”) preference as established by the City. • Demonstrate financial viability.

Following an extensive application review and interview process, on November 8, 2018,1 the City Council selected MidPen Housing and EPACANDO (MidPen Housing and EPACANDO jointly form the “Developer”) from among nine applicants as the developer of the Colibri Commons affordable housing project (“Project”), formerly known as the 965 Weeks Street affordable housing project and directed staff to prepare an Exclusive Negotiation Agreement (ENA) between the City and the Developer.

After a series of community meetings and submittal of a formal Planning application, the Project was approved by the Planning Commission on December 16, 2019.2 The Project consists of 135 units ranging from 30% to 60% Area Median Income (AMI) and one manager 1 November 8, 2018 City Council meeting:
http://eastpaloalto.iqm2.com/Citizens/Detail_Meeting.aspx?ID=1536 2 December 16, 2019 Planning Commission meeting:
http://eastpaloalto.iqm2.com/Citizens/Detail_Meeting.aspx?ID=1155

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unit.

Disposition, Development and Loan Agreement
The City and the Developer entered into a Disposition Development and Loan Agreement as of December 15, 2020,3 that provides for the City to ground lease the Property to the Developer pursuant to the terms of a Ground Lease with a term of ninety-nine (99) years. The Developer will pay the City One dollar per year as ground rent. The DDLA and the Ground Lease require that the Developer construct on the Property the Project and operate the Project as affordable housing in accordance with terms of a regulatory agreement to be recorded against the Property.

The DDLA also serves as the loan agreement for the City loan to the Developer in the amount of $714,000 (“City Loan”). The City Loan bears interest at the rate of 3% and is repaid out of project cash flow shared with the other public lenders. The City Loan is secured by a deed of trust on the Developer’s leasehold interest in the Property. The City Loan is funded with Lowand Moderate-Income Housing Asset Funds transferred to the City by the former Redevelopment Agency.

Funds Committed to the Project
In addition to the City Loan, the City has committed the following resources to the Project:
• On June 4, 2019,4 the City Council authorized Local Initiatives Support Corporation (LISC) to appropriate $1,000,000 in Catalyst Funds for a predevelopment loan to assist the Developer with initial expenses associated with entitling the Project and to apply for other funding sources. MidPen repaid the funds to LISC on February 1, 2023. On January 21, 2020,5 the City Council authorized the appropriation of an additional $5,286,000 in Catalyst Funds for the construction and permanent financing of the Project.
• On March 30, 2023, the City dispersed $1.7 million to the Housing Endowment and Regional Trust of San Mateo County (HEART) as a match grant to HEART from the State of California’s Local Housing Trust (LHTF) Program for the development of the Project. HEART is to provide a low-interest, 55-year loan in the amount of $3.23 million to the Project using LHTF funds. To ensure a long-term benefit to East Palo Alto from the use of City funds, the grant agreement with HEART commits HEART to restricting 50% of program income from the City’s portion of the LHTF to be used on future affordable housing projects in East Palo Alto. The Grant Agreement further states that the loan terms and regulatory agreement associated with HEART funding for the Project will meet or exceed City requirements for funding affordable housing developments.6 3 December 15, 2020 City Council meeting, Item No. 10.1(b):
http://eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1332&MinutesID=1205&F ileFormat=pdf&Format=Minutes&MediaFileFormat=mpeg4
4 June 4, 2019 City Council meeting: http://eastpaloalto.iqm2.com/Citizens/Detail_Meeting.aspx?ID=1511 5 January 21, 2020 City Council meeting (Item No. 8):
http://eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1028&MinutesID=1010&F ileFormat=pdf&Format=Minutes&MediaFileFormat=mp4
6 For more information regarding the Local Housing Trust Fund, read the May 17, 2022 City Council s taff report available at (Item No. 3.4):

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• The City co-applied with the Developer for State of California Affordable Housing Sustainable Communities (AHSC) funds.7 The California Department of Housing and Community Development (HCD) awarded the Project a $11.7 million loan for funding the affordable housing, and an additional $8,087,125 in grant funds (see the breakdown of the funds disbursement in Table 1 below). The City San Mateo County Transit District (“SamTrans”), and the Peninsula Corridor Joint Powers Board (“JPB” or “Caltrain”) will enter into a “Cooperative Agreement” to further specify deliverables and responsibilities and to indemnify, defend, protect, and hold each other harmless against any and all claims arising out of, or in connection with, each other’s performance or failure to perform their respective AHSC Program obligations. As part of the AHSC award the City will also be required to enter into a “Standard Agreement” with the California Department of Housing and Community Development. Additionally, the City, the Developer, SamTrans and JPB may enter into a “Cooperation and Implementation Agreement” related to the various parties' responsibilities pursuant to the AHSC funds.

The City Council authorized and directed the City Manager to enter into, execute, and deliver these and any other required agreements deemed necessary on May 18, 2021 via Resolution No. 66-2021. The resolution listed the first sponsor to be “MidPeninsula The Farm, Inc.” Per an updated award letter received on June 8, 2023 (see Attachment 5) the project sponsor should now be MidPen Housing Corporation. An updated resolution accepting the funds and reauthorizing the execution of agreements has been included with this staff report under Attachment 3.
http://eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1810&MinutesItemID=584 7&Format=Minutes
7 For more information about the AHSC application, see May 18, 2023 City Council meeting available at:
http://eastpaloalto.iqm2.com/Citizens/Detail_LegiFile.aspx?ID=1702&highlightTerms=AHSC%20applicatio n

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Table 1: Colibri Commons AHSC Program Scope
Element Entity Amount Activity
Affordable
Housing
Development
(AHD)
Developer $11,700,000
Funding for the Affordable Housing Project.

Eligible expenses include construction and
permanent financing.

Sustainable
Transportation
Infrastructure
(STI)
City of
East Palo
Alto
$780,000
The City will provide:

1.) an estimated 700 linear feet of safe and
ADA-accessible sidewalks along Garden Street;

2.) an estimated .5 miles of bikeways to
complete the northern section of the City’s
Bicycle Transportation Plan; and

3.) Rail Spur trail improvements to support
bicycle and pedestrian access and connect to
Weeks Street.

Sustainable
Transportation
Infrastructure
(STI)
SamTrans
(passed
through
City of
East Palo
Alto)
$3,520,000
The Route 2/East Palo Alto Express (EPX)
route, a new limited stop route using US-101 as
well as adjacent arterials between East Palo
Alto and San Bruno, was identified as part of the
US-101 Express Bus Feasibility Study (adopted
December 2018). It is tentatively scheduled for
launch in 2022.

Reimagine SamTrans, a comprehensive
operational analysis launched in 2019 to
improve systemwide service, will result in
significant service expansions to existing bus
routes.

An AHSC award will fund 1.) the purchase of
three electric buses to service the Route 2/East
Palo Alto Express (EPX) bus route and 2.) a
portion of operational costs over 2 years for one
additional bus per hour daily on the Route 281
line connecting East Palo Alto to the Palo Alto
Caltrain station. An AHSC award will fund the
total cost of the three EPX buses, $3 M. The
service expansion will cost an estimated
$900,000 total, with $520,000 funded through
AHSC and $380,000 funded through Measure
W.

Sustainable
Transportation
Infrastructure
(STI)
Caltrain
(passed
through
City of
East Palo
Alto)
$2,450,000
The Caltrain Modification Program, or CalMod,
is the Caltrain plan to electrify the entire train
corridor from San Francisco to San Jose and
increase the number of cars in use, increasing
peak hour service and significantly reducing
GHGs. Caltrain will utilize this portion of an
AHSC award to purchase an electric multi-unit
train car (EMU).

Transit-Related
Amenities
(TRA)
City of
East Palo
Alto
$7,500,000 The City will provide lighting improvements and Urban Greening along the Rail Spur.

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Transit-Related
Amenities
(TRA)
Developer $250,000 The Developer will provide street trees and landscaping along the Rail Spur.

Eligible
Program Costs
(PGM)
Developer $337,125
This includes transit passes for up to three
years for all residents of the 965 Weeks
community. The Developer will also use these
funds to support JobTrain scholarships for
career training programming for East Palo Alto
residents, with a focus on the construction
trades.

TOTAL $19,787,125
• On September 12, 2022, pursuant to 2022-23 California Budget Bill Jr. (Chapter 249, Statutes of 2022, AB 179), Section 19.56, the City of East Palo Alto was allocated $8,000,000 for the Project. The City is proposing to loan $6.5 millions of these funds to the Developer for costs associated with the Development. The remaining funds, $1.5 million, will be used by the City for water improvements benefiting the Project.

Surplus Land Act (SLA)
When the City approved the DDLA in 2020, the City prepared a report and made findings pursuant to Health and Safety Code Section 33433 based on the Property being former Redevelopment Agency Property that was transferred to the City as the Housing Successor.

Those findings remain valid with regard to the lease of the Property to the Developer, but in order to ensure that no Surplus Land Act issues arise, the City is also making findings declaring the Property “exempt surplus” land, as discussed below.

Analysis
Documents for City Council Review
The following documents associated with the amendment to the DDLA require City Council approval (see Resolution in Attachment 1) and are provided as attachments to this staff report:

First Amendment to Disposition, Development, and Loan Agreement (DDLA, Attachment 7), Deed of Trust (Attachment 8), and Promissory Note (Attachment 9). The amendments to the DDLA, the Deed of Trust and the Promissory Note increase the City loan to the Developer by the additional $6.5 million that the City received from the State.

Surplus Land Act
The Surplus Land Act (SLA)1 is a statute (Government Code Sections 54220-54234) that all local agencies (including cities and counties) must follow prior to disposing of surplus real property. It requires the local agency to offer the property to affordable home developers and certain entities before the general public, unless the land qualifies as exempt surplus land. There are four (4) categories of exemptions to the SLA as follows (relevant exemptions are in bold):

1. Certain actions were taken by the local agency to dispose of the property prior to September 30, 2019 (Grandfathering Exemption).

3.10 Packet Pg. 131

2. Disposition can be streamlined because the surplus land is proposed for development that includes certain percentages of affordable housing, with specific affordability requirements met for lower income households (Streamlining Exemption).

3. The surplus land is dedicated for other public uses (Public Use Exemption).

4. The surplus land is not suitable for housing development (Unsuitable Parcel Exemption).

The Project meets the requirements for the Streamlining Exemption, pursuant to California Government Code Section 53221(f)(1)(A) in that the property is being disposed of pursuant to Government Code Section 37364, provided that:
• At least eighty (80) percent of the Property will be developed with housing; • At least forty (40) percent of the housing units developed will be affordable to households with incomes at or below seventy-five (75) percent of the maximum income of lower-income households, as defined in Health & Safety Code Section 50079.5; • Half of those affordable units will be affordable to very-low income households, as defined in Health & Safety Code Section 50105;
• The project will restrict units to remain affordable for a period of at least thirty (30) years The Project as proposed by the Developer and restricted by the City’s regulatory agreement meets the requirements for exemption as follows:
• One hundred (100) percent of the Property will be developed with housing; • All housing units are restricted with incomes at or below sixty (60) percent of the area median income;
• The regulatory agreement restricts 55 of the units to be very low or extremely low income households, while under California Government Code Section 37364, only 27 or 28 of the units would need to be restricted to very low income; • The regulatory agreement is for a term of ninety-nine (99) years.

Based on the above facts, findings can be made that the Property is eligible for Exemption from the SLA requirement pursuant to Government Code section 54221 (f)(1)(A) under Category 2b – Streamlining Exemption (see Resolution in Attachment 2) A Note on First Source Hiring
The project will comply with the City’s First Source Hiring Ordinance (adopted April 5, 20228, adding Chapter 5.11 to the East Palo Alto Municipal Code9). Since the City has not yet developed First Source Hiring Guidelines, the City will enter into a First Source Agreement (Attachment 12) between the Developer and related employers establishing the hiring process to be followed and containing the employer's commitment to abide by the responsibilities of an 8 April 5, 2022 City Council Meeting:
http://eastpaloalto.iqm2.com/Citizens/Detail_LegiFile.aspx?Frame=None&MeetingID=1806&MediaPositio n=532.737&ID=2177&CssClass=
9 Municipal Code Chapter 5.11:
https://library.municode.com/ca/east_palo_alto/codes/code_of_ordinances?nodeId=TIT5BULIRE_CH5.11

FISOHICINDPRPR

3.10 Packet Pg. 132
employer in order to maximize the number of East Palo Alto residents and disadvantaged workers employed.

Project Timeline
The original project timeline has shifted to reflect the fact that the Project was awarded AHSC funds in February 2022 (see Attachment 6). The Project was also awarded Low Income Housing Tax Credits (LIHTC) in May 2023. Construction is anticipated to begin in October 2023, with full occupancy of the units achieved by December 2025. Key Project milestones are shown below.

Table 1: Colibri Commons (fka 965 Weeks) Updated Project Timeline Planning Application submitted September 2019
Planning Commission Hearing and
Entitlements received December 2019
Executed DDLA December 2020
Submitted AHSC Round 6 Application June 2021
Received AHSC Round 6 Award January 2022
Submitted IIG Round 7 Program
Application (unawarded)
July 2021
Submitted 4% Tax Credit Application February 2023
Received 4% Tax Credit Award May 2023
Close of Construction Financing October 2023
Construction Start October 2023
Construction End July 2025
100% Occupancy December 2025
Next Steps
If authorized by City Council, the City Manager will execute the First Amendment to the DDLA and allocate the $6.5 million in State funds in the form of a loan to the Project, and conduct the water infrastructure improvements work with the $1.5 million in additional State funds, for a total of $8 million. The City will also collaborate with the Developer in executing all documents necessary for receipt of the $19,787,125 in AHSC funds. These actions will allow the Developer to close the other construction funding and begin construction by the third quarter of 2023.

The City has prepared a resolution (Attachment 2) declaring the subject property to be exempt surplus land to be disposed of pursuant to Government Code 37346, and directing staff to transmit a copy of the resolution to the California Department of Housing and Community Development no later than thirty (30) days prior to the disposition of the Property.

Fiscal Impact
The City of East Palo Alto has been awarded the State HCD grant and AHSC grants for the 965 Weeks Street Affordable Housing Development in the amount of $8,000,000 and $19,787,125, respectively. Staff seek spending authority of the grants for the following purposes.

3.10 Packet Pg. 133
State HCD Grant:

Project/Program Amount
Affordable Housing Loan $6,500,000
Water Infrastructure Projects $1,500,000
Total $8,000,000
AHSC Grants:

Project/Program Amount
Affordable Housing Loan10 $11,700,000
Transportation (STI) $6,750,000
Transportation (TRA) $1,000,000
PGM $337,125
Total $19,787,125
Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo Co. Library located at 2415 University Avenue, East Palo Alto.

Environmental
In accordance with California Environmental Quality Act (CEQA), a Mitigated Negative Declaration has been prepared with an Initial Study. Prior to approving the DDLA the City Council approved the Mitigated Negative Declaration on December 16, 2019. There have been no changes to the project that would warrant conducting additional environmental review pursuant CEQA guidelines 15162. Accordingly, there were no significant CEQA issues that could not be mitigated to a less than significant level and staff has incorporated conditions of approval and mitigation measures accordingly.

Attachments

1. Resolution - Approving Agreements and Amendments re Colibri Commons

2. Resolution - Exempt Surplus Land Declaration

3. Resolution - Affordable Housing Sustainable Communities

4. Resolution 66 - 2021

5. Updated AHSC Award Letter

6. HCD AHSC Loan Commitment

7. First Amendment to Disposition Development and Loan Agreement

8. Deed of Trust Amendment

9. Promissory Note Amendment

10. Regulatory Agreement Amendment

11. Ground Lease Amendment

12. First Source Hiring Agreement
10 Funds will be directly disbursed to the Developer’s payee.

3.10 Packet Pg. 134
RESOLUTION NO. __________

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

AUTHORIZING THE CITY MANAGER TO ACCEPT FUNDS FROM THE STATE OF CALIFORNIA,

TO EXECUTE AN AMENDMENT TO THE DISPOSITION, DEVELOPMENT, AND LOAN AGREEMENT; APPROPRIATING $6,500,000 FOR THE COLIBRI COMMONS PROJECT AT 965 WEEKS (“PROJECT”) IN THE FORM OF A LOAN AND APPROPRIATING AN ADDITIONAL $1,500,000 FOR WATER IMPROVEMENTS BENEFITING THE PROJECT; AND AUTHORIZING

THE CITY MANAGER TO ENTER INTO A FIRST SOURCE AGREEMENT FOR THE PROJECT WHEREAS, in 2009, the City of East Palo Alto Redevelopment Agency purchased the property at 965 Weeks Street (Property) using Low and Moderate Income Housing Funds for the purpose of developing affordable housing on the Property; and WHEREAS, on July 19, 2018, the City released a Request for Proposals (RFP) to select a developer for the Property as an affordable housing development consistent with the general goals and requirements contained in the RFP; and
WHEREAS, on November 8, 2018, the City Council selected the proposal submitted by MidPen Housing Corporation and EPACANDO (jointly, Developer); and WHEREAS, on December 16, 2019, via Resolution No. PC 2019-14, the Planning Commission approved the application for Design Review, Lot Merger, and Density Bonus submitted by the Developer to develop 135 affordable housing units ranging from 30%-60% of Area Median Income (AMI) and one unrestricted manager unit on the Property, and approved the Proposed Initial Study and Mitigated Negative Declaration (IS-MND) for the Project in compliance with the California Environmental Quality Act (CEQA); and
WHEREAS, since the Council’s approval on December 16, 2019 of the IS-MND, there have been no changes to the project that would warrant conducting additional environmental review pursuant CEQA guidelines 15162. Accordingly, there were no significant CEQA issues that could not be mitigated to a less than significant level; and
WHEREAS, the City and the Developer entered into a Disposition, Development and Loan Agreement as of December 15, 2020 (“DDLA”) that provides for the City to loan the Developer $714,000 for Project development costs and to lease the Property to the Developer in accordance with the terms of the Ground Lease attached to the DDLA; and WHEREAS, prior to approving the DDLA the City Council approved the Mitigated Negative Declaration for the Project; and
WHEREAS, on September 12, 2022, pursuant to the 2022-2023 California Budget Bill (Chapter 249, Statutes of 2022, AB 179), Section 19.56, the State allocated to the City $8,000,000 for the Project (“State Funds”) and the City has determined that it is in the best interest of the City to accept the State Funds; and

3.10.a
Packet Pg. 135 Attachment: Resolution - Approving Agreements and Amendments re Colibri Commons (2732 : City Council Action on Colibri Commons, an WHEREAS, the City has determined that it is in the best interest of the City to make a no interest loan to the Developer of $6,500,000 of the State funds for costs associated with the Project, in accordance with the terms of the First Amendment to the DDLA attached to the staff report; and WHEREAS, the City has determined that it is in the best interest of the City and will further the development of the Project to allocate $1,500,000 of the State funds for water improvements to be made by the City to benefit the Development and adjacent properties; WHEREAS, the City of East Palo Alto first enacted a First Source Hiring Policy in 2000, requiring developments that received assistance from the City, as well as the businesses that occupied the developments, to hire local residents and use local small businesses; and WHEREAS, the City Council adopted a First Source Hiring Ordinance on April 5, 2022, adding Chapter 5.11 to the East Palo Alto Municipal Code (EPAMC); and WHEREAS, EPAMC Section 5.11.060(A)(1) states that first source agreements shall contain the same terms set forth in the guidelines’ (“Guidelines”) sample documents, and the form of the first source agreement shall be approved by the City Manager in a form consistent with Chapter 5.11 and the Guidelines;
WHEREAS, given that the Guidelines have not yet been developed, the City will enter into a First Source Agreement, consistent with applicable law, including Chapter 5.11, between the Developer and related employers establishing the hiring process to be followed and containing the employer's commitment to abide by the responsibilities of an employer in order to maximize the number of East Palo Alto residents and disadvantaged workers employed.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY:

1. Finds the above recitals to be true and accurate, and incorporates them by this reference into this action.

2. Finds and determines that the IS-MND addresses the environmental issues pertaining to the City Council’s actions and that no additional environmental analysis or review is required pursuant to CEQA guidelines 15162.

3. Accepts an award of $8,000,000 from the State of California pursuant to 2022-23 California Budget Bill (Chapter 249, Statutes of 2022, AB 179), Section 19.56 (“State Funds”) and authorizes the City Manager to execute all documents necessary for receipt and administration of the State Funds.

4. Authorizes the City Manager to execute an amendment to the DDLA with the Developer providing the Developer with additional loan funds from the State Funds in the amount of $6,500,000 in substantially the form of the First Amendment to the DDLA attached to the staff report, subject to changes approved by the City Attorney.

5. Authorizes the City Manager to administer $1,500,000 of the State Funds for water improvements to be made by the City to benefit the Development and adjacent properties.

3.10.a
Packet Pg. 136 Attachment: Resolution - Approving Agreements and Amendments re Colibri Commons (2732 : City Council Action on Colibri Commons, an

6. Authorizes the City Manager to make such other non-substantive amendments to the DDLA and the Ground Lease as are consistent with the DDLA and this resolution, and to execute such documents necessary to effectuate the purposes of the DDLA and the Ground Lease, including, but not limited to subordination agreements, lease riders, intercreditor agreements, and escrow instructions.

7. Authorizes the City Manager to enter into a First Source Agreement for the Project substantially in the form of the First Source Agreement attached to the staff report, subject to changes approved by the City Attorney.

PASSED AND ADOPTED this 18th day of July 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED:

Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney

3.10.a
Packet Pg. 137 Attachment: Resolution - Approving Agreements and Amendments re Colibri Commons (2732 : City Council Action on Colibri Commons, an RESOLUTION NO. ____ – 2023

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO
FINDING THE CITY-OWNED PROPERTY AT 965 WEEKS TO BE EXEMPT SURPLUS LAND TO

BE DISPOSED OF, AND AUTHORIZING THE CITY MANAGER TO TRANSMIT THIS

RESOLUTION TO THE STATE DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT SEEKING CONFIRMATION OF THE PROPERTY’S ELIGIBILITY AS EXEMPT SURPLUS LAND WHEREAS, in 2009, the City of East Palo Alto Redevelopment Agency having purchased the real property located at 965 Weeks Street in the City of East Palo Alto (City), identified as Assessor's Parcel Numbers 063-232-210, 063-232-220, and 063-232-230 (Property) using Low- and ModerateIncome Housing Funds for the purpose of developing affordable housing on the Property, owned it in fee simple; and
WHEREAS, the Property has a General Plan land use designation of High Density Residential and a Zoning designation of Urban Residential; and
WHEREAS, the General Plan and Zoning designations of the Property allow a range of multifamily housing types ranging from townhomes to multi-family apartments at moderate to high-densities from 22 - 43 dwelling units per acre; and
WHEREAS, on July 19, 2018, the City released a Request for Proposals (RFP) to select a developer for the Property as an affordable housing development consistent with the general goals and requirements contained in the RFP; and
WHEREAS, on November 8, 2018, the City Council selected the proposal submitted by MidPen Housing Corporation and EPACANDO (jointly, Developer); and WHEREAS, MP 965 Weeks Street Associates, L.P., a California limited partnership (“Owner") intends to construct one hundred and thirty-six (136) unit multi-family rental housing development on the Property for rental to extremely low, very low and low income households including one (1) manager's unit that is not subject to affordability restrictions; and WHEREAS, on December 16, 2019, via Resolution No. PC 2019-14, the Planning Commission approved the application for Design Review, Lot Merger, and Density Bonus submitted by the Developer, and found the Proposed Initial Study and Mitigated Negative Declaration (IS-MND) for the Project in compliance with the California Environmental Quality Act (CEQA); and WHEREAS, since the Council’s approval on December 16, 2019 of the IS-MND, there have been no changes to the project that would warrant conducting additional environmental review pursuant CEQA guidelines 15162. Accordingly, there were no significant CEQA issues that could not be mitigated to a less than significant level; and
WHEREAS, the City has entered into a Disposition, Development and Loan Agreement with Owner dated December 15, 2020 as amended by the First Amendment to the Disposition, Development and Loan Agreement ("DDLA") pursuant to which the City agreed to ground lease the Property to the Owner; and

3.10.b
Packet Pg. 138 Attachment: Resolution - Exempt Surplus Land Declaration (2732 : City Council Action on Colibri Commons, an Affordable Housing WHEREAS, the City intends to convey a leasehold interest in the Property to Owner in its capacity as the housing successor to the former East Palo Alto Redevelopment Agency and as permitted under California Health and Safety Code Section 33433; and WHEREAS, the City has agreed to ground lease the Property to the Owner and to make the City Loan on the condition that the Owner construct, maintain and operate the Development in accordance with restrictions set forth in this Regulatory Agreement and in related documents including the DDLA; and
WHEREAS, prior to approving the DDLA the City Council approved the IS-MND for the Project; and
WHEREAS, the Owner applied for and received a density bonus pursuant to the State Density Bonus Law (Government Code Sections 65915-65918) ("Density Bonus Law"). The Density Bonus Law requires the City to ensure and the Owner to agree to continued affordability of the Units subject to the density bonus; and
WHEREAS, the Surplus Land Act requires that prior to disposition of property the City either declare the property to be “surplus land” or “exempt surplus land”; and WHEREAS, the Property can be found to be exempt from the Surplus Land Act pursuant to Government Code section 54221(f)(1)(A) in that the Property is being conveyed to the Owner pursuant to Government Code Section 37364 and will be subject to recorded restrictions that require that at least 80% of the Property be used for housing and that at least 40% of the units developed on the Property be affordable to households with incomes at or below 60% of Area Median Income and one half of those units will be affordable to very low income households; and WHEREAS, based on the foregoing, the City Manager recommends that the City Council find the Property exempt from the Surplus Land Act pursuant to Government Code section 54221(f)(1), and permit the City Manager to transmit this resolution to the State Department of Housing and Community Development (HCD) to seek concurrence of the Property’s qualification as exempt surplus land and pursue due diligence measures in preparation for the disposal of the Property.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY:

1. Accepts the foregoing recitals as true and correct;

2. Finds the City-owned property at 965 Weeks in East Palo Alto, to be “exempt surplus” land to be disposed of pursuant to Government Code section 54221(f)(1); and

3. Finds and determines that the IS-MND addresses the environmental issues pertaining to the City Council’s actions and that no additional environmental analysis or review is required pursuant to CEQA guidelines 15162; and

4. Authorizes the City Manager to transmit the adopted resolution to the State Department of Housing and Community Development to seek concurrence of the subject property’s qualification as “exempt surplus” land pursuant to Government Code section 54230.5 (b)(1).

3.10.b
Packet Pg. 139 Attachment: Resolution - Exempt Surplus Land Declaration (2732 : City Council Action on Colibri Commons, an Affordable Housing PASSED AND ADOPTED this 18th day of July 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED:

Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney

3.10.b
Packet Pg. 140 Attachment: Resolution - Exempt Surplus Land Declaration (2732 : City Council Action on Colibri Commons, an Affordable Housing RESOLUTION NO. ____ – 2023

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

AUTHORIZING THE CITY MANAGER TO ACCEPT AN AWARD OF AFFORDABLE HOUSING SUSTAINABLE COMMUNITIES (“AHSC”) FUNDS FOR THE COLIBRI COMMONS PROJECT AT 965 WEEKS (“PROJECT’) AND EXECUTE ALL NECESSARY DOCUMENTS WHEREAS, the State of California, the Strategic Growth Council (''SGC''), and the State of California Department of Housing and Community Development (the ''Department'') issued a Notice of Funding Availability (''NOFA'') dated February 26, 2021 under the Affordable Housing and Sustainable Communities (''AHSC'') Program, established under Division 44, Part 1 of the Public Resources Code commencing with Section 75200; and
WHEREAS, the City of East Palo Alto (''City'') and MidPen Housing Corporation and EPACANDO (jointly, the ''Developer'') applied jointly for AHSC Program funds for the 965 Weeks Affordable Housing Project and submitted a completed Application Package to the Department for the AHSC Program; and
WHEREAS, the SGC is authorized to approve funding allocations for the AHSC Program, subject to the terms and conditions of the NOFA, Program Guidelines, Application Package, and Standard Agreement, and the Department is authorized to administer the approved funding allocations of the AHSC Program; and
WHEREAS, on May 18, 2021, the City Council approved Resolution 66- 2021, a resolution that authorized the City Manager to submit an AHSC Program Application, Negotiate and Execute a Cooperative Agreement, execute a Standard Agreement with the State of California, and execute a Cooperative and Implement Agreement with the Developer, SamTrans, and the JPB. This resolution listed the developer to be MidPeninsula The Farm, Inc./EPACANDO; and WHEREAS the City and Developer were jointly awarded an AHSC Program loan in an amount not to exceed $11,700,000 (“AHSC Loan”) and an AHSC Program grant in an amount not to exceed $8,087,125 (“AHSC Grant”) for an aggregate amount not to exceed $19,787,125 under the abovedescribed NOFA; and WHEREAS, on May 25, 2023, MidPen Housing Corporation was added as a non-member manager of MP CANDO Weeks Street, LLC. MidPen Housing Corporation replaced Mid-Peninsula The Farm, Inc. as the Co-Developer and Sponsor of Colibri Commons (formerly known as 965 Weeks Street) for the purposes of the AHSC award, and shall be understood as such in all previous and future documents; and
WHEREAS, on June 8, 2023, the Department of Housing and Community Development Program sent an updated award letter and requested an updated resolution from the City of East Palo Alto reflecting the correct Applicant’s name. Per the updated award letter, Sponsor 1 is MidPen Housing Corporation.

3.10.c
Packet Pg. 141 Attachment: Resolution - Affordable Housing Sustainable Communities (2732 : City Council Action on Colibri Commons, an Affordable

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY:

1. Finds the above recitals to be true and accurate, and incorporates them by this reference into this action; and

2. Amends Resolution 66-2021, a resolution that authorized the City Manager to submit an AHSC Program Application, negotiate and execute a Cooperative Agreement, execute a Standard Agreement with the State of California, and execute a Cooperative and Implement Agreement with the Developer, SamTrans, and the JPB to replace mentions of “Mid-Peninsula The Farm, Inc.” with “MidPen Housing Corporation”; and

3. Accepts an award of AHSC funds from the State of California in the amount of $19,787,125; and

4. Authorizes and directs the City Manager to enter into, execute, and deliver a State of California Standard Agreement (''Standard Agreement'') in the amount not to exceed $11,700,000 and any and all other documents required or deemed necessary or appropriate to carry into effect the full intent and purpose of the above resolution, in order to evidence the AHSC Loan, the City's obligations related thereto, and the Department's security therefore; including, but not limited to, a promissory note, a deed of trust and security agreement, a regulatory agreement, a development agreement and certain other documents required by the Department as security for, evidence of or pertaining to the AHSC Loan, and all amendments thereto (collectively, the "AHSC Loan Documents"); and

5. Authorizes and directs the City Manager to enter into, execute, and deliver a State of California Standard Agreement in the amount not to exceed $8,087,125 and any and all other documents required or deemed necessary or appropriate to carry into effect the full intent and purpose of the above resolution, in order to evidence the AHSC Grant, the City's obligations related thereto, and the Department's security therefore; including, but not limited to, a disbursement agreement, a covenant and certain other documents required by the Department as security for, evidence of or pertaining to the AHSC Grant, and all amendments thereto (collectively, the "AHSC Grant Documents"); and
BE IT FURTHER RESOLVED THAT the City shall be subject to the terms and conditions as specified in the Standard Agreement(s). Funds are to be used for allowable capital asset project expenditures to be identified in Exhibit A of the Standard Agreement(s). The application in full is incorporated as part of the Standard Agreements(s). Any and all activities funded, information provided, and timelines represented in the application are enforceable through the Standard Agreement(s). The City hereby agrees to use the funds for eligible capital asset(s) in the manner presented in the application as approved by the Department and in accordance with the NOFA, Program Guidelines and application package.

BE IT FURTHER RESOLVED THAT the City Manager and City Attorney are hereby authorized to execute the AHSC Loan Documents and the AHSC Grant Documents, and any amendment or modifications thereto, on behalf of the City.

3.10.c
Packet Pg. 142 Attachment: Resolution - Affordable Housing Sustainable Communities (2732 : City Council Action on Colibri Commons, an Affordable PASSED AND ADOPTED this 18th day of July 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED:

Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney

3.10.c
Packet Pg. 143 Attachment: Resolution - Affordable Housing Sustainable Communities (2732 : City Council Action on Colibri Commons, an Affordable RESOLUTION NO. 66 — 2021

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

AUTHORIZING THE CITY MANAGER TO SUBMIT AN APPLICATION TO THE CALIFORNIA

DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT FOR THE AFFORDABLE

HOUSING AND SUSTAINABLE COMMUNITIES PROGRAM AND RELATED ACTIONS WHEREAS, the State of California, the Strategic Growth Council (" SGC"), and the State of California Department of Housing and Community Development (" Department") issued a Notice of Funding Availability ("NOFA") dated February 26, 2021 under the Affordable Housing and Sustainable Communities ("AHSC") Program, established under Division 44, Part 1 of the Public Resources Code commencing with Section 75200; and
WHEREAS, the City of East Palo Alto (" City") and MidPeninsula The Farm, Inc./ EPACANDO jointly, the "Developer") desire to apply jointly for AHSC Program funds for the 965 Weeks Affordable Housing Project and submit a completed Application Package to the Department for the AHSC Program; and
WHEREAS, the SGC is authorized to approve funding allocations for the AHSC Program, subject to the terms and conditions of the NOFA, Program Guidelines, Application Package, and Standard Agreement, and the Department is authorized to administer the approved funding allocations of the AHSC Program,

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY authorizes and directs the City Manager to.

1. Submit to the Department the AHSC Program Application, as detailed in the NOFA dated February 26, 2021 for Round 6, in a total amount not to exceed $ 30, 000, 000 of which up to 19,000,000 is requested as a loan for an Affordable Housing Development ("AHSC Loan") and up to $ 11, 000,000 is requested for Sustainable Transportation Infrastructure, Transit - Related Amenities, or Program activities ("AHSC Grant") as defined in the AHSC Program Guidelines adopted by the SGC on February 24, 2021;

2. Negotiate and execute a Cooperative Agreement, in a form approved by the City Attorney, with the San Mateo County Transit District ("
SamTrans") and the Peninsula Corridor Joint
Powers Board (" JPB") as non -applicant partners, that commits each party to complete their respective activities as described in the Application Package if the AHSC Program Application is approved, and as required by Section 106(a)( 12) of the Program Guidelines;

3. If the AHSC Program Application is successful, enter into, execute, and deliver a State of California Standard Agreement (" Standard Agreement") in a total amount not to exceed 30,000,000 ( up to $ 19, 000,000 for the AHSC Loan and up to $ 11, 000,000 for the AHSC Grant), and any and all other documents required or deemed necessary or appropriate to secure the AHSC Program funds from the Department, in a form approved by the City Attorney ( collectively, the " AHSC Documents"), subjecting the City to the terms and conditions specified in the Standard Agreement; and

3.10.d
Packet Pg. 144 Attachment: Resolution 66 - 2021 (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks)

4. If the AHSC Program Application is successful, negotiate and execute an agreement Cooperation and Implementation Agreement") with the Developer, SamTrans, and the JPB, in a form approved by the City Attorney, to allocate responsibilities and liabilities of each party for the AHSC Loan and AHSC Grant.

BE IT F U RT HER RESOLVED THAT funds are to be used for allowable capital asset project expenditures to be identified in Exhibit A of the Standard Agreement. The application in full is incorporated as part of the Standard Agreement. Any and all activities funded, information provided, and timelines represented in the application are enforceable through the Standard Agreement. The City hereby agrees to use the funds for eligible capital asset(s) in the manner presented in the application as approved by the Department and in accordance with the NOFA and Program Guidelines and Application Package.

PASSED AND ADOPTED this 18t" day of May 2021, by the following vote:

AYES: Abrica, Gauthier, Lopez, Wallace -Jones, and Romero NOES:

ABSENT:

ABSTAIN:

ATTEST:

Carlos Romero, Mayor
APPROVED AS TO FORM:

Walfred Solorzang6; City Clerk Rafael E o Jr., City Attorney

3.10.d
Packet Pg. 145 Attachment: Resolution 66 - 2021 (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES and HOUSING AGENCY GAVIN NEWSOM, Governor DEPARTMENT OF HOUSING and COMMUNITY DEVELOPMENT

DIVISION OF STATE FINANCIAL ASSISTANCE
2020 W. El Camino Avenue, Suite 670, 95833
P. O. Box 952054
Sacramento, CA 94252-2054
(916) 263-2771
www.hcd.ca.gov
**CORRECTED LETTER**
June 8, 2023
Jan M. Lindenthal, Assistant Secretary
MidPen Housing Corporation
303 Vintage Park Drive, Suite 250
Foster City, CA 94404
Duana Bay, Executive Director
East Palo Alto Community Alliance Neighborhood Development Organization 2369 University Avenue
East Palo Alto, CA 94303
Patrick Heisinger, Assistant City Manager
City of East Palo Alto
1960 Tate Street
East Palo Alto, CA 94303
RE: Revised Award Announcement – AHSC Program, Round 6
Fiscal Year 2019-20 & Fiscal Year 2020-21
PIN 47772 – 965 Weeks Street
Dear Jan M. Lindenthal, Duana Bay, and Patrick Heisinger:

The California Department of Housing and Community Development (Department) and the Strategic Growth Council are pleased to announce that MidPen Housing Corporation, East Palo Alto Community Alliance Neighborhood Development Organization, and City of East Palo Alto (Awardees) the have been awarded a revised Affordable Housing and Sustainable Communities (AHSC) program award in the amount of $19,787,125. This revision is to clarify the parties receiving the award of AHSC funds. This letter constitutes notice of the award of the following AHSC program funds, as approved by the Strategic Growth Council on January 26, 2022, and fully replaces the corrected letter issued March 7, 2023:

AHSC Program Loan Funds
Amount Awarded $11,700,000
Contract Number 21-AHSC-16981
AHSC Program Grant Funds
Amount Awarded $8,087,125
Contract Number 21-AHSC-16982

3.10.e
Packet Pg. 146 Attachment: Updated AHSC Award Letter (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) PIN 47772 Revised Award – 965 Weeks Street
Contract Numbers 21-AHSC-16981 and 21-AHSC-16982
June 8, 2023

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The Department intends to issue a Standard Agreement within 90 days of receipt of the documentation required to execute this contract. An AHSC representative will be in communication with you to discuss and confirm any documents needed.

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Packet Pg. 147 Attachment: Updated AHSC Award Letter (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES and HOUSING AGENCY GAVIN NEWSOM, Governor DEPARTMENT OF HOUSING and COMMUNITY DEVELOPMENT

DIVISION OF STATE FINANCIAL ASSISTANCE
2020 W. El Camino Avenue, Suite 670, 95833
P. O. Box 952054
Sacramento, CA 94252-2054
(916) 263-2771
www.hcd.ca.gov
**CORRECTED LETTER**
March 7, 2023
Jan M. Lindenthal, Assistant Secretary
Mid-Peninsula Housing Corporation
303 Vintage Park Drive, Suite 250
Foster City, CA 94404
Duana Bay, Executive Director
East Palo Alto Community Alliance Neighborhood Development Organization 2369 University Avenue
East Palo Alto, CA 94303
Patrick Heisinger, Assistant City Manager
City of East Palo Alto
1960 Tate Street
East Palo Alto, CA 94303
RE: Revised Award Announcement – AHSC Program, Round 6
Fiscal Year 2019-20 & Fiscal Year 2020-21
PIN 47772 – 965 Weeks Street
Dear Jan M. Lindenthal, Duana Bay, and Patrick Heisinger:

The California Department of Housing and Community Development (Department) and the Strategic Growth Council are pleased to announce that Mid-Peninsula Housing Corporation, East Palo Alto Community Alliance Neighborhood Development Organization, and City of East Palo Alto (Awardees) the have been awarded a revised Affordable Housing and Sustainable Communities (AHSC) program award in the amount of $19,787,125. This revision is to replace Mid-Peninsula The Farm, Inc. with Mid-Peninsula Housing Corporation. This letter constitutes notice of the award of the following AHSC program funds, as approved by the Strategic Growth Council on January 26, 2022, and fully replaces the letter originally issued on February 4, 2022:

AHSC Program Loan Funds
Amount Awarded $11,700,000
Contract Number 21-AHSC-16981
AHSC Program Grant Funds
Amount Awarded $8,087,125
Contract Number 21-AHSC-16982
elopment Organization
Award Announcement – AHSC Program, Round 6
20 & Fiscal Year 2020-21
965 Weeks Street
Jan M. Lindenthal, Duana Bay, and Patrick Heisinger
Department of Housing and Community Development (Department) and the Strategic Growth Council are pleased to announce that , East Palo Alto Community Alliance Neighborhood Dev
Organization, and City of East Palo Alto (Awardees)
Affordable Housing and Sustainable Communities (AHSC) program amount of $19,787,125. This revision is to replace
Mid-Peninsula Housing Corporation
following AHSC program funds,
January 26, 2022, and fully replaces the letter originally issued on February 4, 2022 Amount Awarded

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Packet Pg. 148 Attachment: Updated AHSC Award Letter (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) PIN 47772 Revised Award – 965 Weeks Street
Contract Numbers 21-AHSC-16981 and 21-AHSC-16982
March 7, 2023

Page 2 ends

Congratulations on a successful application. For further information, please contact Lynn Jones, Section Chief, Program Design and Implementation Branch, Climate Investments, at (916) 695-6071 or [email protected]. Sincerely, Jennifer Seeger
Deputy Director
Division of State Financial Assistance
documentation required to execute this contract. An AHSC representative will be in Congratulations on a successful application. For further information, please contact Lynn Jones, Section Chief, Program Design and Implementation Branch, Climate

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Packet Pg. 149 Attachment: Updated AHSC Award Letter (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES and HOUSING AGENCY GAVIN NEWSOM, Governor DEPARTMENT OF HOUSING and COMMUNITY DEVELOPMENT

DIVISION OF STATE FINANCIAL ASSISTANCE
2020 W. El Camino Avenue, Suite 670, 95833
P. O. Box 952054
Sacramento, CA 94252-2054
(916) 263-2771
www.hcd.ca.gov
February 4, 2022
Jan M. Lindenthal, Assistant Secretary
Mid-Peninsula The Farm, Inc.
303 Vintage Park Drive, Suite 250
Foster City, CA 94404
Duana Bay, Executive Director
East Palo Alto Community Alliance Neighborhood Development Organization 2369 University Avenue
East Palo Alto, CA 94303
Patrick Heisinger, Assistant City Manager
City of East Palo Alto
1960 Tate Street
East Palo Alto, CA 94303
RE: Award Announcement – AHSC Program, Round 6, FY 2019-20 & FY 2020-21 PIN 47772 – 965 Weeks Street
Dear Jan M. Lindenthal, Duana Bay, and Patrick Heisinger:

The California Department of Housing and Community Development (Department) and the Strategic Growth Council are pleased to announce that 965 Weeks Street has been awarded an Affordable Housing and Sustainable Communities (AHSC) program award in the amount of $19,787,125. This letter constitutes notice of the award as approved by the Strategic Growth Council on January 26, 2022 of the following AHSC program funds:

AHSC Program Loan Funds
Amount Awarded $11,700,000
Contract Number 21-AHSC-16981
AHSC Program Grant Funds
Amount Awarded $8,087,125
Contract Number 21-AHSC-16982
The Department intends to issue a Standard Agreement within 90 days of receipt of the documentation required to execute this contract. An AHSC program representative will be in communication with you within a week to discuss and confirm any documents needed.

East Palo Alto Community Alliance Neighborhood Development Organization ouncement – AHSC Program, Round 6, FY 2019
965 Weeks Street
Lindenthal, Duana Bay, and Patrick Heisinger
Department of Housing and Community Development (Department) and the Strategic Growth Council are pleased to announce that awarded an Affordable Housing and Sustainable Communities (AHSC) program in the amount of $19,787,125. This letter constitutes notice of the award as approved by the Strategic Growth Council on January 26,
funds:

AHSC Program
Amount Awarded
Contract Number

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Packet Pg. 150 Attachment: Updated AHSC Award Letter (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) 965 Weeks Street
February 4, 2022

Page 2 ends

Congratulations on a successful application. For further information, please contact Craig Shields, Branch Chief, Program Design and Implementation – Climate Change, at (916) 823-6054 or [email protected]. Sincerely,
Jennifer Seeger
Deputy Director
Division of State Financial Assistance
Climate Change, at

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Packet Pg. 151 Attachment: Updated AHSC Award Letter (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES and HOUSING AGENCY GAVIN NEWSOM, Governor DEPARTMENT OF HOUSING and COMMUNITY DEVELOPMENT

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Packet Pg. 152 Attachment: HCD AHSC Loan Commitment (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) 965 Weeks Street
February 4, 2022

Page 2 ends

Sincerely,
Jennifer Seeger
Deputy Director
Division of State Financial Assistance

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Packet Pg. 153 Attachment: HCD AHSC Loan Commitment (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) 551\01\3553230.1
6/26/2023

FIRST AMENDMENT TO DISPOSITION DEVELOPMENT AND LOAN AGREEMENT

BETWEEN THE CITY OF EAST PALO ALTO
AND
MP 965 WEEKS STREET ASSOCIATES, LP
REGARDING 965 WEEKS STREET AFFORDABLE HOUSING SITE
This First Amendment to Disposition, Development, and Loan Agreement ("Agreement") is entered into as of ______, 2023 ("Effective Date"), by and between the City of East Palo Alto, a California municipal corporation ("City") and MP 965 Weeks Street Associates, L.P., a California limited partnership (the "Developer"). The City and Developer are sometimes individually referred to herein as a "Party" and collectively as the "Parties."

RECITALS
A. The City and the Developer entered into that certain Disposition, Development, and Loan Agreement dated December 15, 2020 (“DDLA”) whereby the City agreed to ground lease to the Developer that certain Property located at 965 Weeks Street in the City of East Palo Alto, California, identified as Assessor's Parcel Numbers 063-232- 210,063-232-220, and 063-232-230, as described in the legal description attached hereto to the DDLA (“Property”).

B. In accordance with the terms of the DDLA, the City also agreed to loan to the Developer the amount of Seven Hundred Fourteen Thousand Dollars ($714,000) to be used for costs associated with the Development which consists of a one hundred and thirty-six (136) unit multifamily rental housing development and parking garage on the Property with long-term affordability requirements including one (1) manager’s unit that is not subject to affordability requirements.

C. Pursuant to the 2022-2023 California Budget Bill (Chapter 249, Statutes of 2022, AB 179), Section 19.56, the State allocated to the City $8,000,000 for the Development (“State Funds”).

D. The City has determined that it is in the best interest of the City to increase the amount of the City Loan to add Six Million Five Hundred Thousand ($6,500,000) of the State Funds (“State Funds Loan”) and to amend the DDLA to provide for the State Funds Loan in accordance with terms of this Agreement.

E. Defined terms not otherwise defined in this Agreement shall have the meaning set forth in the DDLA.

THEREFORE, the City and the Developer agree as follows:

1. City Loan. Section 1.1(g) of the DDLA is amended in its entirety to read as follows:

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6/26/2023
“City Loan” means collectively the loans from the City to the Developer consisting of the (i) the Housing Fund Loan in the amount of Seven Hundred Fourteen Thousand Dollars ($714,000) and (ii) the State Fund Loan in the amount of Six Million Five Hundred Thousand Dollars ($6,500,000), both on the terms set forth in Article 4 of the Agreement.

2. Ground Lease Value. Section 1.1(y) of the DDLA is amended in its entirety to read as follows:
“Ground Lease Value” means the full appraised value of the Property of Seventeen Million Two Hundred Thirty Thousand Dollars ($17,230,000) to the extent allowed by HCD or permitted by applicable law, or if the full appraised value of the Property is not allowed by HCD the amount spent by the City to acquire the Property.

3. City Financing. Section 4.2 of the DDLA is amended in its entirety to read as follows:

City Financing. The City agrees to provide Developer a commitment for construction and permanent loans in the following amounts:
(a) A loan from the City’s Low and Moderate Income Housing Asset Fund in the amount of Seven Hundred Fourteen Thousand Dollars ($714,000) (“Housing Fund Loan”); and
(b) A loan of the State Funds in the amount of Six Million Five Hundred Thousand Dollars ($6,500,000) (“State Fund Loan”), both conditioned on Developer securing all other financing for the Development as set forth in the Final Financing Plan approved in writing by the City.

4. Interest. Section 4.3 of the DDLA is amended in its entirety to read as follows:

Interest. Simple interest will accrue on the outstanding principal balance of the Housing Fund Loan at a per annum rate of interest equal to three percent (3%), commencing on the Closing. Notwithstanding the foregoing, prior to the Closing, the City Manager shall have the right, in his or her reasonable discretion, to adjust the interest rate, including reducing the interest rate to as low as zero percent (0%) upon receipt of adequate documentation establishing that the Project is not financially feasible without such interest rate decrease.

The State Funds Loan shall be interest free.

5. Annual Payments. Section 4.5(a) of the DDLA is amended in its entirety to read as follows:

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Annual Payments. The Developer shall make payments of principal and interest to the City in the amount of the City Prorata Percentage (as defined below) of Residual Receipts. Such annual payments shall be due and payable in arrears no later than June 1 of each year with respect to the previous calendar year, commencing on June 1 of the first year after the permanent conversion date of the Development financing and the City's issuance of a certificate of occupancy for the Improvements. The Developer shall provide the City with any documentation reasonably requested by the City to substantiate the Developer's determination of Residual Receipts. Repayments shall be credited first to the principal of the State Fund Loan, second to interest on the Housing Fund Loan and third to principal on the Housing Fund Loan. The Developer may retain the remaining fifty percent (50%) of Residual Receipts, provided, however, Developer shall use its share of Residual Receipts to benefit affordable housing development or to provide resident services to affordable housing developments. The City approval of use of Developer's share of Residual Receipts for any purposes other than affordable housing development or to provide resident services to affordable housing developments shall be required.

6. Exhibits. The following exhibits attached to the DDLA are replaced in their entirety with the Exhibits attached to this Agreement:

Exhibit D – Ground Lease
Exhibit F – Promissory Note
Exhibit G – Deed of Trust
Exhibit H – Regulatory Agreement.

7. Effect of Amendment. Except as amended herein, all provisions of the DDLA shall remain in full force and effect. To the extent that there is a conflict between this Agreement and the DDLA, this Agreement shall govern. This Agreement shall take effect on the Effective Date set forth above. This Agreement sets forth the Parties entire understanding regarding this matter and may only be modified by another written agreement.

IN WITNESS WHEREOF, the Parties have signed this Agreement on the dates indicated below.

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Packet Pg. 156 Attachment: First Amendment to Disposition Development and Loan Agreement (2732 : City Council Action on Colibri Commons, an Affordable 551
\01\3553230.1
6/26/2023
DEVELOPER:

MP 965 Weeks Street Associates, L.P.,
a California limited partnership
By: MP CANDO Weeks Street, LLC,
a California limited liability company,
its general partner
By: MidPen Housing Corporation,
a California nonprofit public benefit
corporation, its manager
By: ____________________________
Name: __________________________
Its: _____________________________
By: East Palo Alto Community Alliance and
Neighborhood Development Organization,a
California nonprofit public benefit corporation,
its member
By: ____________________________
Name: __________________________
Its: _____________________________
CITY:

CITY OF EAST PALO ALTO
By: _______________________________
Melvin E. Gaines, City Manager
Approved as to form:

By: _________________________________
John D. Lê, City Attorney

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Packet Pg. 157 Attachment: First Amendment to Disposition Development and Loan Agreement (2732 : City Council Action on Colibri Commons, an Affordable 551\01\2717474.3
6/27/2023
1 RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

City of East Palo Alto
2415 University Avenue
East Palo Alto, CA 94303
Attn: City Manager
No fee for recording pursuant to
Government Code Section 27383 and 27388.1
A.P.N. ________________

LEASEHOLD DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY

AGREEMENT, AND FIXTURE FILING
(965 Weeks Street Project)

THIS LEASEHOLD DEED OF TRUST WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING ("Deed of Trust") is made as of ______________ (the "Effective Date") by and among MP 965 Weeks Street Associates, L.P. a California limited partnership ("Trustor"), Old Republic Title Company, a California corporation ("Trustee"), and the City of East Palo Alto, a California municipal corporation ("Beneficiary").

FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's leasehold interest in the property located in the County of San Mateo, State of California, that is described in the attached Exhibit A, incorporated herein by this reference, under and in connection with that certain Ground Lease dated as of ______________________, between Beneficiary, as landlord, and Trustor, as tenant (as modified from time to time, the "Ground Lease"), a memorandum of which shall record in the Official Records of the County of San Mateo, State of California ("Official Records"), substantially concurrently herewith, pursuant to which Beneficiary ground leases the Land to the Trustor (the "Property").

TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including (without limiting the generality of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of the Trustor now or hereafter affixed to or placed upon the Property;

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2 TOGETHER WITH all building materials and equipment now or hereafter delivered to said property and intended to be installed therein;
TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to or used in connection with the Property;
TOGETHER WITH all estate, interest, right, title, other claim or demand, of every nature, in and to such property, including the Property, both in law and in equity, including, but not limited to, all deposits made with or other security given by Trustor to utility companies, the proceeds from any or all of such property, including the Property, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire, any and all awards made for the taking by eminent domain or by any proceeding or purchase in lieu thereof of the whole or any part of such property, including without limitation, any awards resulting from a change of grade of streets and awards for severance damages to the extent Beneficiary has an interest in such awards for taking as provided in Paragraph 4.1 herein;
TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to said building or buildings in any manner; and
TOGETHER WITH all of Trustor's interest in all building materials, fixtures, equipment, work in process and other personal property to be incorporated into the Property; all goods, materials, supplies, fixtures, equipment, machinery, furniture and furnishings, signs and other personal property now or hereafter appropriated for use on the Property, whether stored on the Property or elsewhere, and used or to be used in connection with the Property; all rents, issues and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles, chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance and condemnation awards and proceeds, trade names, trademarks and service marks arising from or related to the Property and any business conducted thereon by Trustor; all replacements, additions, accessions and proceeds; and all books, records and files relating to any of the foregoing.

All of the foregoing, together with the Property, is herein referred to as the "Security." To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever.

FOR THE PURPOSE OF SECURING THE FOLLOWING OBLIGATIONS (the "Secured Obligations"):

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Packet Pg. 159 Attachment: Deed of Trust Amendment (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) 551\01\2717474.3
6/27/2023
3 (a) Payment to Beneficiary of all sums at any time owing under or in connection with the Note (defined in Section 1.3 below) until paid or cancelled and any other amounts owing under the Loan Documents (defined in Section 1.2 below). Said principal and other payments shall be due and payable as provided in the Note or other Loan Documents, as applicable. The Note and all its terms are incorporated herein by reference, and this conveyance shall secure any and all extensions thereof, however evidenced;
(b) Payment of any sums advanced by Beneficiary to protect the Security pursuant to the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein;
(c) Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents; and
(d) All modifications, extensions and renewals of any of the Secured Obligations (including without limitation, (i) modifications, extensions or renewals at a different rate of interest, or (ii) deferrals or accelerations of the required principal payment dates or interest payment dates or both, in whole or in part), however evidenced, whether or not any such modification, extension or renewal is evidenced by a new or additional promissory note or notes.

AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES:

ARTICLE 1

DEFINITIONS
In addition to the terms defined elsewhere in this Deed of Trust, the following terms shall have the following meanings in this Deed of Trust:

Section 1.1 The term "Loan Agreement" means that certain Disposition, Development and Loan Agreement between Trustor and Beneficiary, dated December 15, 2020 as amended by the First Amendment to the Disposition, Development and Loan Agreement dated ________, 2023, providing for the Beneficiary to loan to Trustor Seven Hundred Fourteen Thousand Dollars ($714,000) (“Housing Fund Loan” and Six Million Five Hundred Thousand Dollars ($6,500,000) (“State Fund Loan”).

Section 1.2 The term "Loan Documents" means this Deed of Trust, the Note, the Loan Agreement, the Regulatory Agreement, the Notice of Affordability Restriction on Transfer of Property, and any other debt, loan or security instruments between Trustor and the Beneficiary relating to the Property.

Section 1.3 The term "Note" means the promissory note in the principal amount of Seven Million Two Hundred Fourteen Thousand Dollars ($7,214,000), of even date herewith, executed by Trustor in favor of the Beneficiary, as it may be amended or restated, the payment of

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Packet Pg. 160 Attachment: Deed of Trust Amendment (2732 : City Council Action on Colibri Commons, an Affordable Housing Development at 965 Weeks) 551\01\2717474.3
6/27/2023
4 which is secured by this Deed of Trust. (A copy of the Note is on file with the Beneficiary and terms and provisions of the Note are incorporated herein by reference.) Section 1.4 The term "Notice of Affordability Restriction on Transfer of Property" means the Notice of Affordability Restriction on Transfer of Property of even date herewith by and between the Beneficiary and the Trustor.

Section 1.5 The term "Loan" means the amount required to be paid under the Note.

Section 1.6 The term "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants of even date herewith by and between the Beneficiary and the Trustor.

ARTICLE 2

MAINTENANCE AND MODIFICATION OF THE PROPERTY

AND SECURITY
Section 2.1 Maintenance and Modification of the Property by Trustor.

The Trustor agrees that at all times prior to full payment and performance of the Secured Obligations, the Trustor will, at the Trustor's own expense, maintain, preserve and keep the Security or cause the Security to be maintained and preserved in good condition, reasonable wear and tear excepted. The Trustor will from time to time make or cause to be made all repairs, replacements and renewals deemed proper and necessary by it. The Beneficiary shall have no responsibility in any of these matters or for the making of improvements or additions to the Security.

Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all claims for labor done and for material and services furnished in connection with the Security, diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation of labor on the work or construction on the Security for a continuous period of thirty (30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Security of any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary as its agent (said agency being coupled with an interest) with the authority, but without any obligation, to file for record any notices of completion or cessation of labor or any other notice that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the Loan Documents; provided, however, that Beneficiary shall exercise its rights as agent of Trustor only in the event that Trustor shall fail to take, or shall fail to diligently continue to take, those actions as hereinbefore provided.

Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or claims as Beneficiary shall specify upon laborers, materialmen, subcontractors or other persons who have furnished or claim to have furnished labor, services or materials in connection with the Security. Nothing herein contained shall require Trustor to pay any claims for labor, materials or services which Trustor in good faith disputes and is diligently contesting provided that Trustor shall, within thirty (30) days after the filing of any claim of lien, record in the Office of the

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5 Recorder of San Mateo County, a surety bond in an amount 1 and 1/2 times the amount of such claim item to protect against a claim of lien.

Section 2.2 Granting of Easements.

Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in the nature of easements with respect to any property or rights included in the Security except those required or desirable for installation and maintenance of public utilities including, without limitation, water, gas, electricity, sewer, telephone and telegraph, or those otherwise required by law, and as approved, in writing, by Beneficiary.

Section 2.3 Assignment of Rents.

As part of the consideration for the indebtedness evidenced by the Note, Trustor hereby absolutely and unconditionally assigns and transfers to Beneficiary all the rents and revenues of the Property including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Trustor hereby authorizes Beneficiary or Beneficiary's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Beneficiary or Beneficiary's agents; provided, however, that prior to written notice given by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, Trustor shall collect and receive all rents and revenues of the Property as trustee for the benefit of Beneficiary and Trustor to apply the rents and revenues so collected to the Secured Obligations with the balance, so long as no Event of Default, as defined in Section 8.1 below, has occurred, to the account of Trustor, it being intended by Trustor and Beneficiary that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon the occurrence and during the continuance of an Event of Default, and without the necessity of Beneficiary entering upon and taking and maintaining full control of the Property in person, by agent or by a courtappointed receiver, Beneficiary shall immediately be entitled to possession of all rents and revenues of the Property as specified in this Section 2.3 as the same becomes due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Trustor as trustee for the benefit of Beneficiary only; provided, however, that the written notice by Beneficiary to Trustor of an Event of Default shall contain a statement that Beneficiary exercises its rights to such rents. Trustor agrees that commencing upon and during the continuance of an Event of Default, each tenant of the Property shall make such rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Trustor.

Trustor hereby covenants that Trustor has not executed any prior assignment of said rents that remains in effect, that Trustor has not performed, and will not perform, any acts or has not executed and will not execute, any instrument which would prevent Beneficiary from exercising its rights under this Section 2.3, and that at the time of execution of this Deed of Trust, there has been no anticipation or prepayment of any of the rents of the Property for more than two (2) months prior to the due dates of such rents. Trustor covenants that Trustor will not hereafter

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6 collect or accept payment of any rents of the Property more than two (2) months prior to the due dates of such rents. Trustor further covenant that Trustor will execute and deliver to Beneficiary such further assignments of rents and revenues of the Property as Beneficiary may from time to time request.

Upon the occurrence and during the continuance of an Event of Default, Beneficiary may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Beneficiary's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Deed of Trust. In the event Beneficiary elects to seek the appointment of a receiver for the Property upon the occurrence of an Event of Default, Trustor hereby expressly consents to the appointment of such receiver. Beneficiary or the receiver shall be entitled to receive a reasonable fee for so managing the Property.

All rents and revenues collected during the continuance of an Event of Default shall be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Trustor as lessor or landlord of the Property and then to the sums secured by this deed of Trust.

Beneficiary or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received.

Beneficiary shall not be liable to Trustor, anyone claiming under or through Trustor or anyone having an interest in the Property by reason of anything done or left undone by Beneficiary under this Section 2.3.

If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Beneficiary for such purposes shall become part of the Secured Obligations pursuant to Section 3.3 hereof. Unless Beneficiary and Trustor agree in writing to other terms of payment, such amounts shall be payable upon notice from Beneficiary to Trustor requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in Section 3.3.

Any entering upon and taking and maintaining of control of the Property by Beneficiary or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Beneficiary under applicable law or provided herein. This assignment of rents of the Property shall terminate at such time as this Deed of Trust ceases to secure the Secured Obligations.

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7 ARTICLE 3
TAXES AND INSURANCE; ADVANCES
Section 3.1 Taxes, Other Governmental Charges and Utility Charges.

Trustor shall pay, or cause to be paid, prior to the date of delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company which are or may become a lien affecting the Security or any part thereof; provided, however, that Trustor shall not be required to pay and discharge any such tax, assessment, charge or levy so long as (a) the legality thereof shall be promptly and actively contested in good faith and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien therefor on any part of the Security; provided, however, if such taxes, assessments or charges may be paid in installments, Trustor may pay in such installments. Except as provided in clause (b) of the first sentence of this paragraph, the provisions of this Section 3.1 shall not be construed to require that Trustor maintain a reserve account, escrow account, impound account or other similar account for the payment of future taxes, assessments, charges and levies.

In the event that Trustor shall fail to pay any of the foregoing items required by this Section to be paid by Trustor, Beneficiary may (but shall be under no obligation to) pay the same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to fully pay such items within seven (7) business days after receipt of such notice. Any amount so advanced therefor by Beneficiary, together with interest thereon from the date of such advance at the maximum rate permitted by law, shall become part of the Secured Obligations secured hereby, and Trustor agrees to pay all such amounts.

Section 3.2 Provisions Respecting Insurance.

Trustor agrees to provide insurance conforming in all respects to that required under the Loan Documents during the course of construction and following completion, and at all times until all amounts secured by this Deed of Trust have been paid and all Secured Obligations secured hereunder fulfilled, and this Deed of Trust reconveyed.

All such insurance policies and coverages shall be maintained at Trustor's sole cost and expense. Certificates of insurance for all of the above insurance policies, showing the same to be in full force and effect, shall be delivered to the Beneficiary upon demand therefor at any time prior to Trustor's satisfaction of the Secured Obligations.

Section 3.3 Advances.

In the event the Trustor shall fail to maintain the full insurance coverage required by this Deed of Trust or shall fail to keep the Security in accordance with the Loan Documents, the Beneficiary, after at least seven (7) days prior notice to Trustor, may (but shall be under no obligation to) take out the required policies of insurance and pay the premiums on the same or may make such repairs or replacements as are necessary and provide for payment thereof; and all amounts so advanced therefor by the Beneficiary shall become part of the Secured Obligations (together with interest as set forth below) and shall be secured hereby, which amounts the

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8 Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, shall bear interest from the date of the advance at the lesser of ten percent (10%) per annum or the maximum rate permitted by law.

ARTICLE 4

DAMAGE, DESTRUCTION OR CONDEMNATION
Section 4.1 Awards and Damages.

All judgments, awards of damages, settlements and compensation made in connection with or in lieu of (1) taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (2) any damage to or destruction of the Property or in any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property (collectively, the "Funds") shall be used to repair or restore the Property, but if the property cannot be repaired or restored such Funds are hereby assigned to and shall be paid to the Beneficiary by a check made payable to the Beneficiary. The Beneficiary is authorized and empowered (but not required) to collect and receive any Funds and, if such funds are not used to restore the Property as aforesaid, is authorized to apply them in whole or in part upon any indebtedness or obligation secured hereby, in such order and manner as the Beneficiary shall determine at its sole option. The Beneficiary shall be entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All or any part of the amounts so collected and recovered by the Beneficiary may be released to Trustor upon such reasonable and customary conditions as the Beneficiary may impose for its disposition. Application of all or any part of the Funds collected and received by the Beneficiary or the release thereof shall not cure or waive any default under this Deed of Trust. The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior mortgage lender. The Beneficiary shall release the Funds to Trustor to be used to reconstruct the improvements on the Property provided that Beneficiary reasonably determines that Trustor (taking into account the Funds) has sufficient funds to rebuild the improvements in substantially the form they existed prior to the casualty or condemnation.

ARTICLE 5
AGREEMENTS AFFECTING THE PROPERTY; FURTHER
ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST
Section 5.1 Other Agreements Affecting Property.

The Trustor shall duly and punctually perform all terms, covenants, conditions and agreements binding upon it under the Loan Documents and any other agreement of any nature whatsoever now or hereafter involving or affecting the Security or any part thereof.

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9 Section 5.2 Agreement to Pay Attorneys' Fees and Expenses.

In the event of any Event of Default (as defined in Section 7.1) hereunder, and if the Beneficiary should employ attorneys or incur other expenses for the collection of amounts due or the enforcement of performance or observance of an obligation or agreement on the part of the Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so incurred by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the Secured Obligations, and shall bear interest from the date such expenses are incurred at the lesser of ten percent (10%) per annum or the maximum rate permitted by law.

Section 5.3 Payment of the Loan.

The Trustor shall pay to the Beneficiary the Loan and any other payments as set forth in the Note in the amounts and by the times set out therein.

Section 5.4 Personal Property.

To the maximum extent permitted by law, the personal property subject to this Deed of Trust shall be deemed to be fixtures and part of the real property and this Deed of Trust shall constitute a fixtures filing under the California Commercial Code. As to any personal property not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement under the California Commercial Code.

Section 5.5 Financing Statement.

The Trustor shall execute and deliver to the Beneficiary such financing statements pursuant to the appropriate statutes, and any other documents or instruments as are required to convey to the Beneficiary a valid perfected security interest in the Security. The Trustor agrees to perform all acts which the Beneficiary may reasonably request so as to enable the Beneficiary to maintain such valid perfected security interest in the Security in order to secure the payment of the Note in accordance with its terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdiction(s) as it shall deem appropriate from time to time in order to protect the security interest established pursuant to this instrument.

Section 5.6 Operation of the Security.

The Trustor shall operate the Security (and, in case of a transfer of a portion of the Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in full compliance with the Loan Documents.

Section 5.7 Inspection of the Security.

At any and all reasonable times upon seventy-two (72) hours' notice, subject to the rights of tenants under lease, the Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right, without payment of charges or fees, to inspect the Security, except in the event of an emergency, in which case no prior notice shall be required.

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10 Section 5.8 Nondiscrimination.

The Trustor herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, age, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Security, nor shall the Trustor itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Security. The foregoing covenants shall run with the land.

ARTICLE 6

HAZARDOUS WASTE
Trustor shall keep and maintain the Property in compliance with, and shall not cause or permit the Property to be in violation of any federal, state or local laws, ordinances or regulations relating to industrial hygiene or to the environmental conditions ("Environmental Laws") on, under or about the Property including, but not limited to, soil and ground water conditions.

Trustor shall not use, generate, manufacture, store or dispose of on, under, or about the Property or transport to or from the Property any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials, including without limitation, any substances defined as or included in the definition of "hazardous substances," hazardous wastes," "hazardous materials," or "toxic substances" under any applicable federal or state laws or regulations (collectively referred to hereinafter as "Hazardous Materials") except (x) as permitted under Environmental Laws; (y) such of the foregoing as may be customarily used in construction or operation of a multi-family residential development; or (z) such of the foregoing as was present on the Property prior to the commencement of the Ground Lease.

Trustor shall immediately advise Beneficiary in writing if at any time it receives written notice of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Trustor or the Property pursuant to any Environmental Law; and (ii) all claims made or threatened by any third party against Trustor or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above are hereinafter referred to as "Hazardous Materials Claims").

Beneficiary shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims.

Beneficiary shall have its reasonable attorneys' fees in connection therewith paid by Trustor.

Trustor shall indemnify, defend, and hold harmless Beneficiary and its councilmembers, supervisors, directors, officers, employees, agents, successors and assigns from and against any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to (i) any violation of Environmental Laws with respect to Trustor or the Property from and after the Effective Date; (ii) any Hazardous Materials Claims arising from a violation of Environmental Laws occurring from and after the Effective Date; (iii) any use, generation, manufacture, storage, release, threatened release, discharge, disposal, transportation, or presence of Hazardous

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11 Materials on, under, or about the Property arising from a violation of any Environmental Laws occurring from and after the Effective Date; including without limitation: (a) all foreseeable consequential damages; (b) the costs of any required or necessary repair, cleanup or detoxification of the Property and the preparation and implementation of any closure, remedial or other required plans; and (c) all reasonable costs and expenses incurred by Beneficiary in connection with clauses (a) and (b), including but not limited to reasonable attorneys' fees and consultant's fees. This indemnification applies whether or not any government agency has issued a cleanup order. Losses, claims, costs, suits, liability, and expenses covered by this indemnification provision include, but are not limited to: (1) losses attributable to diminution in the value of the Property; (2) loss or restriction of use of rentable space on the Property; (3) adverse effect on the marketing of any rental space on the Property; and (4) penalties and fines levied by, and remedial or enforcement actions of any kind issued by any regulatory agency (including but not limited to the costs of any required testing, remediation, repair, removal, cleanup or detoxification of the Property and surrounding properties). Except for obligations assumed by Trustor herein, Trustor shall have no indemnity obligation to Beneficiary for any liabilities arising from or related to a failure to comply with any Environmental Laws with respect to the Property, whether known or unknown, that existed or arose after the Beneficiary acquired the Property and prior to the Effective Date, regardless of when such liabilities may accrue.

Without Beneficiary's prior written consent, which shall not be unreasonably delayed or withheld, Trustor shall not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property, nor shall Turstor enter into any settlement agreement, consent decree, or other compromise (collectively, a "Compromise") in respect to any Hazardous Material Claims, which Compromise might, in Beneficiary's reasonable judgement, impair the value of the Beneficiary's security hereunder; provided, however, that Beneficiary's prior consent shall not be necessary in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain Beneficiary's consent before taking such action, provided that in such event Trustor shall notify Beneficiary in writing as soon as practicable of any action so taken.

Beneficiary agrees not to withhold its consent, where such consent is required hereunder, if (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) Trustor will or may be subjected to administrative, civil or criminal sanctions or penalties if it fails to take a required action; (iii) Trustor establishes to the reasonable satisfaction of Beneficiary that there is no reasonable alternative to such Compromise which would result in less impairment of Beneficiary's security hereunder; or (iv) the action has been agreed to by Beneficiary.

The Trustor hereby acknowledges and agrees that (i) this Article is intended as the Beneficiary's written request for information (and the Trustor's response) concerning the environmental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other Loan Documents (together with any indemnity applicable to a breach of any such representation and warranty) with respect to the environmental condition of the property is intended by the Beneficiary and the Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736.

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12 In the event that any portion of the Property is determined to be "environmentally impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3)) or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(1)), then, without otherwise limiting or in any way affecting the Beneficiary's or the Trustee's rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its rights under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and remedies of an unsecured creditor, including reduction of its claim against the Trustor to judgment, and (b) any other rights and remedies permitted by law. For purposes of determining the Beneficiary's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), the Trustor shall be deemed to have willfully permitted or acquiesced in a release or threatened release of hazardous materials, within the meaning of California Code of Civil Procedure Section 726.5(d)(1), if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and the Trustor knew or should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) reasonable attorneys' fees, incurred by the Beneficiary in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.5(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the default rate specified in the Loan Agreement until paid, shall be added to the indebtedness secured by this Deed of Trust and shall be due and payable to the Beneficiary upon its demand made at any time following the conclusion of such action.

ARTICLE 7

LEASEHOLD MORTGAGE PROVISIONS
Section 7.1 General
The provisions of this Article 7 shall apply in the event that, and so long as, any portion of the Property consists of Trustor’s interests as tenant under any lease (including, without limitation, the Ground Lease). The lien of this Deed of Trust shall encumber all of Trustor’s leasehold estate and other rights and interests under and in connection with the Ground Lease, including without limitation, renewal and extension rights, options to expand, and purchase options (all of which rights shall be collectively referred to herein as the “Leasehold”).

Section 7.2 Performance of Obligations.

Trustor shall timely perform its obligations in connection with the Ground Lease. Trustor specifically acknowledges Beneficiary’s right, while any default by Trustor under the Ground Lease remains uncured, to perform the defaulted obligations and take all other actions which Beneficiary reasonably deems necessary to protect its interests with respect thereto, and Trustor hereby irrevocably appoints Beneficiary its true and lawful attorney-in-fact in its name or otherwise to execute all documents, and perform all other acts, which Beneficiary reasonably deems necessary to preserve its or Trustor’s rights with respect to the Leasehold.

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13 Section 7.3 Notice under Ground Lease.

Trustor shall notify Beneficiary promptly in writing of (i) the occurrence of any default by any party under any Ground Lease and (ii) the receipt by Trustor of any notice claiming the occurrence of any default by Trustor under the Ground Lease or the occurrence of any event which, with the passage of time or the giving of notice or both, would constitute a default by Trustor under the Ground Lease (and Trustor shall also promptly deliver a copy of any such notice to Beneficiary); provided that, for so long as the City of East Palo Alto is both the Beneficiary hereunder and the lessor under the Ground Lease, notices sent to (or by) the lessee under the Ground Lease shall satisfy the requirements of this Section 7.3 without the need for duplicate notices to Beneficiary.

Section 7.4 Subordination of Leasehold Interest.

Trustor shall not subordinate the Ground Lease or Leasehold to any deed of trust or other encumbrance of, or lien on, any interest in the real property subject to such Leasehold without the prior written consent of Beneficiary. Any such subordination without such consent shall, at Beneficiary’s option, be void.

Section 7.5 Additional Events of Default.

In addition to all other Events of Default described in this Deed of Trust, the occurrence of any of the following shall be an Event of Default hereunder:
(a) A material breach or default by Trustor under the Ground Lease, subject to any applicable cure period; or
(b) The occurrence of any event or circumstance which gives either party under the Ground Lease a right to terminate such Ground Lease.

Section 7.6 Application of Bankruptcy Code.

As used in this Deed of Trust, the “Bankruptcy Code” shall mean 11 U.S.C. §§ 101 et seq., as modified and/or recodified from time to time. Notwithstanding anything to the contrary contained herein with respect to any Ground Lease:
(a) The lien of this Deed of Trust attaches to all of Trustor’s rights under Subsection 365(h) of the Bankruptcy Code, including without limitation any and all elections to be made thereunder, any and all rights under the Ground Lease which Trustor is entitled to retain pursuant to 11 U.S.C. § 365(h)(1)(A)(ii) in the event of a rejection under the Bankruptcy Code of the Ground Lease by the landlord thereunder (or any trustee thereof), and any and all rights of offset under or as described in 11 U.S.C. § 365(h)(1)(B). (b) Trustor acknowledges and agrees that, as the beneficiary under this Deed of Trust and by operation of 11 U.S.C. §365(h)(1)(D), Beneficiary has, and until this Deed of Trust has been fully reconveyed continuously shall have, whether before or after any default under any of the Secured Obligations or the taking of any action to enforce any of Beneficiary’s rights and

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14 remedies under this Deed of Trust or any foreclosure sale hereunder, the complete, unfettered and exclusive right, in its sole and absolute discretion, to elect (the “365(h) Election”) whether (i) the Ground Lease that has been rejected under the Bankruptcy Code by the landlord thereunder (or any trustee therefor) shall be treated as terminated under 11 U.S.C. §365(h)(1)(A)(i), or (ii) the rights under the Ground Lease that are in or appurtenant to the real property, as described in 11 U.S.C. §365(h)(1)(A)(ii), should be retained pursuant to that subsection. To the extent that, notwithstanding the preceding sentence and 11 U.S.C. §365(h)(1)(D), Trustor now or at any time in the future has any right to make, or to participate in or otherwise in any manner affect the making of, the 365(h) Election with respect to the Ground Lease, Trustor hereby absolutely assigns and conveys to Beneficiary any and all such rights, and all of Trustor’s right, title, and interest therein, which may be used and exercised by Beneficiary completely, exclusively, and without any restriction whatsoever, in Beneficiary’s sole and absolute discretion, whether before or after any default upon any of the Secured Obligations, the taking of any action to enforce any of Beneficiary’s rights and remedies under this Deed of Trust, or any foreclosure sale hereunder. Trustor hereby unconditionally and irrevocably appoints Beneficiary as its attorney-in-fact to exercise Trustor’s right, if any, to make, or participate in or otherwise in any matter affect the making of, the 365(h) Election with respect to the Ground Lease. Trustor shall not in any manner impede or interfere with any action taken by Beneficiary and, at the request of Beneficiary, Trustor shall take or join in the taking of any action to make, or participate in or otherwise in any manner affect the making of, the 365(h) Election with respect to the Ground Lease, in such manner as Beneficiary determines in its sole and absolute discretion. Unless and until instructed to do so by Beneficiary (as determined by Beneficiary in its sole and absolute discretion), Trustor shall not take any action to make, or participate in or otherwise in any manner affect the making of, the 365(h) Election with respect to the Ground Lease, including in particular, but without limitation, any election to treat the Ground Lease as terminated. Beneficiary shall have no obligation whatsoever to Trustor or any other person or entity in connection with the making of the 365(h) Election with respect to the Ground Lease or any instruction by Beneficiary to Trustor given, withheld or delayed in respect thereof, nor shall Beneficiary have any liability to Trustor or any other person or entity arising from any of the same.
(c) As security for the Secured Obligations, Trustor hereby irrevocably assigns to Beneficiary all of Trustor’s rights to damages arising from any rejection by the landlord (or any trustee thereof) of the Ground Lease under the Bankruptcy Code. Beneficiary and Trustor shall proceed jointly or in the name of Trustor in respect of any claim or proceeding relating to the rejection of the Ground Lease, including without limitation the right to file and prosecute any proofs of claim, complaints, motions and other documents in any case in respect of such landlord under the Bankruptcy Code. This assignment shall continue in effect until all of the Secured Obligations have been satisfied in full. Any amounts received by Beneficiary or Trustor as damages arising from the rejection of the Ground Lease as aforesaid shall be applied first to all costs reasonably incurred by Beneficiary (including attorneys’ fees) in connection with this subsection (c) and then in accordance with other applicable provisions of this Deed of Trust. (d) If, pursuant to the Bankruptcy Code, Trustor seeks to offset against the rent reserved in the Ground Lease the amount of any damages caused by the nonperformance of the landlord’s obligations after the rejection by the landlord (or any trustee thereof) of the Ground Lease, Trustor shall, prior to effecting such offset, notify Beneficiary in writing of its intent to do

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15 so, setting forth the amounts proposed to be offset and, in the event that Beneficiary objects, Trustor shall not effect any offset of the amounts to which Beneficiary objects. (e) If any legal proceeding is commenced with respect to the Ground Lease in connection with any case under the Bankruptcy Code, Beneficiary and Trustor shall cooperatively conduct any such proceeding with counsel reasonably agreed upon between Trustor and Beneficiary. Trustor shall, upon demand, pay to Beneficiary all costs (including attorneys’ fees) reasonably incurred by Beneficiary in connection with any such proceeding. (f) Trustor shall immediately notify Beneficiary orally upon learning of any filing by or against any landlord under any Ground Lease of a petition under the Bankruptcy Code.

Trustor shall thereafter promptly give written notice of such filing to Beneficiary, setting forth any information available to Trustor with respect to the date of such filing, the court in which such petition was filed, and the relief sought therein. Trustor shall promptly deliver to Beneficiary all notices, pleadings and other documents received by Trustor in connection with any such proceeding.

Section 7.7 Additional Representations and Warranties.

Trustor hereby represents and warrants to Beneficiary, with respect to the Ground Lease, as follows:
(a) The Ground Lease is in full force and effect;
(b) Trustor owns the entire tenant’s interest under the Ground Lease and has the right under the Ground Lease to execute this Deed of Trust; and (c) As of the Effective Date, no default under the Ground Lease remains uncured, nor has any event occurred which, with the passage of time or service of notice or both, would constitute such a default.

ARTICLE 8

EVENTS OF DEFAULT AND REMEDIES
Section 8.1 Events of Default.

The following shall constitute events of default ("Events of Default") following the expiration of any applicable notice and cure periods: (1) failure to make any payment to be paid by Trustor under the Loan Documents; (2) failure to observe or perform any of Trustor's other covenants, agreements or obligations under the Loan Documents, including, without limitation, the provisions concerning discrimination, unless such default is reasonably susceptible to cure, in which event no Event of Default shall occur if Trustor commences to cure such default within ten (10) days (or such shorter period expressly provided herein) and thereafter diligently pursues the cure to completion, not to exceed sixty (60) days; (3) failure to make any payment or observe or perform any of Trustor's other covenants, agreements, or obligations under any other debt instrument or regulatory agreement secured by the Property, which default shall not be cured

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16 within the times and in the manner provided therein; or (4) a default is declared under the Approved Financing by the lender of such Approved Financing. Notwithstanding anything to the contrary contained herein, Beneficiary hereby agrees that any cure of any default made or tendered by one or more of Trustor's limited partners shall be deemed a cure by the Trustor and shall be accepted or rejected on the same basis as if made or tendered by Trustor. Copies of all notices which are sent to Trustor hereunder shall be sent to Investor Limited Partner at the address set forth in the Loan Agreement; provided, however, Beneficiary shall have no liability to such Investor Limited Partner for its failure to do so.

Section 8.2 Acceleration of Maturity.

If an Event of Default shall have occurred and be continuing, then at the option of the Beneficiary, the amount of any payment related to the Event of Default and all unpaid Secured Obligations shall immediately become due and payable, upon written notice by the Beneficiary to the Trustor (or automatically where so specified in the Loan Documents), and no omission on the part of the Beneficiary to exercise such option when entitled to do so shall be construed as a waiver of such right.

Section 8.3 The Beneficiary's Right to Enter and Take Possession.

If an Event of Default shall have occurred and be continuing, the Beneficiary may:
(a) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Security and take possession thereof (or any part thereof) and of any of the Security, in its own name or in the name of Trustee, and do any acts which it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security shall not cure or waive any Event of Default or Notice of Sale (as defined below) hereunder or invalidate any act done in response to such Event of Default or pursuant to such Notice of Sale, and, notwithstanding the continuance in possession of the Security, Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any Event of Default, including the right to exercise the power of sale;
(b) Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (c) Deliver to Trustee a written declaration of default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of Sale"), which notice Trustee or Beneficiary shall cause to be duly filed for record in the Official Records of San Mateo County; or
(d) Exercise all other rights and remedies provided herein, in the instruments by which the Trustor acquires title to any Security, or in any other document or agreement now or hereafter evidencing, creating or securing the Secured Obligations.

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17 Section 8.4 Foreclosure By Power of Sale.

Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained, the Beneficiary shall deliver to the Trustee the Notice of Sale and shall deposit with Trustee this Deed of Trust which is secured hereby (and the deposit of which shall be deemed to constitute evidence that the Secured Obligations are immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require.
(a) Upon receipt of the Notice of Sale from the Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Sale as then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such Notice of Sale having been given as required by law, sell the Security, at the time and place of sale fixed by it in the Notice of Sale, whether as a whole or in separate lots or parcels or items as Trustee shall deem expedient and in such order as it may determine at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed or any matters of facts shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale. (b) After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to payment of: (i) the unpaid Loan amount of the Note; (ii) all other Secured Obligations owed to Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the remainder, if any, to Trustor.
(c) Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new Notice of Sale.

Section 8.5 Receiver.

If an Event of Default shall have occurred and be continuing, Beneficiary, as a matter of right and without further notice to Trustor or anyone claiming under the Security, and without regard to the then value of the Security or the interest of Trustor therein, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of entry as provided herein, and shall continue as such and exercise all such powers until the date of confirmation of sale of the Security, unless such receivership is sooner terminated.

Section 8.6 Remedies Cumulative.

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18 No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other right, power or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity.

Section 8.7 No Waiver.
(a) No delay or omission of the Beneficiary to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy, or shall be construed to be a waiver of any such Event of Default or acquiescence therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from time to time and as often as may be deemed expeditious by the Beneficiary.

Beneficiary's express or implied consent to breach, or waiver of, any obligation of the Trustor hereunder shall not be deemed or construed to be a consent to any subsequent breach, or further waiver, of such obligation or of any other obligations of the Trustor hereunder. Failure on the part of the Beneficiary to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Beneficiary of its right hereunder or impair any rights, power or remedies consequent on any Event of Default by the Trustor.
(b) If the Beneficiary (i) grants forbearance or an extension of time for the payment or performance of any Secured Obligation, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the granting of any easement or other right affecting the Security, or (vi) makes or consents to any agreement subordinating the lien hereof, any such act or omission shall not release, discharge, modify, change or affect the original liability under this Deed of Trust, or any other obligation of the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co-signer, endorser, surety or guarantor (unless expressly released); nor shall any such act or omission preclude the Beneficiary from exercising any right, power or privilege herein granted or intended to be granted in any Event of Default then made or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by the Beneficiary shall the lien of this Deed of Trust be altered thereby.

Section 8.8 Suits to Protect the Security.

The Beneficiary shall have power to (a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Security and the rights of the Beneficiary as may be unlawful or any violation of this Deed of Trust, (b) preserve or protect its interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment, rule or order would impair the Security thereunder or be prejudicial to the interest of the Beneficiary.

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19 Section 8.9 Trustee May File Proofs of Claim.

In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting the Trustor, its creditors or its property, the Beneficiary, to the extent permitted by law, shall be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of the Beneficiary allowed in such proceedings and for any additional amount which may become due and payable by the Trustor hereunder after such date.

Section 8.10 Waiver.

The Trustor waives presentment, demand for payment, notice of dishonor, notice of protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in taking any action to collect any Secured Obligations or in proceedings against the Security, in connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust.

ARTICLE 9

MISCELLANEOUS
Section 9.1 Amendments.

This Deed of Trust cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by Beneficiary and Trustor.

Section 9.2 Reconveyance by Trustee.

Upon written request of Beneficiary stating that all Secured Obligations have been paid or forgiven, and all obligations under the Loan Documents have been performed in full, and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor of Trustee's reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto.

Section 9.3 Notices.

Formal notices, demands, and communications between the Parties shall be sufficiently given if and shall not be deemed given unless (a) dispatched by registered or certified mail, postage prepaid, return receipt requested, (b) delivered by express delivery service, return receipt requested, (c) delivered personally, or (d) sent by electronic mail, provided that any notice sent by electronic mail must be followed by notice delivered under either (a), (b), or (c) within 2 business days. All such notices shall be delivered to the principal office of the Parties as follows:

Beneficiary: City of East Palo Alto
2415 University Avenue
East Palo Alto, CA 94303
Attn: City Manager

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20 With a copy to:

City of East Palo Alto
1960 Tate Street
East Palo Alto, CA 94303
Attn: Community and Economic Development Director
Trustor: MP 965 Weeks Street Associates, L.P.
c/o MidPen Housing Corporation
303 Vintage Park Dr. Suite 250
Foster City, CA 94404
Attn: Chief Real Estate Development Officer
c/o East Palo Alto Community Alliance and Neighborhood
Development Organization
2369 University Avenue
East Palo Alto, California 94303
Attn: Executive Director
Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected Party may from time to time designate by mail as provided in this Section. Receipt shall be deemed to have occurred on the date shown on a written receipt as the date of delivery or refusal of delivery (or attempted delivery if undeliverable) except that any electronic mail received after 5:00 p.m. shall be deemed to have been received on the next business day.

Section 9.4 Successors and Joint Trustors.

Where an obligation created herein is binding upon Trustor, the obligation shall also apply to and bind any transferee or successors in interest. Where the terms of the Deed of Trust have the effect of creating an obligation of the Trustor and a transferee, such obligation shall be deemed to be a joint and several obligation of the Trustor and such transferee. Where Trustor is more than one entity or person, all obligations of Trustor shall be deemed to be a joint and several obligation of each and every entity and person comprising Trustor.

Section 9.5 Captions.

The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust.

Section 9.6 Invalidity of Certain Provisions.

Every provision of this Deed of Trust is intended to be severable. In the event any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or other body of competent jurisdiction, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and

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21 enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid or applied to the full payment of that portion of the debt which is not secured or partially secured by the lien of this Deed of Trust.

Section 9.7 Governing Law.

This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California.

Section 9.8 Gender and Number.

In this Deed of Trust the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires.

Section 9.9 Deed of Trust, Mortgage.

Any reference in this Deed of Trust to a mortgage shall also refer to a deed of trust and any reference to a deed of trust shall also refer to a mortgage.

Section 9.10 Actions.

Trustor agrees to appear in and defend any action or proceeding purporting to affect the Security.

Section 9.11 Substitution of Trustee.

Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Trust. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the Property is situated, shall be conclusive proof of proper appointment of the successor trustee.

Section 9.12 Statute of Limitations.

The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law.

Section 9.13 Acceptance by Trustee.

Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law the Trustee is not

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22 obligated to notify any party hereto of pending sale under this Deed of Trust or of any action of proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee.

Section 9.14 Tax Credit Provisions.

Notwithstanding anything to the contrary contained herein or in any documents secured by this Deed of Trust or contained in any subordination agreement, the Beneficiary acknowledges and agrees that in the event of a foreclosure or deed-in-lieu of foreclosure (collectively, "Foreclosure") with respect to the Security encumbered by this Deed of Trust, the following rule contained in Section 42(h)(6)(E)(ii) of the Internal Revenue Code of 1986 (26 USC 42 (h)(6)(E)(ii)), as amended, shall apply:

For a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by a Regulatory Agreement with the California Tax Credit Allocation Committee, (i) none of the tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause), (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Code. [SIGNATURES TO FOLLOW ON NEXT PAGE]

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23 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written.

TRUSTOR:

MP 965 Weeks Street Associates, L.P.,
a California limited partnership
By: MP CANDO Weeks Street, LLC,
a California limited liability company,
its general partner
By: MidPen Housing Corporation,
a California nonprofit public benefit corporation,
its manager
By: ____________________________
Name: __________________________
Its: _____________________________
By: East Palo Alto Community Alliance and
Neighborhood Development Organization,
a California nonprofit public benefit corporation,
its member
By: ____________________________
Name: __________________________
Its: _____________________________

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STATE OF CALIFORNIA )
)
COUNTY OF __________________ )
On ____________________, before me, ___________________________, Notary Public, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.
______________________________________
Name: ______________________________
Name: Notary Public
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

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EXHIBIT A

LEGAL DESCRIPTION

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1 PROMISSORY NOTE
(965 Weeks Street Project)
$7,214,000 East Palo Alto, California
____ [insert date]___
FOR VALUE RECEIVED, the undersigned MP 965 Weeks Street Associates, L.P., a California limited partnership ("Borrower"), promises to pay to the City of East Palo Alto, a California municipal corporation ("Holder") the principal sum of up to Seven Million Two Hundred Fourteen Thousand Dollars ($7,214,000), plus interest thereon pursuant to Section 2 below.

1. Borrower's Obligation. This Note evidences Borrower's obligation to pay the Holder the total principal amount of Seven Million Two Hundred Fourteen Thousand Dollars ($7,214,000) which consist of a loan in the amount of Seven Hundred Fourteen Thousand Dollars ($714,000) (“Housing Fund Loan”) and a loan in the amount of Six Million Five Hundred Thousand Dollars ($6,500,000) (“State Funds Loan”, and collectively with the Housing Fund Loan, the “City Loan”) with interest as set forth herein . The Housing Fund Loan and the State Funds Loan are made to finance the construction of the Improvements pursuant to that certain Disposition, Development and Loan Agreement between Borrower and Holder dated December 15, 2020 as amended by the First Amendment to the Disposition, Development and Loan Agreement dated _____, 2023 ("Loan Agreement"). All capitalized terms used but not defined in this Note have the meanings set forth in the Loan Agreement.

2. Interest. Funds disbursed under this Note for the Housing Fund Loan bear simple interest at the rate of ____ percent (_%) per annum, calculated on a 365-day per year basis, from the date of disbursement. Funds disbursed under this Note for the State Fund Loan shall not bear interest. If a Default occurs, interest on the principal balance of the City Loan will begin to accrue as of the date of Default (following expiration of applicable notice and cure periods) and continuing until such time as the City Loan funds are repaid in full or the Default is cured, at the Default Rate.

3. Term and Repayment Requirements. Principal and interest under this Note, are due and payable in accordance with this Note and as set forth in Sections 4.5 and 4.6 of the Loan Agreement. In any event, the unpaid principal balance, together with any accrued interest, is due and payable not later than the date that is the fifty-seventh (57th) anniversary of the Ground Lease; provided, however, if a record of the commencement of the Ground Lease cannot be located or established, the City Loan is due and payable on the fifty-seventh (57th) anniversary of the date of this Note.

4. No Assumption. This Note is not assumable by the successors and assigns of Borrower without the prior written consent of Holder, except as may be otherwise set forth in the Loan Agreement.

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2 5. Security. This Note is secured by the City Deed of Trust wherein Borrower is the trustor and Holder is the beneficiary.

6. Terms of Payment.
(a) Borrower shall make all payments due under this Note in currency of the United States of America to Holder at the City of East Palo Alto, 2415 University Avenue, East Palo Alto, California 94303, Attention: City Manager, or such other place as Holder may from time to time designate.
(b) All payments on this Note are without expense to Holder. Borrower shall pay all costs and expenses, including reconveyance fees and reasonable attorney's fees of Holder, incurred in connection with the enforcement of this Note and the release of any security hereof. (c) Notwithstanding any other provision of this Note, or any instrument securing the obligations of Borrower under this Note, if, for any reason whatsoever, the payment of any sums by Borrower pursuant to the terms of this Note would result in the payment of interest that exceeds the amount that Holder may legally charge under the laws of the State of California, then the amount by which payments exceed the lawful interest rate will automatically be deducted from the principal balance owing on this Note, so that in no event is Borrower obligated under the terms of this Note to pay any interest that would exceed the lawful rate. (d) The obligations of Borrower under this Note are absolute and Borrower waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reason whatsoever.
(e) This Note shall be nonrecourse to Borrower and its partners, pursuant to and except as provided in Section 4.7 of the Loan Agreement, which Section 4.7 is hereby incorporated into this Note.

7. Default.
(a) Upon the occurrence of a Default, the entire unpaid principal balance, together with all interest thereon, and together with all other sums then payable under this Note and the Deed of Trust, will at the option of Holder, become immediately due and payable without further demand.
(b) Holder's failure to exercise the remedy set forth in Subsection 7(a) above or any other remedy provided by law upon the occurrence of a Default does not constitute a waiver of the right to exercise any remedy at any subsequent time in respect to the same or any other Default. The acceptance by Holder of any payment that is less than the total of all amounts due and payable at the time of such payment does not constitute a waiver of the right to exercise any of the foregoing remedies or options at that time or at any subsequent time, or nullify any prior exercise of any such remedy or option, without the express consent of Holder, except as and to the extent otherwise provided by law.

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3 8. Waivers.
(a) Borrower waives: (i) demand, presentment, protest, notice of demand, notice of non-payment, notice of dishonor, notice of protest, and all other demands and notices in connection with the delivery, acceptance, performance, and enforcement of this Note; and (ii) any and all lack of diligence or delays by Holder in collection or enforcement hereof. Borrower expressly agrees that this Note or any payment hereunder may be extended from time to time, and that Holder may accept further security or release any security for this Note, all without in any way affecting the liability of Borrower.
(b) Any extension of time for payment of this Note or any installment hereof made by agreement of Holder with any person now or hereafter liable for payment of this Note must not operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part.

9. Miscellaneous Provisions.
(a) All notices to Holder or Borrower are to be given in the manner and at the addresses set forth in the Loan Agreement, or to such addresses as Holder and Borrower may therein designate.
(b) Borrower promises to pay all costs and expenses, including reasonable attorney's fees, incurred by Holder in the enforcement of the provisions of this Note, regardless of whether suit is filed to seek enforcement.
(c) This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
(d) This Note is governed by and construed in accordance with the laws of the State of California.
(e) The times for the performance of any obligations hereunder are to be strictly construed, time being of the essence.
(f) The City Documents, of which this Note is a part, contain the entire agreement between the parties as to the City Loan and the provisions of the City Documents are incorporated herein by reference. This Note may not be modified except upon the written consent of the parties.
[Signature on following page.]

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IN WITNESS WHEREOF, this Promissory Note is executed by Borrower as of the day and year first written above.

BORROWER
MP 965 Weeks Street Associates, L.P.,
a California limited partnership
By: MP CANDO Weeks Street, LLC,
a California limited liability company,
its general partner
By: MidPen Housing Corporation,
a California nonprofit public benefit corporation,
its manager
By: ____________________________
Name: __________________________
Its: _____________________________
By: East Palo Alto Community Alliance and
Neighborhood Development Organization,
a California nonprofit public benefit corporation,
its member
By: ____________________________
Name: __________________________
Its: _____________________________

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RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

City of East Palo Alto
2415 University Avenue
East Palo Alto, CA 94303
Attn: City Manager
____________________________________________________________________________ No fee for recording pursuant to
Government code Section 27383 and 27388.1

REGULATORY AGREEMENT AND

DECLARATION OF RESTRICTIVE COVENANTS
(965 Weeks Street Affordable Housing Site)
This Regulatory Agreement and Declaration of Restrictive Covenants (the "Agreement") is made and entered into as of _______, by and between the City of East Palo Alto, a California municipal corporation (the "City"), and MP 965 Weeks Street Associates, L.P., a California limited partnership (the "Owner").

RECITALS
A. Owner is the owner of a leasehold interest in that certain property located at 965 Weeks Street in the City of East Palo Alto, California, identified as Assessor's Parcel Numbers 063-232-210, 063-232-220, and 063-232-230, as more particularly described in the legal description attached hereto as Exhibit A and incorporated herein by this reference (the "Property") pursuant to that certain Ground Lease dated as of __________, 2023 (as modified from time to time, the "Ground Lease"), a memorandum of which shall record in the Official Records of the County of San Mateo, State of California ("Official Records"), substantially concurrently herewith. Owner intends to construct one hundred and thirty-six (136) unit multifamily rental housing development on the Property for rental to extremely low, very low and low income households including one (1) manager's unit that is not subject to affordability restrictions. Together the Property and its improvements are the "Development".

B. City has entered into a Disposition, Development and Loan Agreement with Owner dated December 15, 2020 as amended by the First Amendment to the Disposition, Development and Loan Agreement ("DDLA") pursuant to which the City agreed to ground lease the Property to the Owner. The DDLA further provides for the City to loan to the Owner Seven Hundred Fourteen Thousand Dollars ($714,000) ("Housing Fund Loan") and Six Million Five Hundred Thousand Dollars ($6,500,000) (“State Funds Loan, and with the Housing Fund Loan, the ”City Loan”) to assist with the construction of the Development.

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C. The City conveyed a leasehold interest in the Property to Owner in its capacity as the housing successor to the former East Palo Alto Redevelopment Agency and as permitted under California Health and Safety Code Section 33433.

D. The City has agreed to ground lease the Property to the Owner and to make the City Loan on the condition that the Owner construct, maintain and operate the Development in accordance with restrictions set forth in this Regulatory Agreement and in related documents including the DDLA.

E. The Owner applied for and received a density bonus pursuant to the State Density Bonus Law (Government Code Sections 65915-65918) ("Density Bonus Law"). The Density Bonus Law requires the City to ensure and the Owner to agree to continued affordability of the Units subject to the density bonus. This Agreement satisfies the requirements and obligations of the Density Bonus Law.

F. The Owner applied for and received an allocation of Catalyst funds from the Local Initiatives Support Corporation ("Catalyst Funds") acting as the fund administrator for the Catalyst funds. In accordance with the requirements of the Catalyst Funds as set forth in Fund Administration Agreement, the City is required to ensure that units receiving Catalyst Funds meet certain affordability requirements. This Agreement satisfies the requirements and obligations of the Catalyst Funds.

G. In consideration for ground lease of the Property and receipt of the City Loan at an interest rate substantially below the market rate, Owner agrees to observe all of the terms and conditions set forth below.

THEREFORE, City and Owner hereby agree as follows.

ARTICLE 1.

DEFINITIONS
Section 1.1 Definitions. When used in this Agreement, the following terms shall have the respective meanings assigned to them in this Article 1. (a) "Actual Household Size" shall mean the actual number of persons in the applicable household.
(b) "Affiliate" means any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with Owner which, if Owner is a partnership or limited liability company, shall include each of the constituent members or partners, respectively thereof. The term "control" as used in the immediately preceding sentence, means, with respect to a person that is a corporation, the right to the exercise, directly or indirectly, of more than fifty percent (50%) of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person.

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(c) "Agreement" shall mean this Regulatory Agreement and Declaration of Restrictive Covenants.
(d) "Area Median Income" shall mean for the Density Bonus Units the median gross yearly income adjusted for Actual Household Size or Assumed Household Size as specified herein, in the County of San Mateo, California, as published from time to time and periodically updated in Title 25, California Code of Regulations, Section 6932 (or successor provision) by HCD. Area Median Income for all of Units other than the Density Bonus Units shall mean the median gross yearly income adjusted for Actual Household Size or Assumed Household Size as specified herein, in the County of San Mateo, California, as published from time to time by the United Stated Department of Housing and Urban Development ("HUD") for Multifamily Tax Subsidy Projects. In the event that such income determinations are no longer published or are not updated for a period of at least twelve (12) months, City shall provide the Owner with other income determinations which are reasonably similar with respect to methods of calculation to those previously published by HCD or HUD as applicable. (e) "Assumed Household Size" means the household size "adjusted for family size appropriate to the unit" in accordance with the California Tax Credit Allocation Committee rules and regulations.
(f) "City" shall mean the City of East Palo Alto, a California municipal corporation.
(g) "City Loan" shall mean all funds loaned to Owner pursuant to the DDLA. (h) "Completion Date" means the date a final certificate of occupancy, or equivalent document is issued by the City to certify that the construction of the Development is complete and the Development may be legally occupied.
(i) "DDLA" shall mean the Disposition, Development and Loan Agreement entered into by and among the City and Owner and dated as of December 15, 2020 as amended by the First Amendment to the Disposition, Development and Loan Agreement. (j) "Deed of Trust" shall mean the Leasehold Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing of even date herewith by and among Owner, as Trustor, __________ Title Company, as trustee, and the City as beneficiary, that encumbers Owner's leasehold interest in the Property to secure repayment of the City Loan and Owner's performance of the Loan Documents.
(k) "Density Bonus Units" shall mean the eleven (11) units that are restricted to Very Low Income Households at affordable rents compliant with the Density Bonus Law. (l) "Development" shall mean the Property and the one hundred and thirty-six (136) units to be developed on the Property (including one unrestricted manager's unit), and any additional improvements and all landscaping, roads and parking spaces existing thereon, as the same may from time to time exist.

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(m)"Extremely Low Income Household" shall mean a household with a Household Income which does not exceed thirty percent (30%) of Area Median Income adjusted for Actual Households Size.
(n) "Extremely Low Income Units" shall mean the Units which, pursuant to Section 2.1(b) below, are required to be occupied by Extremely Low Income Households. (o) "Fifteen Year Compliance Period" means the fifteen (15) year compliance period as described in Section 42(i)(1) of the Internal Revenue Code of 1986, as amended. (p) "Household Income" shall mean the total anticipated annual income of all persons in a household, as calculated in accordance with the California Tax Credit Allocation Committee rules and regulations or pursuant to a successor State housing program that utilizes a reasonably similar method of calculation of adjusted income. In the event that no such program exists, City shall provide the Owner with a reasonably similar method of calculation of adjusted income as provided in 25 California Code of Regulations Section 6914. (q) "Investor Limited Partner" means __________________. (r) "Loan Documents" shall mean this Agreement, the DDLA, the Note, and the Deed of Trust.
(s) "Low Income Household" shall mean household, with a Household Income which does not exceed sixty percent (60%) of the Area Median Income adjusted for Actual Household Size.
(t) "Low Income Unit" shall mean the Units which pursuant to Section 2.1(f) below, are required to be occupied by Low Income Households. (u) "Note" shall mean the promissory note from the Owner to City evidencing all or any part of the City Loan.
(v) "Owner" shall mean MP 965 Weeks Street Associates, a California limited partnership, and its respective successors and assigns to the Development. (w) "Partnership Agreement" means the Agreement of Limited Partnership, dated on or about October 24, 2019 that governs the operation and organization of Owner, as a California limited partnership, as amended from time to time. (x) "Property" shall mean the real property described in Exhibit A attached hereto and incorporated herein.
(y) "Rent" shall mean the total of monthly payments by the tenants of a Unit for the following: use and occupancy of the Unit and land and associated facilities, including parking; any separately charged fees or service charges assessed by Owner which are required of all tenants, other than security deposits; the cost of an adequate level of service for utilities paid by the tenant, including garbage collection, sewer, water, electricity, gas and other heating, cooking and refrigeration fuel, but not cable or telephone service; any other interest, taxes, fees

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or charges for use of the land or associated facilities and assessed by a public or private entity other than Owner, and paid by the Tenant. Utility allowances may be determined by use of the utility allowance published by the local public housing authority or the California Utility Allowance Calculator ("CUAC") model allowed by the TCAC regulations, if the Property qualifies.
(z) "TCAC" shall mean the California Tax Credit Allocation Committee. (aa) "Tenant" shall mean a household occupying a Unit.
(bb) "Term" means the term of this Regulatory Agreement which commences as of the date of this Regulatory Agreement and shall remain in effect until the ninety-ninth (99th) anniversary of the issuance of a Certificate of Occupancy for the Development. (cc) "Units" shall mean the one hundred and thirty-six (136) rental units to be constructed by the Owner on the Property.
(dd) "Very Low Income Household" shall mean a household with a Household Income that does not exceed fifty percent (50%) of Area Median Income adjusted for Actual Households Size.
(ee) "Very Low Income Units" shall mean the Units which, pursuant to Section

2.1(d) below, are required to be occupied by Very Low Income Households.

ARTICLE 2.

AFFORDABILITY COVENANTS
Section 2.1 Occupancy Requirements.
(a) Extremely Low Income Units. Forty-One (41) of the Units shall be rented to and occupied by or, if vacant, available for occupancy by Extremely Low Income Households. (b) Very Low Income Units. Fourteen (14) of the Units shall be rented to and occupied by or, if vacant, available for occupancy by Very Low Income Households. (c) Low Income Units. Eighty (80) of the Units shall be rented to and occupied by or, if vacant, available for occupancy by Low Income Households. (d) Density Bonus Units. The Density Bonus Units shall be Very Low Income Units as long as the Household Income at initial occupancy does not exceed the qualifying income for a Very Low Income Household as determined in accordance with the Density Bonus Law and Rents for the Density Bonus Units do not exceed the allowed Rent in accordance with the Density Bonus Law.
(e) Catalyst Units. Forty-seven (47) of the Units are being funded by the Catalyst Funds. Of these forty-seven Units, fourteen (14) of the Extremely Low Income Units, fourteen (14) of the Very Low Income Units and nineteen (19) of the Low Income Units shall be considered funded by the Catalyst funds.

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(f) Manager's Unit. One (1) Unit shall be reserved for an on-site manager and shall not be subject to affordability or occupancy restrictions. (g) Unit Affordability and Bedroom Mix. All Units shall be intermingled and of comparable quality. Tenants in all Units shall have equal access to and enjoyment of all common facilities in the Development. The affordable Units must be of the bedroom size set forth in the following chart:

Extremely
Low
Income
Units
Very
Low
Income
Units
Low
Income
Units
Manager's
Unit
Total
Studio 4 1 3 8
OneBed3 1 15 19
TwoBed22 8 44 74
ThreeBed9 3 15 27
FourBed3 1 3 7
Subtotal 41 14 80 1
136
(h) No Additional Fees. Owner shall not charge any fee, other than Rent, to any resident of the Units for any housing or other services provided by Owner. (i) Disabled Persons Occupancy.
(1) Owner shall cause the Development to be operated at all times in compliance with all applicable federal, state, and local disabled persons accessibility requirements including, but not limited to the applicable provisions of: (i) the Unruh Act, (ii) the California Fair Employment and Housing Act, (iii) Section 504 of the Rehabilitation Act of 1973, (iv) the United States Fair Housing Act, as amended, (v) the Americans With Disabilities Act of 1990, and (vi) Chapters 11A and 11B of Title 24 of the California Code of Regulations, which relate to disabled persons access (collectively, the "Accessibility Requirements"). (2) Owner shall indemnify, protect, hold harmless and defend (with counsel reasonably satisfactory to the City) the City, and its city council, officers and employees, from all suits, actions, claims, causes of action, costs, demands, judgments and liens arising out of Owner's failure to comply with the Accessibility Requirements. This obligation to indemnify survives termination of this Regulatory Agreement, repayment of the City Loan, cancellation of the Promissory Note, and the reconveyance of the Deed of Trust.

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Section 2.2 Allowable Rent.
(a) Extremely Low Income Rent. Subject to the provisions of Section 2.3 below, the Rent charged to Tenants of the Extremely Low Income Units, shall not exceed one-twelfth of thirty percent (30%) of thirty percent (30%) of Area Median Income, adjusted for Assumed Household Size.
(b) Very Low Income Rent. Subject to the provisions of Section 2.3 below, the Rent charged to Tenants of the Very Low Income Units shall not exceed one-twelfth (1/12th) of thirty percent (30%) of fifty percent (50%) of Area Median Income, adjusted for Assumed Household Size.
(c) Low Income Rent. Subject to the provisions of Section 2.3 below, the Rent charged to Tenants of the Low Income Unit shall not exceed one-twelfth (1/12th) of thirty percent of sixty percent (60%) of Area Median Income, adjusted for Assumed Household Size. (d) Compliance with TCAC Requirements and Density Bonus Law. If there is a conflict with respect to the occupancy standards, occupancy assumptions, income limits, and rent levels that are permitted by this Regulatory Agreement and any other regulatory agreement applicable to the Units, the Owner shall comply with the TCAC requirements except for those units that are designated as the Density Bonus Units. Occupancy standards, occupancy assumptions, income limits and rent levels for the Density Bonus Units shall comply with the requirements of the Density Bonus Law for the first fifty-five years of the Term.

Section 2.3 Rent Increases.

Initial Rents and subsequent Rents for all Units are subject to City approval. All Rent increases for all Units are also subject to City approval. Notwithstanding the foregoing, City’s review and approval of Rents and Rent increases shall be limited to determining that such Rents and Rent increases comply with the requirements of this Regulatory Agreement. No later than sixty (60) days prior to the proposed implementation of any Rent increase affecting a Unit, Owner shall submit to the City a written schedule of any proposed increase in the Rent charged for Units. Except as otherwise permitted under Section 2.4 below, Rents may not be increased more often than once every twelve (12) months and by no more than five percent (5%) per year.

Owner shall provide each Tenant with at least sixty (60) days written notice of any increase in Rent applicable to such Tenant, following completion of the City approval process set forth above.

Section 2.4 Increased Income of Occupying Households.
(a) Increased Income Below Low Income Household.
(1) Subject to Section 2.3 above, in the event that, upon recertification of the income of a Tenant of an Extremely Low Income Unit, Owner determines that the income of the Tenant has increased to above the qualifying limit of an Extremely Low Income Household, but below the qualifying limit of a Very Low Income Household, the Tenant may continue to occupy the Unit and the Tenant's Rent will remain at the Extremely Low Income

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Rent. Owner shall then rent the next available Unit to an Extremely Low Income Household, at a Rent not exceeding the maximum Rent specified in Section 2.2(a). At the time that Owner rents the next available unit to an Extremely Low Income Household, the Unit with the overincome Extremely Low Income Household may be re-designated a Very Low Income Unit, or Low Income Unit consistent with the current income level of the Tenant, and as necessary to comply with the Unit mix requirements of Section 2.1 above, and at the time of such redesignation, such over-income Tenant's Rent may be increased to match the new designation, regardless of whether the Rent increase is greater than a five percent (5%) annual increase. (2) Subject to Section 2.3 above, in the event that, upon recertification of the income of a Tenant of a Very Low Income Unit or Extremely Low Income Unit, Owner determines that the income of the Tenant has increased to above the qualifying limit of a Very Low Income Household, but below the qualifying limit of a Low Income Household, the Tenant may continue to occupy the Unit and the Tenant's Rent will remain at the Very Low Income Rent, or Extremely Low Income Rent, as applicable. Owner shall then rent the next available Unit to a Very Low Income Household or Extremely Low Income Households as necessary to maintain the Unit mix requirements set forth in Section 2.1, at a Rent not exceeding the maximum Rent specified in Section 2.2(a) or (b) as applicable. At the time that Owner rents the next available unit to a Very Low Income Household or Extremely Low Income Household, the Unit with the over-income Very Low Income Household, or Extremely Low Income Household may be re-designated a Low Income Unit consistent with the current income level of the Tenant, and as necessary to comply with the Unit mix requirements of Section 2.1 above, and at the time of such re-designation, such over-income Tenant's Rent may be increased to match the new designation, regardless of whether the Rent increase is greater than a five percent (5%) annual increase.
(b) Non-Qualifying Household. If, upon recertification of the income of a Tenant of a Unit, Owner determines that a Tenant of a Unit has an Adjusted Income exceeding the maximum qualifying income for a Low Income Household, such Tenant shall be permitted to continue occupying the Unit and upon sixty (60) days written notice, the Rent may be increased to one-twelfth (1/12th) of thirty percent (30%) of the actual Adjusted Income of the Tenant, regardless of whether the Rent increase is greater than a five percent (5%) annual increase, and Owner shall rent the next available Unit to an Extremely Low Income Household, Very Low Income Household, or a Low Income Household, as applicable, at a Rent not exceeding the maximum Rent specified in Section 2.2, or designate another Unit in the Development with an Extremely Low Income Household as an Extremely Low Income Unit, a Very Low Income Household as a Very Low Income Unit, or a Low Income Household as a Low Income Unit, as applicable, to meet the Unit mix requirements of Section 2.1 above. (c) Termination of Occupancy. Upon termination of occupancy of a Unit by a Tenant, such Unit shall be deemed to be continuously occupied by a household of the same income level (e.g., Extremely Low Income Household, Very Low Income Household, or Low Income Household) as the initial income level of the vacating Tenant, until such Unit is reoccupied, at which time the income character of such Unit shall be redetermined to meet the occupancy requirements of Section 2.1 above.

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(d) Continued Compliance. In the event an occupant household's income increases and the rent is increased as set forth in Sections (a) and (b) above, the Unit shall continue to be classified as an Extremely Low Income Unit, Very Low Income Unit, or a Low Income Unit, as applicable, until such time as the Unit is either vacated by the occupant or another Unit is rented at the applicable income limit.
(e) Rent Increase after 55 years. Fifty-five (55) years after the issuance of a certificate of occupancy for the Development, the Owner may request in writing that the City agree to increase the Rents for one or more of the Extremely Low Income Units and/or the Very Low Income Units if necessary to maintain the Development's financial feasibility. The City will provide written consent to allow Owner to increase the Extremely Low Income Units Rents and the Very Low Income Unit Rents only upon the City's determination that such rent increase is necessary to maintain the Development's financial feasibility and then only to the extent necessary to maintain the financial feasibility, starting the year after the 55th anniversary of the Project’s receipt of a certificate of occupancy, for the remainder of the Term. Any Rent increase allowed shall: (i) not cause the Units Rent to exceed the Low Income Household Rents, (ii) be in an amount approved by the City, (ii) not exceed the amount necessary for the financial feasibility of the Development, and (iv) not result in displacement of any current Tenants. Any necessary rent increases shall be phased in as gradually as possible, consistent with maintaining the Development’s financial feasibility. Rent increases pursuant to this Section 2.4(e) may be approved by the City Manager or his or her designee.
(f) Subsidy Loss Rent Increase. In the event that project-based rental assistance or operating subsidy to the Development is terminated, reduced or not renewed due to a change in federal law and through no fault of Owner, Owner may provide a written request to the City to increase Rents for one or more of the Extremely Low Income Units and/or Very Low Income Units. The City will provide written consent to allow Owner to increase the Extremely Low Income Units Rent and the Very Low Income Unit Rents only upon the City's determination that no other rental assistance or operating subsidy is available and such increase is necessary for the financial feasibility of the Development. Any Rent increase allowed shall: (i) not cause the Units Rent to exceed the Low Income Household Rents, (ii) be in an amount approved by the City, (iii) not exceed the amount necessary for the financial feasibility of the Development, (iv) not result in displacement of any current Tenant; and (v) be permitted by TCAC and other Development lenders and investors. Any necessary rent increases shall be phased in as gradually as possible, consistent with maintaining the Development’s financial feasibility. Notwithstanding the foregoing, this subsection shall not apply to the Density Bonus Units. Rent increases pursuant to this Section 2.4(f) may be approved by the City Manager or his or her designee.

Section 2.5 Condominium Conversion. The Owner shall not convert the Development or any Units to condominium or cooperative ownership or sell condominium or cooperative conversion rights to the Property during the Term of this Agreement.

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ARTICLE 3.

INCOME CERTIFICATION AND REPORTING
Section 3.1 Income Certification.

Owner shall obtain, complete, and maintain on file, immediately prior to initial occupancy and annually thereafter, income certifications from each Tenant renting any of the Units. Owner shall make a good faith effort to verify that the income provided by an applicant or occupying household in an income certification is accurate by taking two (2) or more of the following steps as a part of the verification process: (i) obtain a pay stub for the most recent two (2) months of pay period; (ii) obtain an income tax return for the most recent tax year; (iii) conduct a credit agency or similar search; (iv) obtain an income verification form from the applicant's current employer verifying employment for the last two (2) months; (v) obtain an income verification form from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies; or (vi) if the applicant is unemployed and has no such tax return, obtain another form of independent verification.

Owner shall also complete and/or have the Tenants of the Units complete and sign the "Income Computation and Certification" and the "Owner's Certification of Household Income" both of which are attached hereto as Exhibit B and incorporated herein by this reference, or any other form approved by the City, and/or any other forms related to Tenants' income provided to Owner by the City or that provide income information that is sufficient to determine an applicant's income as required by this Section. Copies of Tenant income certifications shall be made available to the City upon request.

Section 3.2 Resident/Workforce Priority.

To the extent permitted by law, including applicable federal and state fair housing laws, and to the extent permitted by the other Project funding sources, Owner shall also comply with the City local preference policy in the selection of tenants. Owner's Marketing Plan and Tenant Selection Plan must reflect City-wide outreach in order to satisfy this requirement. The City's resident/workforce preference applies to the rentals of the Units throughout the Term. Owner shall not, without the prior written consent of the City, give any other preference to any particular class or group of persons in renting the Units, except to the extent that the Units are required to be leased to eligible households pursuant the requirements concerning the applicable provisions of any project based vouchers provided to the Development.

Section 3.3 Reporting Requirements.

Upon completion of the construction, Owner shall submit to the City quarterly Development status reports for the first year of Development operation no later than ninety (90) days after the end of each quarter. Thereafter, Owner shall submit to the City annual reports in a form approved by the City, no later than one hundred twenty (120) days after the end of Owner's fiscal year. The reports shall contain such information as the City may require, including, but not limited to, the following:

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A statement of the fiscal condition of the Development, including a financial statement indicating surpluses or deficits in operating accounts for the period covered, a detailed itemized listing of income and expenses, and the amounts of any Development reserves.

The report due after the end of each fiscal year shall contain an audited version of this statement.

Such audit shall be prepared in accordance with the requirements of the City and certified at the Development's expense by an independent Certified Public Accountant licensed by the State of California. Owner shall also follow audit requirements of the Single Audit Act and 2 C.F.R. Part 200.

The substantial physical defects in the Development, if any, including a description of any major repair or maintenance work undertaken in the reporting period.

The occupancy of the Development indicating:
(1) A listing of current Tenants' names, income levels, Rent charged and paid, move-in dates, and the race and ethnic groups of Tenants; (2) The number of applicants denied/accepted for tenancy with a household member with criminal convictions, along with the basis of denials; (3) A listing of the Tenants in the targeted group identified in Section

3.2 above;
(4) The number of Tenants receiving services for each year and an assessment of compliance with the Resident Services Plan; and (5) General management performance, including Tenant relations and other relevant information.

Upon request of the City, Owner shall furnish, within fifteen (15) days, copies of all Tenant agreements for the Units. Within fifteen (15) days after receipt of a written request from the City, Owner shall also submit any other information or completed forms requested by the City (provided, however, that Owner shall in no event be obligated to provide any information that it cannot legally obtain as a housing provider).

Section 3.4 Additional Information.

Owner shall provide any additional information reasonably requested by the City. The City shall have the right to examine and make copies of all books, records or other documents of Owner which pertain to the Development.

Section 3.5 Tenant Records.

Owner shall maintain complete, accurate and current records pertaining to the income and household size of Tenants. All Tenant lists, applications and waiting lists relating to the Development shall at all times be kept separate and identifiable from any other business of Owner and shall be maintained as required by the City, in a reasonable condition for proper audit and subject to examination during business hours by representatives of the City. Owner shall

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retain copies of all materials obtained or produced with respect to occupancy of the Units for a period of at least five (5) years. The City may examine and make copies of all books, records or other documents of Owner that pertain to the Tenants.

Section 3.6 Development Records.

Owner shall keep and maintain at the principal place of business of the Owner set forth in Section 6.11 below, or elsewhere with the City's written consent, full, complete and appropriate books, records and accounts relating to the Development. Owner shall cause all books, records and accounts relating to its compliance with the terms, provisions, covenants and conditions of the Loan Documents to be kept and maintained in accordance with generally accepted accounting principles consistently applied, and to be consistent with requirements of this Agreement. Owner shall cause all books, records, and accounts to be open to and available for inspection and copying by HUD, the City, its auditors or other authorized representatives at reasonable intervals during normal business hours. Owner shall cause copies of all tax returns and other reports that Owner may be required to furnish to any government agency to be open for inspection by the City at all reasonable times at the place that the books, records and accounts of Owner are kept. Owner shall preserve such records for a period of not less than five (5) years after their creation in compliance with all HUD records and accounting requirements. If any litigation, claim, negotiation, audit exception, monitoring, inspection or other action relating to the use of the City Loan is pending at the end of the record retention period stated herein, then Owner shall retain the records until such action and all related issues are resolved. Owner shall cause the records to include all invoices, receipts, and other documents related to expenditures from the City Loan funds. Such records are to include but are not limited to:
(1) Records providing a full description of the activities undertaken with the use of the City Loan funds;
(2) Records demonstrating compliance with the affordability and income requirements for Tenants;
(3) Records documenting compliance with the fair housing, equal opportunity, and affirmative fair marketing requirements; (4) Records demonstrating compliance with applicable relocation requirements which must be retained for at least five (5) years after the date by which persons displaced from the Property have received final payments; (5) Records demonstrating compliance with Section 3, and labor requirements, including (a) certified payrolls from Owner's general contractor evidencing that applicable prevailing wages have been paid and (b) prevailing wage monitoring reports in a form approved by the City; and
(6) Financial and other records as required by 2 C.F.R. Part 200.

The City shall notify Owner of any records it deems insufficient. Owner shall have fifteen (15) days after the receipt of such a notice to correct any deficiency in the records

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specified by the City in such notice, or if a period longer than fifteen (15) days is reasonably necessary to correct the deficiency, then Owner shall begin to correct the deficiency within fifteen (15) days and correct the deficiency as soon as reasonably possible.

ARTICLE 4.

OPERATION OF THE DEVELOPMENT
Section 4.1 Residential Use.

The Development shall be operated only for residential use. No part of the Development shall be operated as transient housing. Owner shall provide to Tenants and post in a public location at the Development a "Tenants Rights and Responsibilities" document in the form provided by the City.

Section 4.2 Compliance with Loan Documents and Regulatory Requirements.

Owner's actions with respect to the Property shall at all times be in full conformity with: (i) all requirements of the Loan Documents then applicable to the Development; and (ii) any other regulatory requirements, then applicable to the Development, or imposed on the Development including but not limited to regulatory agreements associated with the Low Income Housing Tax Credits provided by the California Tax Credit Allocation Committee, and rental subsidies provided to the Development ("Development Regulatory Documents").

Owner shall promptly notify the City in writing of the existence of any default under any Development Regulatory Documents and provide the City copies of any such notice of default.

Section 4.3 Taxes and Assessments.

Owner is solely responsible for payment of all fees, assessments, taxes, charges, and levies imposed by any public authority or utility company with respect to the Property or the Development, and shall pay such charges prior to delinquency and at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Property. Owner is also solely responsible for payment of all personal property taxes, and all franchise, income, employment, old age benefit, withholding, sales, and other taxes assessed against it, or payable by it, and shall pay such charges prior to delinquency and at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Property.

However, Owner is not required to pay and discharge any such charge so long as: (i) the legality thereof is being contested diligently and in good faith and by appropriate proceedings; and (ii) if requested by the City, Owner deposits with the City any funds or other forms of assurance that the City in good faith from time to time determines appropriate to protect the City from the consequences of the contest being unsuccessful.

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In the event Owner exercises its right to contest any tax, assessment, or charge against it, Owner, on final determination of the proceeding or contest, will immediately pay or discharge any decision or judgment rendered against it, together with all costs, charges and interest.

Owner shall not apply for a property tax exemption for the Property under any provision of law except California Revenue and Taxation Code Section 214(g) without the prior written consent of the City.

Section 4.4 Marketing Plan.

No later than six (6) months prior to the projected date of the completion of the Development, Owner shall submit to the City for approval its plan for marketing the Development ("Marketing Plan"), to ensure that target populations, Citywide and local residents and workforce populations will be aware of the housing opportunities in the Development.

Specifically, the Marketing Plan must include information on Owner's plan to: (i) affirmatively market the Development, (ii) comply with fair housing laws, and (iii) meet the targeting requirements in Section 3.2.

Upon receipt of the Marketing Plan, the City shall promptly review the Marketing Plan and shall approve or disapprove it within fifteen (15) days after submission, provided that such approval shall not be unreasonably denied. If City does not approve or disapprove within such fifteen-day period, the Marketing Plan shall be deemed approved. If the Marketing Plan is not approved, the City shall set forth in writing and notify Owner of the City's reasons for withholding such approval. Owner shall submit a revised Marketing Plan within fifteen (15) days thereafter, and the City shall approve or disapprove it within fifteen (15) days after submission, provided that such approval shall not be unreasonably denied. If the City still does not approve the revised Marketing Plan, Owner and City shall meet and confer and use good faith best efforts to revise the Marketing Plan such that it addresses the City's objections.

Owner shall comply with the approved Marketing Plan during the Term and may not make material modifications to the Marketing Plan without the prior written approval of the City, which approval shall not be unreasonably withheld.

Section 4.5 Tenant Selection Plan.

No later than six (6) months prior to the projected date of the completion of the Development, Owner shall submit to the City for approval its policies and criteria for selecting tenants for the Development to ensure that the leasing of the Development will be conducted in a manner that provides fair and equal access under the law ("Tenant Selection Plan"). The Tenant Selection Plan may be part of the Marketing Plan. The Tenant Selection Plan must include information on Owner's plan to: (i) limit occupancy to income-eligible households, (ii) give notice to applicants of rejection and grounds for rejection,(iii) manage applicants on a wait list for occupancy in the Development, and (iv) comply with fair housing laws.

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Upon receipt of the Tenant Selection Plan, the City shall promptly review the Tenant Selection Plan and shall approve or disapprove it within fifteen (15) days after submission, provided that such approval shall not be unreasonably denied. If the City does not approve or disapprove the Tenant Selection Plan within such fifteen (15) day period, the Tenant Selection Plan shall be deemed approved. If the Tenant Selection Plan is not approved, the City shall set forth in writing and notify Owner of the City's reasons for withholding such approval.

Owner shall submit a revised Tenant Selection Plan within fifteen (15) days thereafter, and the City shall approve or disapprove it within fifteen (15) days after submission, provided that such approval shall not be unreasonably denied. If the City does not approve the revised Tenant Selection Plan, Owner and City shall meet and confer and use good faith efforts to revise the Tenant Selection Plan such that is addresses the City's objections.

Owner shall comply with the approved Tenant Selection Plan during the Term and may not make material modifications to the Tenant Selection Plan without the prior written approval of the City, which approval shall not be unreasonably withheld.

Section 4.6 Resident Services Plan and Budget.

No later than six (6) months prior to the projected date of the completion of the Development, Owner shall submit to the City a plan for providing supportive services to the Tenants ("Resident Services Plan") and a budget for providing those services ("Resident Services Budget") for the initial year of operation of the Development. Services shall the needs of the residents of the Development which may include, but are not limited to, the following services: after-school programs of an ongoing nature for school age children, financial planning skills, job coaching, and/or the availability of a bona fide services coordinator to the Tenants.

The Resident Services Plan must identify service provider(s) and staffing levels, and describe the services provided. The Resident Services Plan must include copies of contracts and/or memoranda of understanding for the provision of services by service providers, along with any annual compliance certifications. The Resident Services Budget must state the dollar value of the services, and the funding source(s) for the services (cash or in-kind).

Upon receipt by the City of the proposed Resident Services Plan and Resident Services Budget, the City shall promptly review the same and approve or disapprove it within fifteen (15) days, provided that such approval shall not be unreasonably denied. If the City does not approve or disapprove the Resident Services Plan and the Resident Services Budget within such fifteen (15) day period, the Resident Services Plan and the Resident Services Budget shall be deemed approved. If the Resident Services Plan and/or Resident Services Budget are not approved by the City, the City shall set forth in writing and notify Owner of the City's reasons for withholding such approval, which may include a request by the City for a change in the nature or scope of resident services or a change in service provider. Owner shall, within fifteen (15) days thereafter, submit a revised Resident Services Plan and/or Resident Services Budget for City approval in accordance with this subsection. If the City does not approve the revised Resident Service Plan, Owner and the City shall meet and confer and use good faith efforts to revise the Resident Services Plan and/or Resident Services Budget such that its addresses the City's objection.

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Owner shall thereafter submit to the City annual updates to the Resident Services Plan and Resident Services Budget by October 1st of each year of operation of the Development, identifying any changes made to the previously approved Resident Services Plan and Resident Services Budget. Any revisions to the Resident Services Plan and Resident Services Budget shall be subject to the City's review and approval and the process for timing and review of such revisions shall be subject to the process identified in subsection (b).

Section 4.7 Lease Provisions.

No later than four (4) months prior to the date construction of the Development is projected to be complete, Owner shall submit to the City Owner’s proposed form of lease agreement for the City's review and approval. When leasing Units within the Development, Owner shall use the form of lease approved by the City. The form of lease must comply with all requirements of this Agreement, the other Loan Documents and must, among other matters:
(1) Provide for termination of the lease and consent by the Tenant to immediate eviction for failure: (i) to provide any information required under this Agreement or reasonably requested by Owner to establish or recertify the Tenant's qualification, or the qualification of the Tenant's household, for occupancy in the Development in accordance with the standards set forth in this Agreement, and (ii) to qualify as an Extremely Low Income, Very Low Income or Low Income Household, as applicable, as a result of any material misrepresentation made by such Tenant with respect to the income computation. (2) Be for an initial term of not less than one (1) year, unless by mutual agreement between the Tenant and Owner, and provide for no increase in Rent during such year. After the initial year of tenancy, the lease may be month-to-month by mutual agreement of Owner and the Tenant. Notwithstanding the above, any Rent increases shall be subject to the requirements of Section 2.3.
(3) Include a provision which shall require a Tenant who is residing in a Unit made accessible and who is not in need of an accessible Unit to move to a non-accessible Unit when a non-accessible Unit becomes available and another Tenant or prospective Tenant is in need of an accessible Unit.
(4) Include any provisions necessary to comply with the requirements of the Violence Against Women Reauthorization Act of 2013 (Pub. L. 113–4, 127 Stat. 54) applicable to HUD-funded programs.

Any termination of a lease or refusal to renew a lease for a Unit within the Development must be preceded by not less than sixty (60) days written notice to the Tenant by Owner specifying the grounds for the action.

Section 4.8 Annual Operating Budget; Operating Deficiencies.

Owner, at least sixty (60) days prior to the end of each of Owner's fiscal years, shall furnish the City a budget for the operation of the Development (the "Annual Operating Budget"). The City may request additional information to assist the City in evaluating

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the financial viability of the Development. Upon receipt by the City of the proposed Annual Operating Budget, the City shall promptly review the same and approve or disapprove it within fifteen (15) days, provided that such approval shall not be unreasonably denied. If the City does not approve or disapprove the Annual Operating Budget within such fifteen (15) day period, the Annual Operating Budget shall be deemed approved. If the Annual Operating Budget is not approved by the City, the City shall set forth in writing and notify Owner of the City's reasons for withholding such approval. Owner shall thereafter submit a revised Annual Operating Budget for City approval within thirty (30) days, which approval shall be granted or denied within fifteen (15) days in accordance with the procedures set forth above.

Owner shall promptly notify the City upon Owner's discovery that Owner's rental income and other Development subsidies are insufficient to pay for any or all operating expenses incurred by Owner in connection with the operations of the Development.

Section 4.9 Reserves; City Approval of Use of Reserve Funds.

Replacement Reserve Account. Owner shall establish and maintain an account that is available for capital expenditures for repairs and replacement necessary to maintain the Development in the condition required by the Loan Documents ("Replacement Reserve Account"). Owner shall deposit and maintain in the Replacement Reserve Account the minimum amount of $68,000.

Operating Reserve Account. Owner shall establish and maintain an account that is available to fund operating deficits (which is the amount by which annual Operating Expenses exceed Operating Revenue for any period) ("Operating Reserve Account").

Owner shall capitalize the Operating Reserve Account at the conversion of Development financing to permanent financing in the amount of three (3) months of annual Operating Expenses; provided, however that if the Partnership Agreement or the documents evidencing the permanent financing require the Operating Reserve Account to be capitalized and replenished in an greater amount, Owner shall capitalize and replenish the Operating Reserve Account as required by the Partnership Agreement or the documents evidencing the permanent financing, as applicable, for as long as the Partnership Agreement or the permanent financing, as applicable, is outstanding.

Consent to Withdraw Funds. Prior to the use of funds from any reserve account, Owner must submit a written request to withdraw funds from the reserve account if such withdrawal will exceed Five Thousand Dollars ($5,000) or if the cumulative of all draws made to date exceed Twenty Thousand ($20,000). The written request shall specify the amount requested and state how the funds will be used. The City shall approve such request within thirty (30) days of receipt of the written request for use of reserves; such approval shall not be unreasonably withheld. If the City does not approve or disapprove the withdrawal of funds within such thirty (30) day period, the request shall be deemed approved.

Section 4.10 Additional City Requirements.

Owner shall comply with all applicable laws and regulations governing the use of the City Loan, this Agreement and the other Loan Documents.

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ARTICLE 5.

PROPERTY MANAGEMENT AND MAINTENANCE
Section 5.1 Management Responsibilities.

Owner is responsible for all management functions with respect to the Development, including, without limitation, the selection of Tenants, certification and recertification of household size and income, evictions, collection of rents and deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital items, and security. The City shall have no responsibility over management of the Development. Owner shall retain a professional property management company approved by the City in writing its reasonable discretion to perform Owner's management duties hereunder, pursuant to Section 5.2 below. A resident manager shall also be required.

Section 5.2 Management Agent.

Owner shall cause the Development to be managed by an experienced management agent reasonably acceptable to the City, with demonstrated ability to operate residential facilities like the Development in a manner that will provide decent, safe, and sanitary housing (as approved, the "Management Agent"). Owner shall submit for the City's written approval the identity of any other proposed Management Agent. Owner shall also submit such additional information about the background, experience and financial condition of any proposed management agent as is reasonably necessary for the City to determine whether the proposed management agent meets the standard for a qualified management agent set forth above. If the proposed management agent meets the standard for a qualified management agent set forth above, the City shall approve the proposed management agent by notifying Owner in writing. Unless the proposed management agent is disapproved by the City within thirty (30) days, which disapproval shall state with reasonable specificity the basis for disapproval, it shall be deemed approved. The City hereby approves MidPen Property Management Corporation as the property manager for the Development.

Section 5.3 Periodic Performance Review.

The City reserves the right to conduct an annual (or more frequently, if deemed necessary by the City) review of the management practices and financial status of the Development. The purpose of each periodic review will be to enable the City to determine if the Development is being operated and managed in accordance with the requirements and standards of this Agreement. Owner shall cooperate with the City in such reviews.

Section 5.4 Replacement of Management Agent. If, as a result of a periodic review, the City determines in its reasonable judgment that the Development is not being operated and managed in accordance with any of the material requirements and standards of this Agreement, the City shall deliver written notice to Owner of its intention to cause replacement of the Management Agent, including the reasons therefor. Within fifteen (15) days after receipt by Owner of such written notice, City staff and Owner shall meet in good faith to consider methods for improving the

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financial and operating status of the Development, including, without limitation, replacement of the Management Agent.

If, after such meeting, City staff recommends in writing the replacement of the Management Agent, Owner shall promptly dismiss the current Management Agent, and shall appoint as the Management Agent a person or entity meeting the standards for a management agent set forth in Section 5.2 above and approved by the City pursuant to Section 5.2 above.

Any contract for the operation or management of the Development entered into by Owner shall provide that the Management Agent may be dismissed and the contract terminated as set forth above. Failure to remove the Management Agent in accordance with the provisions of this Section shall constitute a default under this Agreement, and the City may enforce this provision through legal proceedings as specified in Section 6.5 below.

Section 5.5 Approval of Management Policies.

Owner shall submit its written management policies with respect to the Development to the City for its review, and shall amend such policies in any way necessary to ensure that such policies comply with the provisions of this Agreement.

Section 5.6 Property Maintenance.

City Standards. The City places prime importance on quality maintenance to protect its investment and to ensure that all City-assisted housing projects within the City are not allowed to deteriorate due to below-average maintenance. Normal wear and tear of the Development will be acceptable to the City assuming Owner agrees to provide all necessary improvements to assure the Development is maintained in good condition. Owner shall make all repairs and replacements necessary to keep the improvements in good condition and repair.

Maintenance Requirements. For the entire Term of this Agreement Owner shall maintain all interior and exterior improvements, including landscaping, on the Property in decent, safe and sanitary condition, and good condition and repair (and, as to landscaping, in a healthy condition), in accordance with all applicable laws, rules, ordinances, orders and regulations of all federal, state, City, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials.

Owner shall cause the Development to be free of all health and safety defects. Owner shall correct any life-threatening maintenance deficiencies, immediately upon notification.

Violation of Maintenance Requirements. In the event that Owner breaches any of the covenants contained in this section and Owner does not commence to cure such breach within (i) a period of five (5) business days after written notice from City (and diligently prosecute such cure to completion within ten (10) business days following such notice) with respect to graffiti, debris, waste material, landscaping and general maintenance or (ii) or a period of ten (10) business days after written notice from the City (and diligently prosecute such cure to completion within thirty (30) days following such notice) with respect to building improvements, then the City, in addition to whatever other remedy it may have at law or in equity, shall have the right to enter upon the Development and the Owner's interest in the

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Property and perform or cause to be performed all such acts and work necessary to cure the default. Pursuant to such right of entry, the City shall be permitted (but is not required) to enter upon the Development and the Owner's interest in the Property and perform all acts and work necessary to protect, maintain, and preserve the improvements and landscaped areas on the Development and the Owner's interest in the Property, and to attach a lien on the Development and the Owner's interest in the Property, or to assess on the Development and the Owner's interest in the Property, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by the City and/or costs of such cure, which amount shall be promptly paid by Owner to the City upon demand.

Section 5.7 Inspections.

The City shall have the right to perform an on-site inspection of the Development when deemed necessary by the City, in any event at least one (1) time per year upon reasonable notice to Owner to ensure compliance with the requirements of the Loan Documents. Owner agrees to cooperate in such inspection.

After the completion of an inspection, the City shall deliver a copy of the inspection report to Owner. If the City determines as a result of such inspection that there are any life-threatening health and safety related deficiencies, Owner has the obligation to correct such deficiencies immediately. If the City determines as a result of the inspection that there are any deficiencies for any of the inspectable items in the Development, Owner shall correct such deficiencies within fifteen (15) days from the delivery of the inspection report or if a period longer than fifteen (15) days is reasonably necessary to correct the deficiency, then Owner must begin to correct the deficiency within fifteen (15) days and correct the deficiency as soon as reasonably possible. In addition, Owner acknowledges that the City may reinspect the Development to verify all deficiencies have been corrected or rely on third party documentation submitted by Owner for non-hazardous deficiencies.

Section 5.8 Asset Management.

Owner is responsible for all asset management functions with respect to the Development, including, without limitation, the oversight of the Management Agent, maintaining accurate and current books and records for the Development, and promptly paying costs incurred in connection with the Development. The City shall have no responsibility over asset management of the Development.

ARTICLE 6.

MISCELLANEOUS
Section 6.1 Nondiscrimination.

Owner covenants by and for Owner, its assigns, and all persons claiming under or through Owner, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, religion, creed, age, disability, sex, sexual orientation, marital status, familial status, source of income, ancestry or national origin, Vietnam era veteran's status, political affiliation, HIV/AIDS, or any other arbitrary basis, in the leasing,

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subleasing, transferring, use, occupancy, tenure, or enjoyment of any Unit nor shall Owner or any person claiming under or through Owner, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees of any Unit or in connection with the employment of persons for the construction, operation and management of any Unit.

Notwithstanding the above, with respect to familial status, the above should not be construed to apply to housing for older persons as defined in Section 12955.9 of the Government Code and other applicable sections of the Civil Code as identified in Health and Safety Code Section 33050(b).

Nothing in this Section prohibits Owner from requiring Units in the Development to be available to and occupied by eligible households in accordance with this Agreement.

Owner shall accept as Tenants, on the same basis as all other prospective Tenants, persons who are recipients of federal certificates for rent subsidies pursuant to the existing housing program under Section 8 of the United States Housing Act, or its successor.

Owner shall not apply selection criteria to Section 8 certificate or voucher holders that are more burdensome than criteria applied to all other prospective Tenants, nor shall Owner apply or permit the application of management policies or lease provisions with respect to the Development which have the effect of precluding occupancy of units by such prospective Tenants.

Section 6.2 Application of Provisions.

The provisions of this Agreement shall apply to the Development and the Owner's interest in the Property for the entire Term, even if the entire City Loan is paid in full prior to the end of the Term. This Agreement binds any successor, heir or assign of Owner, whether a change in interest occurs voluntarily or involuntarily, by operation of law or otherwise, except as expressly released by the City. The City makes the City Loan on the condition, and in consideration of, this provision, and would not do so otherwise.

Section 6.3 Notice of Expiration of Term.

At least six (6) months prior to the expiration of the Term, Owner shall provide by first-class mail, postage prepaid, a notice to all Tenants containing (i) the anticipated date of the expiration of the Term, (ii) any anticipated increase in Rent upon the expiration of the Term, (iii) a statement that a copy of such notice will be sent to the City, and (iv) a statement that a public hearing may be held by the City on the issue and that the Tenant will receive notice of the hearing at least fifteen (15) days in advance of any such hearing. Owner shall also file a copy of the above-described notice with the City Manager.

In addition to the notice required above, Owner shall comply with the requirements set forth in California Government Code Sections 65863.10 and 65863.11. Such notice requirements include: (i) a twelve (12) month notice to existing tenants, prospective tenants and Affected Public Entities (as defined in California Government Code Section 65863.10(a), which would include the City Manager) prior to the expiration of the Term, (ii) a

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six (6) month notice requirement to existing tenants, prospective tenants and Affected Public Entities prior to the expiration of the Term; (iii) a notice of an offer to purchase the Development to "qualified entities" (as defined in California Government Code Section 65863.11(d)), if the Development is to be sold within five (5) years of the end of the Term; (iv) a notice of right of first refusal within the one hundred eighty (180) day period that qualified entities may purchase the Development.

Section 6.4 Covenants to Run With the Land.

The City and Owner hereby declare their express intent that the covenants and restrictions set forth in this Agreement shall run with the land, and shall bind all successors in title to the Development; provided, however, that on the expiration of the Term, said covenants and restrictions expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Development or the Owner's interest in the Property or any portion thereof, is to be held conclusively to have been executed, delivered and accepted subject to such covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument, unless the City expressly releases such conveyed portion of the Development or the Owner's interest in the Property from the requirements of this Agreement.

Section 6.5 Enforcement by the City.

If Owner fails to perform any obligation under this Agreement, and fails to cure the default within thirty (30) days after the City has notified Owner in writing of the default or, if the default cannot be cured within thirty (30) days, failed to commence to cure within thirty (30) days and thereafter diligently pursue such cure and complete such cure within ninety (90) days, the City shall have the right to enforce this Agreement by any or all of the following actions, or any other remedy provided by law:

Calling the City Loan. The City may declare a default under the Note, accelerate the indebtedness evidenced by the Note and proceed with foreclosure under the Deed of Trust.

Action to Compel Performance or for Damages. The City may bring an action at law or in equity to compel Owner's performance of its obligations under this Agreement, and/or for damages.

Remedies Provided Under Loan Documents. The City may exercise any other remedy provided under the Loan Documents.

Section 6.6 Attorneys' Fees and Costs.

In any action brought to enforce this Agreement, the prevailing party shall be entitled to all costs and expenses of suit, including reasonable attorneys' fees. This section shall be interpreted in accordance with California Civil Code Section 1717 and judicial decisions interpreting that statute.

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Section 6.7 Recording and Filing.

The City and Owner shall cause this Agreement, and all amendments and supplements to it, to be recorded in the Official Records of the County of San Mateo. This Agreement shall be recorded against the Property senior to the Senior Loan deed of trust.

Section 6.8 Governing Law.

This Agreement is governed by the laws of the State of California.

Section 6.9 Waiver of Requirements.

Any of the requirements of this Agreement may be expressly waived by the City in writing, but no waiver by the City of any requirement of this Agreement shall, or shall be deemed to, extend to or affect any other provision of this Agreement.

Section 6.10 Amendments.

This Agreement may be amended only by a written instrument executed by all the parties hereto or their successors in title, and duly recorded in the Official Records of the County of San Mateo. Any legal fees incurred due to any amendment of this Agreement, or any of the Loan Documents, shall be paid for by the Owner.

Section 6.11 Notices.

Formal notices, demands, and communications between the Parties shall be sufficiently given if, and shall not be deemed given unless, dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered by express delivery service, return receipt requested, or delivered personally, to the principal office of the Parties as follows:

City: City of East Palo Alto
2415 University Avenue
East Palo Alto, CA 94303
Attn: City Manager
With a copy to: City of East Palo Alto
1960 Tate Street
East Palo Alto, CA 94303
Attn: Community & Economic Development Director

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Owner: MP 965 Weeks Street Associates, L.P.
c/o MidPen Housing Corporation
303 Vintage Park Dr. Suite 250
Foster City, CA 94404
Attn: Chief Real Estate Development Officer
c/o East Palo Alto Community Alliance and Neighborhood
Development Organization
2369 University Avenue
East Palo Alto, California 94303
Attn: Executive Director
Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected Party may from time to time designate by mail as provided in this Section. Receipt shall be deemed to have occurred on the date shown on a written receipt as the date of delivery or refusal of delivery (or attempted delivery if undeliverable).

Section 6.12 Severability.

If any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions of this Agreement shall not in any way be affected or impaired thereby.

Section 6.13 Multiple Originals; Counterparts.

This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts.
[Signatures on Following Page]

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IN WITNESS WHEREOF, the City and Owner have executed this Agreement by duly authorized representatives, all on the date first written above.

CITY:

CITY OF EAST PALO ALTO, a California
municipal corporation
By: _______________________________
Melvin E. Gaines, City Manager
Approved as to form:

By: ________________________________
John D. Lê, City Attorney

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OWNER:

MP 965 Weeks Street Associates, L.P.,
a California limited partnership
By: MP CANDO Weeks Street, LLC,
a California limited liability company,
its general partner
By: MidPen Housing Corporation,
a California nonprofit public benefit
corporation, its manager
By: ____________________________
Name: __________________________
Its: _____________________________
By: East Palo Alto Community Alliance and
Neighborhood Development Organization,
a California nonprofit public benefit
corporation,
its member
By: ____________________________
Name: __________________________
Its: _____________________________

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STATE OF CALIFORNIA )
)
CITY OF __________________ )
On ____________________, before me, ___________________________, Notary Public, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.
______________________________________
Name: _______________________________
Notary Public
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

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I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.
______________________________________
Name: ______________________________
Notary Public
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

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EXHIBIT A
Property Description
[to be added]

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EXHIBIT B
I, the Undersigned, certify that I have read and answered fully, and truthfully each of the following questions for all persons in the household who are to occupy a room in this house for which application is made.

Occupant's Name Social Security # Age Place of Employment Annual Income

1. 2.

3. 4.

5. 6.

7. TOTAL:

The total anticipated annual household income* for the twelve (12) month period beginning this date (the sum of the final column): $ _____________________.

Signed: __________________________ Date: ____________________ Head of Household
* The anticipated annual Income as determined by Attachment A.

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Owner's Certification of Household Income
Household Name ______________________
I certify, as Owner/Management Agent for ___________________________ that I have verified this Household's Income by using the following:

1. Tax returns ____________________

2. Place of employment verification ____________________

3. Pay stubs ____________________

4. Notarized statement from lessee ____________________

5. Other (please describe) ____________________
_____________________________
Owner/Management Agent
______________________
Date

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GROUND LEASE
by and between
City of East Palo Alto, as Lessor
and
MP 965 Weeks Street Associates, L.P., as Lessee
Dated as of ______________________, ______

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TABLE OF CONTENTS
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ARTICLE 1. Definitions..................................................................................................................1 Section 1.1 Definitions.........................................................................................................1 Section 1.2 Exhibits. ............................................................................................................5 ARTICLE 2. Lease of the LAND....................................................................................................6 Section 2.1 Lease of Land....................................................................................................6 Section 2.2 Term..................................................................................................................6 Section 2.3 Use. ...................................................................................................................6 Section 2.4 Possession. ........................................................................................................7 Section 2.5 Memorandum of Lease. ....................................................................................7 Section 2.6 No Right to Encumber Fee. ..............................................................................7 Section 2.7 Publicly Accessible Pedestrian and Bike Pathway. ..........................................7 Section 2.8 Community Room.............................................................................................8 ARTICLE 3. The Improvements .....................................................................................................8 Section 3.1 Construction......................................................................................................8 Section 3.2 Liens..................................................................................................................8 Section 3.3 Permits, Licenses and Easements. ..................................................................10 Section 3.4 Title to Improvements.....................................................................................10 Section 3.5 Benefits of Improvement During Term. .........................................................11 Section 3.6 No Abandonment............................................................................................11 ARTICLE 4. Rents.........................................................................................................................11 Section 4.1 Ground Rent....................................................................................................11 Section 4.2 Payments.........................................................................................................12 ARTICLE 5. Taxes and Other Impositions; Utilities ....................................................................12 Section 5.1 Payment of Impositions. .................................................................................12

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Section 5.2 Possessory Interest Taxes. ..............................................................................12 Section 5.3 Contested Taxes and Other Impositions. ........................................................12 Section 5.4 Valuation Assessment/Property Tax Exemption. ...........................................13 Section 5.5 Failure to Pay Impositions. .............................................................................13 Section 5.6 Utilities............................................................................................................13 ARTICLE 6. Insurance ..................................................................................................................13 Section 6.1 Required Insurance Coverage.........................................................................13 Section 6.2 Insurance Policies and Premiums. ..................................................................14 Section 6.3 Proceeds of Insurance. ....................................................................................16 Section 6.4 Limitation of Liability.....................................................................................16 ARTICLE 7. MAINTENANCE, ALTERATIONS, REPAIRS AND REPLACEMENTS ..........16 Section 7.1 Maintenance of Leased Premises; Landscaping. ............................................16 Section 7.2 Landscaping Maintenance. .............................................................................17 Section 7.3 Alterations to Leased Premises.......................................................................17 Section 7.4 Indemnifications. ............................................................................................18 Section 7.5 Capital Replacement Reserve Account...........................................................18 Section 7.6 Operating Reserve Account. ...........................................................................19 ARTICLE 8. MORTGAGE LOANS.............................................................................................19 Section 8.1 Liens and Encumbrances Against the Leasehold Estate.................................19 Section 8.2 Cost of Approved Loans to be Paid by Lessee. ..............................................22 Section 8.3 Proceeds of Approved Loans. .........................................................................22 Section 8.4 Notice and Right to Cure Defaults Under Approved Loans...........................22 Section 8.5 Rights of Investor............................................................................................22

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ARTICLE 9. REPRESENTATIONS, WARRANTIES AND COVENANTS .............................22 Section 9.1 Representations, Warranties and Covenants of Lessor...................................22 Section 9.2 Representations, Warranties and Covenants of Lessee...................................23 Section 9.3 Hazardous Materials. ......................................................................................24 Section 9.4 Hazardous Materials Indemnification.............................................................24 Section 9.5 Prevailing Wage Requirements.......................................................................25 Section 9.6 Compliance with Laws. ..................................................................................26 Section 9.7 Affordability and Use Restrictions. ................................................................26 Section 9.8 Non-Discrimination; Compliance with Fair Housing Laws. ..........................26 Section 9.9 Fair Housing....................................................................................................27 Section 9.10 Management Entity.......................................................................................27 Section 9.11 Subleases.......................................................................................................27 ARTICLE 10. EMINENT DOMAIN ............................................................................................27 Section 10.1 Termination of Lease. ...................................................................................28 Section 10.2 Continuation of Lease and Presumption of Restoration. ..............................28 Section 10.3 Temporary Taking. .......................................................................................28 Section 10.4 Apportionment of Award..............................................................................28 Section 10.5 Joinder...........................................................................................................29 Section 10.6 City Reservation of Rights............................................................................29 ARTICLE 11. DAMAGE OR DESTRUCTION...........................................................................29 Section 11.1 Damage or Destruction to Leased Premises. ................................................30 Section 11.2 Damage or Destruction Near End of Term. ..................................................30 Section 11.3 Distribution of Insurance Proceeds...............................................................30 Section 11.4 Insurance Requirements................................................................................30

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ARTICLE 12. EVENTS OF DEFAULT.......................................................................................31 Section 12.1 Events of Default. .........................................................................................31 Section 12.2 Rights and Remedies.....................................................................................32 Section 12.3 Default by Lessor..........................................................................................34 Section 12.4 Notices. .........................................................................................................34 ARTICLE 13. QUIET ENJOYMENT AND POSSESSION; INSPECTIONS.............................34 Section 13.1 Quiet Enjoyment. ..........................................................................................34 Section 13.2 Lessor's Right of Inspection..........................................................................34 ARTICLE 14. VACATION OF LEASED PREMISES ................................................................35 Section 14.1 Vacation Upon Termination. ........................................................................35 ARTICLE 15. NON-MERGER.....................................................................................................35 Section 15.1 Non-Merger...................................................................................................35 ARTICLE 16. TRANSFERS.........................................................................................................35 Section 16.1 Permitted Transfer by Lessee........................................................................35 ARTICLE 17. MISCELLANEOUS PROVISIONS......................................................................36 Section 17.1 Consents........................................................................................................36 Section 17.2 Enforced Delay; Extension of Times of Performance. .................................36 Section 17.3 Interpretation.................................................................................................37 Section 17.4 Entire Agreement: Modifications. ................................................................37 Section 17.5 Governing Law. ............................................................................................37 Section 17.6 Binding Effect...............................................................................................37 Section 17.7 Severability. ..................................................................................................37 Section 17.8 Further Assurances........................................................................................37 Section 17.9 Authority to Execute Agreement. .................................................................38

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Section 17.10 Lease Administration and Approvals..........................................................38 Section 17.11 Captions. .....................................................................................................38 Section 17.12 Gender.........................................................................................................38 Section 17.13 Exhibits. ......................................................................................................38 Section 17.14 References...................................................................................................38 Section 17.15 Cumulative..................................................................................................38 Section 17.16 Notices ........................................................................................................38 Section 17.17 Counterparts................................................................................................40 Section 17.18 Time of Essence..........................................................................................40 Section 17.19 No Third Party Beneficiaries. .....................................................................40 Section 17.20 Parties Not Co-Venturers; Independent Contractor; No Agency Relationship. ..........................................................................................................40 Section 17.21 No Personal Liability. .................................................................................40 Exhibit A: Legal Description of the Leased Premises
Exhibit B: Site Map of the Leased Premises
Exhibit C: Memorandum of Lease
Exhibit D: Scope of Development
Exhibit E: Financing Plan

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GROUND LEASE
(965 Weeks Street Project)
This Ground Lease (the "Lease") is entered into as of __________, 20__, by and between the City of East Palo Alto, a California municipal corporation ("Lessor"), and MP 965 Weeks Street Associates, L.P, a California limited partnership ("Lessee").

RECITALS
A. Lessee and Lessor entered into that certain Disposition, Development and Loan Agreement for the 965 Weeks Street Project dated December 15, 2020, as amended by the First Amendment to the Disposition and Development Agreement dated ______, 2023 (the "DDLA").

B. Lessor is the owner of that certain real property in the City of East Palo Alto, County of San Mateo, State of California, more particularly described in the legal description attached hereto as Exhibit A and depicted on the map attached as Exhibit B (the "Land"). Under the DDLA, the City agreed to ground lease the Land to Lessee for ninety-nine (99) years, and Lessee has agreed to develop and operate thereon a one-hundred and thirty-six (136) unit multifamily rental housing development with long term affordability requirements including one (1) manager's unit that is not subject to affordability requirements (the "Improvements").

C. Lessor desires to lease the Land to Lessee for a period of ninety-nine (99) years pursuant to the terms of this Lease.

D. Capitalized terms which are referred to and utilized throughout this Lease are defined in Article 1 of this Lease.

NOW, THEREFORE, for and in consideration of the foregoing premises, the covenants, representations, warranties and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE 1.

DEFINITIONS
Section 1.1 Definitions. For the purposes of this Lease, the following defined terms shall have the meanings ascribed thereto in this Article 1:
(a) Applicable Laws: As defined in Section 9.6.
(b) Approved Loans: All loans, including without limitation, the City Loan, obtained from time to time by Lessee for the construction and permanent financing of the Improvements in compliance with the Financing Plan attached hereto as Exhibit E, as such Financing Plan may be revised from time to time by written consent of the Parties. (c) Casualty: As defined in Article 11 hereof.

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(d) City: The City of East Palo Alto, California.
(e) City Loan: means collectively the loans from the City to the Developer pursuant to the terms of set forth in the DDLA consisting of (i) the Housing Fund Loan in the amount of Seven Hundred Fourteen Thousand Dollars ($714,000) and (ii) the State Fund Loan in the amount of Six Million Five Hundred Thousand Dollars ($6,500,000). (f) Claims: means collectively: claims, demands, actions, causes of action, suits, judicial or administrative proceedings, damages, losses, liabilities, costs, expenses (including without limitation reasonable attorneys' fees), damages, penalties, deficiencies, fines, orders, charges, judgments, remedial action requirements, and enforcement actions of any kind. (g) Commencement Date: The date set forth in the first paragraph of this Lease.
(h) County: The County of San Mateo, California.
(i) Development: Development shall have the same meaning set forth in the DDLA.
(j) DDLA: As defined in Recital A.
(k) Environmental Laws: All federal, state or local statutes, ordinances, rules, regulations, orders, decrees, judgments or common law doctrines, and provisions and conditions of permits, licenses and other operating authorizations regulating, or relating to, or imposing liability or standards of conduct concerning (i) pollution or protection of the environment, including natural resources; (ii) exposure of persons, including employees and agents, to Hazardous Materials or other products, raw materials, chemicals or other substances; (iii) protection of the public health or welfare from the effects of by-products, wastes, emissions, discharges or releases of chemical substances from industrial or commercial activities; (iv) the manufacture, use or introduction into commerce of Hazardous Materials, including without limitation, their manufacture, formulation, labeling, distribution, transportation, handling, storage and disposal; or (iv) the use, release or disposal of Hazardous Materials or the remediation of air, surface waters, groundwater or soil, as now or may at any later time be in effect, together with any regulations promulgated thereunder.
(l) Event of Default: As described in Article 12 of this Lease. (m) Governmental Authorities: Any applicable federal, State or local governmental or quasi-governmental entities, subdivisions, agencies, authorities or instrumentalities having jurisdiction over the Leased Premises, the Improvements, Lessor or Lessee.
(n) Hazardous Materials: means: (i) any substance, material, or waste that is petroleum, petroleum-related, or a petroleum by-product, asbestos or asbestos-containing material, polychlorinated biphenyls, flammable, explosive, radioactive, freon gas, radon, or a pesticide, herbicide, or any other agricultural chemical, and (ii) any waste, substance or material defined as or included in the definition of "hazardous substances," "hazardous wastes,"

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"hazardous materials," "toxic materials", "toxic waste", "toxic substances," or words of similar import under any Hazardous Materials Law (1) which poses a hazard to the Leased Premises, to adjacent properties, or to persons on or about the Leased Premises, (2) which causes the Leased Premises to be in violation of any of the aforementioned laws or regulations, or (3) the presence of which on or in the Leased Premises requires investigation, reporting or remediation under any such laws or regulations. Hazardous Materials shall exclude hazardous materials customarily used in construction or operation of a multi-family residential development, provided that such materials and substances are used in accordance with all applicable laws (o) "Hazardous Materials Law" means any federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, health, industrial hygiene, environmental conditions, or the regulation or protection of the environment, and all amendments thereto as of this date and to be added in the future and any successor statute or rule or regulation promulgated thereto.
(p) Impositions: All taxes, including without limitation, possessory interest taxes, assessments, water and sewer charges, charges for public utilities, excises, levies, license and permit fees and other charges that shall or may be assessed, levied or imposed during the Term by any Governmental Authorities upon the Leased Premises or any part thereof, including the buildings or improvements now or hereafter located thereon, trade fixtures, furnishings, equipment, and all other personal property of Lessee contained in the Leased Premises. "Impositions" shall not include any income tax, capital levy, estate, succession, inheritance, or similar taxes of Lessor. Except for a tax, assessment, or charge resulting from Lessee's use of the Leased Premises pursuant to this Lease, "Impositions" shall not include any franchise tax imposed upon any owner of the fee of the Leased Premises, or any income, profits or revenue tax, assessment or charge imposed upon the rent or other benefit received by Lessor under this Lease by any Governmental Authorities.
(q) Improvements: The one hundred and thirty-six (136) units of affordable housing for income-eligible households, including one (1) manager's unit which will not be restricted with affordability covenants, to be constructed in accordance with this Lease and the DDLA, related onsite improvements related onsite improvements, parking garage, office space for property management and resident services staff, community amenities, including a community room with kitchen, outdoor play areas, and space for an after school program for resident children, landscaping and other improvements located or to be located on the Land. The Improvements are also referred to in this Lease as the "Project". (r) Indemnitees: Lessor and its elected and appointed officials, officers, employees, agents, contractors, representatives and volunteers. (s) Insurance Requirements: The requirements, whether now or hereafter in force, of any insurer or insurance carrier, any board of fire underwriters or any other company, bureau, organization or entity performing the same or similar functions, applicable to the Leased Premises and/or the Improvements, or any portion thereof, to the extent so applicable. (t) Investor: The low income housing tax credit investor that will provide equity to the Project

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(u) Land: As defined in Recital A above.
(v) Lease Year: A calendar year.
(w) Leased Premises: The Land, together with the Improvements and any other improvements now or hereafter located thereon, and together with all and singular rights, easements, licenses, privileges and appurtenances thereunto attaching or in any way belonging thereto.
(x) Leasehold Mortgage: Any mortgage, deed of trust, security agreement or collateral assignment pursuant to an Approved Loan encumbering Lessee's Estate as a leasehold mortgage lien.
(y) Legal Requirements: All laws, statutes, codes, ordinances, orders, rules, regulations and requirements of all Governmental Authorities and the appropriate agencies, officers, departments, boards and commissions thereof, whether now or hereafter in force applicable to Lessor, Lessee, the Leased Premises, the Improvements, or any portion thereof, to the extent so applicable.
(z) Lender: The holder, mortgagee, grantee or secured party under any Leasehold Mortgage.
(aa) Lessee's Estate or Leasehold Estate: During the Term of this Lease, Lessee's leasehold interest in the Land and Lessee's fee ownership interest in the Improvements. (bb) Lessor's Estate: Lessor's fee estate in the Land and reversionary interest in the Improvements pursuant to this Lease.
(cc) Loan Documents. All documents executed by Lessee evidencing or securing a Leasehold Mortgage.
(dd) Management Agent: The Person designated from time to time as "Management Agent" of all or any portion of the Improvements under any management agreement entered into from time to time with Lessee. The initial Management Agent will be MidPen Property Management Corporation.
(ee) Net Condemnation Award: The net amounts owed or paid to the Parties or to which either of the Parties may be or become entitled by reason of any Taking or pursuant to any agreement with any condemning authority which has been made in settlement of any proceeding relating to a Taking, less any costs and expenses incurred by the Parties in collecting such award or payment.
(ff) Partnership: The limited partnership that is the Lessee. (gg) Party: Lessor or Lessee, as applicable. Lessor and Lessee shall be referred to collectively as the "Parties."

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(hh) Person: An individual, partnership, corporation, public benefit corporation, trust, unincorporated association, or other entity or association. (ii) Plans and Specifications: Those plans and specifications approved by the Lessor, for the construction of the Improvements, as they may be amended from time to time and as approved by Lessor.
(jj) Project: The Improvements as defined above.
(kk) Rent: As described in Section 4.1 hereof.
(ll) Taking: A taking during the Term hereof of all or any part of the Leased Premises and/or the Improvements, or any interest therein or right accruing thereto, as a result of the exercise of the right of condemnation or eminent domain materially affecting the Leased Premises or any part thereof. A conveyance in lieu of or in anticipation of the exercise of any such right of condemnation or eminent domain shall be considered a Taking. Any such Taking shall be deemed to have occurred upon the earlier to occur of (a) the date on which the property, right or interest so taken must be surrendered to the condemning authority, or (b) the date title vested in a condemning authority or other party pursuant to any Taking. (mm) Tax Credit Eligible Household: A household that is eligible to rent and occupy a qualified low income dwelling unit under Section 42 of the Internal Revenue Code and applicable TCAC and State of California Legal Requirements relating to low income housing tax credits including but not limited to California Revenue and Taxation Code Sections 17057.5, 17058, 23610.4, and 23610.5 and California Health and Safety Code Section 50199, et seq. (nn) Tax Credit Restrictive Covenant: The agreement with TCAC to be executed by Lessee and properly recorded against the Lessee's Estate in the land records of the County, setting forth certain terms and conditions under which one hundred and thirty-five (135) of the residential units in the Improvements will be operated (oo) TCAC: means the California Tax Credit Allocation Committee. (pp) Tenant(s): Any subtenant, sublessee or licensee of Lessee under any Resident Sublease(s).
(qq) Resident Sublease(s): Any sublease or license agreement entered into by Lessee with residents of the residential units to be developed on the Land. (rr) Term: The period of time described in Section 2.2 hereof. (ss) Transfer: Any sale, assignment, transfer, conveyance, lease, sublease, encumbrance, mortgage, or hypothecation, in any manner or form or any agreement to do any of the foregoing.

Section 1.2 Exhibits. The Exhibits referred to in this Lease and attached hereto are:

Exhibit A: Legal Description of the Land

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Exhibit B: Site Map of the Land
Exhibit C: Memorandum of Lease
Exhibit D: Scope of Development
Exhibit E: Financing Plan
ARTICLE 2.

LEASE OF THE LAND
Section 2.1 Lease of Land. Subject to the terms hereof and in consideration of the covenants of payment and performance stipulated herein, Lessor leases the Land to Lessee, and in consideration thereof, Lessee takes, hires and leases the Land from the Lessor, pursuant to the terms of this Lease. This Lease, the interests of Lessor and Lessee hereunder, and the Leased Premises, are in all respects subject to and bound by all of the covenants, conditions, restrictions, reservations, rights, rights-of-way, and easements of record prior to the date of this Lease.

Lessee hereby accepts the Leased Premises and acknowledges that the Leased Premises is in the condition required by the DDLA and this Lease.

Section 2.2 Term. Unless sooner terminated pursuant to the provisions hereof, this Lease shall continue in full force and effect for a term ("Term"), commencing on the Commencement Date and expiring on midnight the day immediately preceding the ninety-ninth (99th) anniversary thereof.

Section 2.3 Use. Subject to the provisions hereof, Lessee shall use the Leased Premises for the construction and operation of the Project, which includes the construction, development and operation of the Improvements on the Land in accordance with the restrictions and requirements set forth in Article 2 hereof. Further, Lessee agrees:
(a) that all uses conducted on the Leased Premises, including, without limitation, all activities undertaken by Lessee pursuant to this Lease, shall conform to all applicable provisions of the City of East Palo Alto Municipal Code, the DDLA and the Regulatory Agreement;
(b) not to use the Leased Premises for any disorderly or unlawful purpose; (c) to use its best efforts to prevent any Tenant from committing or maintaining any nuisance or unlawful conduct on or about the Leased Premises; (d) to use its best efforts to prevent any action by any Tenant that would cause Lessee to violate any of the covenants and conditions of this Lease with respect to the Improvements;
(e) to take reasonable action, if necessary, to abate any action by any Tenant that violates, or that would cause Lessee to violate this Lease; and (f) subject to the laws of the State of California and the rights of Tenants, to permit Lessor and its agents to inspect the Leased Premises or any part thereof at any reasonable time during the Term.

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Section 2.4 Possession. Lessor agrees to and shall provide possession of the Leased Premises to Lessee upon close of construction financing, free and clear of all rights to possession or use by any tenants or other individuals or entities other than Lessee (except as disclosed to Lessee or apparent from Lessee's inspection), and free and clear of any encumbrances except as expressly approved by Lessee in writing.

Section 2.5 Memorandum of Lease. The Parties shall execute and acknowledge a Memorandum of Ground Lease, substantially in the form attached hereto as Exhibit C, which shall be recorded at Lessee's expense.

Section 2.6 No Right to Encumber Fee. Lessee acknowledges and agrees that Lessee shall not have the right to encumber or mortgage Lessor's fee interest in the Property.

Section 2.7 Publicly Accessible Pedestrian and Bike Pathway. During the term of the Ground Lease, and in conjunction with completion of construction of the Project, Lessee shall create and maintain a Public Access Area (defined below) that shall be made available, on a nonexclusive basis, to the general public for their ingress, egress and use as a pedestrian and bicycle pathway. The Public Access Area is depicted as the area of the Property shown in Exhibit B.

Lessee at its own cost and expense, shall be responsible for maintenance and repairs in the Public Access Area and shall maintain the Public Access Area in good condition at all times, including, without limitation, all landscaping, walkways, and other improvements located within the Public Access Area in good repair at all times. Use of the Public Access Area will be subject to reasonable rules proposed by Lessee and approved by the City prior to the issuance of a certificate of occupancy for the Development, which approval shall not be unreasonably withheld or delayed, provided such rules are consistent with the City's rules for use of the City bike path that connects with the Public Access Area.

Lessor acknowledges that the use of the Public Access Area by the general public is nonexclusive. Lessee, its successors, assigns, grantees and licensees, shall have the right to use and occupy the Public Access Area in any manner that does not unreasonably interfere with the with the use of the Public Access Area by the general public. Lessor acknowledges and agrees that temporary obstruction, blockage, encroachments or limitations in the Public Access Area reasonably necessary for development, construction, installation, maintenance, repair, replacement, reconstruction or removal of improvements within and outside the Public Access Area shall not constitute unreasonable interference with the Public Access Area, provided such obstruction, blockage, encroachment or limitations are limited to the time periods necessary for Lessee to complete any necessary work. The Parties acknowledge and agree that regardless of the provisions of this section the Public Access Area shall remain private property and that the granting of access to the Public Access Area does not convert the Property or the Public Access Area into public property. The Parties further acknowledge and agree that the uses of the Public Access Area by the general public are intended to be and shall be construed as recreational purposes as defined by California Civil Code Section 846 and that the Parties shall be entitled to the protections and provisions of California Civil Code Section 846.

Lessee shall indemnify and save harmless Lessor, its officials, agents, employees, successors and assigns, from and against any and all loss, damage, liability, expense, claim or demand of whatsoever character, direct or consequential, including, but without limiting thereby

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the generality of the foregoing, injury to or death of persons and damage to or loss of property to the extent arising out of the breach by Lessee of any of its rights or obligations herein, except those arising by reason of the negligence or willful misconduct of Lessor or its agents, contractors or employees. Lessor shall indemnify and save harmless Lessee, its trustees, officers, agents, employees, successors and assigns, from and against any and all loss, damage, liability, expense, claim or demand of whatsoever character, direct or consequential, including, but without limiting thereby the generality of the foregoing, injury to or death of persons and damage to or loss of property to the extent arising out of the exercise by Lessor or its agents, employees or contractors (but not including the exercise by any member of the public who is not an agent, employee or contractor of Lessor) of any right expressly or impliedly granted herein, except those arising by reason of the negligence or willful misconduct of Lessee, including its agents, contractors or employees.

Section 2.8 Community Room. Lessor and Lessee acknowledge that the Project's surrounding community generally lacks access to functional, quality meeting space for publicly accessible community meetings and agree that providing the larger surrounding community with access to the Project's community room will help improve the quality of life for community residents. Accordingly, Lessee shall allow community groups access to and use of the community room in accordance with a reservation system administered by the Lessee to be approved by the Lessor and at charges approved by the Lessor, provided, however, Lessee shall not be obligated to allow use of the community room or other common areas of the project by groups other than Tenants at any time that the community room is reserved by a Tenant of Lessee for such Tenant's exclusive use or at any time that the Lessee has a planned event in the community room.

ARTICLE 3.

THE IMPROVEMENTS
Section 3.1 Construction. Lessee shall cause the Improvements to be constructed in substantial compliance with the Construction Plans (as defined in the DDLA) approved by City and the terms and conditions of the land use permits and approvals and building permits, including any variances granted for the Improvements to be approved by Lessor, within the time periods set forth in the Schedule of Performance (as defined in the DDLA). Any and all Improvements constructed by or on behalf of Lessee shall be constructed in a good, skillful and professional manner, in compliance with all applicable Legal Requirements, and in accordance with all of the requirements of the DDLA. Except as may be specified in the DDLA and any City financing for the Project that may be approved by the City in its sole discretion, Lessee shall bear the entire and sole cost of planning, designing, engineering, financing, constructing, supervising, and inspecting the Improvements, including all fees and mitigation measures.

Lessee shall comply with the City of East Palo Alto's First Source Hiring Policy during construction of the Improvements and shall include in all construction contracts a requirement that the contractor comply with the First Source Hiring Policy.

Section 3.2 Liens. Lessee shall not have any right, authority or power to bind Lessor, Lessor's Estate, or any interest of Lessor in the Land or the Leased Premises, for any claim for labor or material, or for any other charge or expense, lien or security interest incurred in

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connection with Lessee's use of the Land, or the development, construction or operation of the Improvements, or any change, alteration of addition thereto. Lessee shall have the right to encumber Lessee's Estate with security instruments required in connection with the Approved Loans. Prior to entering into an Approved Loan, Lessee shall submit a copy of proposed loan documents to Lessor and shall obtain written confirmation from Lessor that the Approved Loan is in conformance with the Financing Plan then in effect. Lessee shall have the right to enter into utility easements and other customary easements necessary and incidental to the development, construction and operation of the Improvements, provided that such easements are subject to the approval of Lessor, which shall not be unreasonably withheld, conditioned or delayed and which consent may be provided by the City's Director of Public Works or his or her designee without further approval of the City Council ("Permitted Easements").

The Lessee shall not create or permit or suffer to be created or to remain upon the Lessor's Estate or any interest of Lessor in the Land or the Leased Premises, or upon the Leased Premises, or any part thereof, and will discharge, any lien, including, but not limited to, the liens of mechanics, laborers, materialmen, suppliers or vendors for work or materials alleged to be done or furnished in connection with the Leased Premises or the Project, or any part thereof. If any claim of lien is filed against the Lessor's Estate or any interest of Lessor in the Land or the Leased Premises, or a stop notice is served on any other lender or other third party in connection with the Leased Premises or the Improvements, or upon the Leased Premises, or any part thereof, then the Lessee shall, within twenty (20) days after such filing or service, either pay or contest such claim diligently and in good faith, provided that Lessee fully discharges the lien or stop notice, effects the release of such lien or stop notice by delivering to the Lessor a surety bond in sufficient form and amount, or provides the Lessor with other assurance satisfactory to the Lessor that the claim of lien or stop notice will be paid or discharged. If the Lessee fails to discharge any lien, encumbrance, charge, or claim in the manner required in this Lease, then in addition to any other right or remedy, the Lessor may (but shall be under no obligation to) discharge such lien, encumbrance, charge, or claim at the Lessee's expense. Any expense incurred by Lessor pursuant to this Section shall be immediately due and payable by Lessee to Lessor as Additional Rent under this Lease. The Lessee shall have the right to contest in good faith and by appropriate legal proceedings the validity or amount of any mechanics', laborers', materialmen's, suppliers' or vendors' lien or claimed lien; provided that the Lessee shall utilize all reasonable means (including the posting of adequate security for payment) to protect the Leasehold Estate, the Lessor's Estate and any other interest of Lessor in the Land or the Leased Premises against foreclosure. In addition to any other indemnities provided in this Lease or the DDLA, Lessee shall indemnify, protect, defend (with counsel of Lessor's choosing), and hold harmless the Indemnitees from any and all alleged or actual Claims arising by reason of a mechanic's lien or work, labor, services, or materials supplied or claimed to have been supplied to Lessee or anyone holding the Leased Premises or Development, or any part thereof, through or under Lessee.

Nothing in this Lease shall be construed as constituting the consent of the Lessor, expressed or implied, to the performance of any labor or the furnishing of any materials or any specific improvements, alterations of or repairs to the Leased Premises or the Project, or any part thereof, by any contractor, subcontractor, laborer or materialman, nor as giving the Lessee or any other person any right, power or authority to act as agent of or to contract for, or permit the rendering of, any services or the furnishing of any materials in such manner as would give rise to

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the filing of mechanics' liens or other claims against the Lessor's Estate or any other interest of Lessor in the Land or the Leased Premises. The Lessor shall have the right at all reasonable times to post and keep posted on the Leased Premises any notices which the Lessor may deem necessary for the protection of the Lessor and of Lessor's Estate or any other interest of Lessor in the Land or the Leased Premises from mechanics' liens or other claims. In addition, but subject to the paragraph above, the Lessee shall make, or cause to be made, prompt payment of all monies due and legally owing to all persons doing any work or furnishing any materials or supplies to the Lessee, or any of its respective contractors or subcontractors in connection with the Leased Premises and the Project. The provisions of this Section shall survive the expiration or termination of this Lease.

Notwithstanding any other provision of this Lease, including, but not limited to, this Section 3.2, Lessor acknowledges and agrees to recordation of the TCAC lease rider and, if applicable, a lease rider as required by the California Department of Housing and Community Development, each in a form reasonably approved by City, against Lessor’s Estate.

Lessor’s fee interest in the Leased Premises shall be senior to, and not be subordinated to, any financing obtained by Lessee in connection with the Leased Premises.

Section 3.3 Permits, Licenses and Easements. Lessor agrees to use Lessor's best reasonable efforts to assist Lessee in obtaining any and all permits, licenses, easements and other authorizations required by any Governmental Authority with respect to any construction or other work to be performed on the Leased Premises and to grant, or to assist Lessee in obtaining, as applicable, all permits, licenses, easements and other governmental authorizations that are necessary or helpful for electric, telephone, gas, cable television, water, sewer, drainage, access and such other public or private utilities or facilities as may be reasonably necessary or desirable in connection with the construction or operation of the Improvements. Payment of all fees, costs and expenses associated with any of the foregoing shall be the responsibility of Lessee, and Lessor shall have no responsibility to pay any such fees, costs or expenses.

Section 3.4 Title to Improvements.
(a) During the Term. Lessor hereby grants to Lessee, without warranty express or implied, any right, title, or interest that Lessor may have in the Improvements now or hereafter located on the Leased Premises. Notwithstanding any provision in this Lease to the contrary, the Improvements and all alterations, additions, equipment, and fixtures built, made or installed by Lessee in, on, under or to the Leased Premises or Improvements shall be the sole property of Lessee until the expiration of the Term or other termination of this Lease; provided, however, that Lessee shall have no right to destroy, demolish or remove the Improvements except as specifically provided for in this Lease or as approved in writing by Lessor. It is the intent of the parties hereto that this Lease shall create a constructive notice of severance of the Improvements from the Leased Premises without the necessity of a deed from Lessor after the Improvements have been constructed.
(b) After the Term. Upon the expiration of the Term or other termination of the Lease, the Improvements and all alterations, additions, equipment and fixtures shall be deemed to be and shall automatically become the property of Lessor, without cost or charge to

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Lessor. At such time, Lessee shall peaceably and quietly leave and surrender the Leased Premises and the Improvements to Lessor in good order, condition, and repair, reasonable wear and tear and obsolescence excepted. Lessee shall leave in place and in good order, condition, and repair, all fixtures and machinery; except Lessee shall have the right to remove only Lesseeowned appliances, other unattached equipment, furniture and merchandise that Lessee shall have installed, which removal must be done without damage to the Leased Premises or Improvements.

Lessor agrees that Lessee, at any time prior to the expiration or other termination of this Lease, may remove from the Leased Premises any and all equipment which Lessee has furnished for maintenance purposes or for the use of the Management Agent, provided that Lessee shall repair any physical damage to the Leased Premises caused by the removal of such equipment and property. Lessee agrees to execute, at the request of Lessor at the end of the Term, a confirmatory quitclaim deed of the Improvements and/or Leased Premises to Lessor to be recorded at Lessor's option and expense and any other documents that may be reasonably required by Lessor or Lessor's title company to provide Lessor title to the Leased Premises and the Improvements free and clear of all monetary liens and monetary encumbrances not caused or agreed to by Lessor. Without limiting the foregoing, upon the expiration or sooner termination of this Lease, Lessee shall deliver the Leased Premises and the Improvements to Lessor free of all monetary liens and encumbrances unless otherwise consented to in writing by Lessor. Any equipment or other personal property not removed from the Leased Premises by the expiration of the Term shall become the property of Lessor, and Lessor shall have the right to dispose of such equipment and property in the manner of Lessor's choosing.

Section 3.5 Benefits of Improvement During Term. Lessor acknowledges and agrees that any and all depreciation, amortization and tax credits for federal or state tax purposes relating to the Improvements located on the Leased Premises and any and all additions thereto, substitutions therefor, fixtures therein and other property relating thereto shall be deducted or credited exclusively by Lessee during the Term.

Section 3.6 No Abandonment. Lessee shall not abandon or vacate the Leased Premises or the Improvements at any time during the Term. If Lessee shall abandon, vacate, or otherwise surrender the Leased Premises or the Improvements, or be dispossessed thereof by process of law or otherwise, the same shall constitute a default under this Lease on the part of Lessee and, in addition to any other remedy available on the part of Lessor, any of Lessee’s property left in, upon or about the Leased Premises or the Improvements (except for underground storage tanks) shall, at Lessor’s option, be deemed to be abandoned and shall become the property of Lessor. The appointment of a receiver pursuant to a Lender’s exercise of its rights under a Leasehold Mortgage, or the foreclosure of a Leasehold Mortgage, shall not be a default under this Section.

ARTICLE 4.

RENTS
Section 4.1 Ground Rent. For each Lease Year during the Term, Lessee shall pay to Lessor on the Commencement Date of this Lease and on each succeeding anniversary thereof rent in advance for the next succeeding Lease Year ("Rent") in the amount of One Dollar ($1.00) per Lease Year or partial Lease Year.

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Section 4.2 Payments. All Rent, Additional Rent, and other sums, if any, due Lessor hereunder shall be paid by Lessee to Lessor at the address of Lessor set forth hereinafter for notices, or to such other person and/or at such other address as Lessor may direct by written notice to Lessee, without notice or demand, and without abatement, deduction or set off. Lessee may pay all Rent due at the rate set forth in Section 4.1 for the entire Term of this Lease in advance.

ARTICLE 5.

TAXES AND OTHER IMPOSITIONS; UTILITIES
Section 5.1 Payment of Impositions. As and when the same shall become due, Lessee will pay all of the Impositions, except that if any Imposition that Lessee is obligated to pay in whole or in part is permitted by law to be paid in installments, Lessee may pay or cause to be paid such Imposition (or its proportionate part thereof) in installments as and when such installments become due. Upon the written request of Lessor, Lessee shall provide to Lessor evidence satisfactory to Lessor of payment of all Impositions. During the first and last years of the Term, all Impositions shall become payable during each calendar, fiscal, tax or Lease Year, as applicable, shall be ratably adjusted on a per diem basis between Lessor and Lessee in accordance with the respective portions of such calendar, fiscal, tax, assessment or Lease Year during the Term. If any special assessments are payable in installments, Lessee shall pay only those installments that are due and payable during the Term.

Section 5.2 Possessory Interest Taxes. In accordance with California Revenue and Taxation Code Section 107.6(a), Lessor notices Lessee that by entering into this Lease, a possessory interest subject to assessment and collection of property taxes may be created.

Lessee or other party in whom the possessory interest is vested may be subject to the payment of property taxes levied on such interest. If possessory interest taxes are assessed, Lessee agrees it is responsible for payment thereof and Lessor has no obligation or liability of any kind or nature relating to payment of property taxes. Lessee shall, at its sole cost and expense, seek exemption from, or contest the payment of, assessments and the collection of property taxes pursuant to Revenue and Taxation Code Section 214, or a successor statute. During the pendency of such contest or request, Lessee’s non-payment of assessments or taxes when due shall not constitute a default hereunder if (i) the validity of such assessments and taxes is actively contested in good faith and by appropriate proceedings, (ii) Lessee has demonstrated to Lessor’s reasonable satisfaction that leaving such assessments or taxes unpaid pending the outcome of such proceedings could not result in conveyance of the Leased Premises in satisfaction of such assessments or taxes or otherwise impair Lessor’s estate in the Leased Premises, (iii) Lessee has furnished Lessor with a bond or other security satisfactory to Lessor in an amount not less than 100% of the applicable claim (including interest and penalties) and (iv) upon the final disposition of such proceedings, Lessee shall promptly pay all taxes and assessments then due, inclusive of any unpaid accrued penalties and interest. Lessor is a public agency and no property taxes will be or are legally assessable against its fee interest.

Section 5.3 Contested Taxes and Other Impositions.

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(a) Lessee, in its own name or in the name of Lessor if prior written consent of Lessor is obtained by Lessee, may contest the validity or amount of any Imposition relating to all or any portion of the Leased Premises, in which event the payment thereof, if authorized by applicable law, may be deferred during the pendency of such contest and for which adequate reserves have been provided in accordance with generally accepted accounting principles, if diligently prosecuted. If applicable law is silent on or expressly disallows deferring payment pending the contest of validity, Lessee shall timely pay any Imposition that is subject to dispute under protest, reserving any and all rights for repayment from the applicable taxing entity if resolution of such contest results in a decision or judgment in Lessee's favor. (b) As may be necessary or desirable, Lessor or Lessee, as applicable, upon the request of the other Party, shall use its best reasonable efforts to assist in any such proceeding to contest the validity or amount of any Imposition.

Section 5.4 Valuation Assessment/Property Tax Exemption. If applicable, Lessee may attempt to obtain a lowering of the assessed valuation of the Leased Premises for any year or obtain a property tax exemption for the purpose of reducing taxes thereon.

Section 5.5 Failure to Pay Impositions. If Lessee shall fail to pay any Impositions before the same become delinquent, except if Lessee is in good faith contesting such Impositions pursuant to Section 5.5 hereof, Lessor, at its election, may pay such Impositions (but shall not be obligated to pay same), together with any interest and penalties due thereon, and the amount so paid by Lessor shall be repayable to Lessor by Lessee, within thirty (30) days as Additional Rent hereunder.

Section 5.6 Utilities. Lessee shall pay all charges for all utilities used, rendered or supplied upon or in connection with the Improvements and the operation or construction thereof including, but not limited to, all charges for gas, electricity, light, heat or power, all telephone and other communications services, all water rents and sewer service charges, and all sanitation fees or charges (all of the foregoing, collectively "Utility Charges") levied or charged against the Leased Premises during the Term; provided, however, that Lessee shall have no responsibility hereunder for the payment of Utility Charges for utilities supplied by the respective providers directly to Tenants for such Tenants' use in connection with the occupancy of their respective residential units unless otherwise provide in the applicable Resident Sublease. Notwithstanding any contrary provision of this Lease, Lessor shall have no responsibility for payment of any Utility Charges.

ARTICLE 6.

INSURANCE
Section 6.1 Required Insurance Coverage.Standard "All Risk" Casualty and Fire and Extended Coverage Endorsement. Lessee shall during the Lease Term keep the Leased Premises insured against loss or damage by a standard all risk policy in amounts such that the proceeds of such insurance shall not be less than the full replacement value of the Leased Premises unless otherwise consented to in writing by Lessor and the other Lenders.

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(a) Liability and Property Damage Insurance. During the Lease Term, Lessee shall keep in full force and effect a policy or policies of comprehensive general liability and property damage insurance against liability for bodily injury to or death of any person or property damage arising out of an occurrence on or about the Leased Premises. The limits of such insurance shall be not less than Two Million Dollars ($2,000,000) combined single limit each occurrence, Two Million Dollars ($2,000,000) annual aggregate, together with Three Million Dollars ($3,000,000) excess liability coverage, or such other policy limits as Lessor may require in its reasonable discretion, including coverage for bodily injury, property damage, products, completed operations and contractual liability coverage. Such policy or policies shall be written on an occurrence basis and shall name the Indemnitees as additional insureds. (b) Workers' Compensation Insurance. Lessee shall carry or cause to be carried workers' compensation insurance covering all persons employed in connection with the Leased Premises and with respect to whom death, bodily injury, or sickness insurance claims could be asserted against Lessor and/or Lessee. Lessee shall furnish or cause to be furnished to Lessor evidence satisfactory to Lessor that Lessee and any contractor that has contracted for the performance of work on the Land or otherwise pursuant to this Lease carries statutory Workers' Compensation insurance and Employer's Liability insurance in a minimum amount of One Million Dollars ($1,000,000) per accident.
(c) Builders' Risk Insurance. Upon commencement of construction and continuing until issuance of a temporary certificate of occupancy, or equivalent for the Improvements, Lessee and all contractors working on behalf of Lessee shall maintain a policy of builder's all-risk insurance in an amount not less than the full insurable cost of the Project on a replacement cost basis naming Lessor as loss payee as its interests may appear. During the course of any alteration, construction or reconstruction, the cost of which exceeds Two Hundred Fifty Thousand Dollars ($250,000), Lessee shall require any contractor to provide builders' risk insurance for the full insurable cost of the work and liability insurance in an amount not less than One Million Dollars ($1,000,000) combined single limit for bodily injury or property damage insuring the interests of Lessor, Lessee and any contractors and subcontractors. (d) Property Insurance. During the Lease Term, Lessee shall keep in full force and effect a policy or policies of insurance against fire, extended coverage, vandalism, and malicious mischief, and such other additional perils, hazards, and risks as now are or may be included in the standard “all risk” form in general use in the County of San Mateo, California, with the standard form fire insurance coverage in an amount equal to full actual replacement cost thereof, as the same may change from time to time. The above insurance policy or policies shall include coverage for earthquakes to the extent generally and commercially available at commercially reasonable rates, if such insurance is generally obtained for affordable multifamily housing projects in the County of San Mateo. Lessor shall be a loss payee under such policy or policies and such insurance shall contain a replacement cost endorsement.

Section 6.2 Insurance Policies and Premiums.
(a) All liability policies required by this Lease or any of the Lenders shall be written on an occurrence basis, and shall name the Indemnitees as additional insureds. Duplicate copies of such policies or certificates of such insurance shall be promptly furnished to Lessor.

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(b) All policies of insurance shall include an endorsement that provides that notice of any change or cancellation of said policy must be made in writing and sent to Lessee and Lessor at their respective principal offices at least thirty (30) days before the effective date of change or cancellation.
(c) The rights of Lessor to receipt of any insurance proceeds will be subject and subordinate to the rights of any Lender pursuant to and in accordance with applicable Loan Documents.
(d) Companies writing the insurance required hereunder shall be approved to do business in the State of California. Insurance shall be placed with insurers with a current A.M. Best’s rating of no less than A: VII. The Commercial General Liability policies required hereunder shall name the Indemnitees as additional insureds. Builder’s Risk and property insurance shall name City as loss payee.
(e) If any insurance policy or coverage required hereunder is canceled or reduced, Lessee shall, within thirty (30) days after receipt of notice of such cancellation or reduction in coverage, but in no event later than the effective date of cancellation or reduction, file with Lessor a certificate showing that the required insurance has been reinstated or provided through another insurance company or companies. Upon failure to so file such certificate, Lessor may, with notice and at its option, procure such insurance coverage at Lessee's expense, and Lessee shall promptly reimburse Lessor for such expense upon receipt of billing from Lessor.
(f) Coverage provided by Lessee shall be primary insurance and shall not be contributing with any insurance, or self-insurance maintained by Lessor, and the policies shall so provide. The insurance policies shall contain a waiver of subrogation for the benefit of the Lessor. Lessee shall furnish the required certificates and endorsements to Lessor prior to the commencement of rehabilitation or construction work on the Project, and shall provide Lessor with certified copies of the required insurance policies upon request of Lessor. (g) Deductibles/Retentions. Any deductibles or self-insured retentions shall be declared to, and be subject to approval by, City's Risk Manager. At the option of and upon request by City's Risk Manager if the Risk Manager determines that such deductibles or retentions are unreasonably high, either the insurer shall reduce or eliminate such deductibles or self-insurance retentions as respects the Indemnitees or Lessee shall procure a bond guaranteeing payment of losses and related investigations, claims administration and defense expenses. (h) Adjustments. The limits of the liability coverage and, if necessary, the terms and conditions of insurance, shall be reasonably adjusted from time to time (not less than every five (5) years after the Commencement Date nor more than once in every three (3) year period) to address changes in circumstances, including, but not limited to, changes in the purchasing power of the dollar and the litigation climate in California. Within thirty (30) days following Lessor's delivery of written notice of any such adjustments, Lessee shall provide Lessor with amended or new insurance certificates and endorsements evidencing compliance with such adjustments.

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Section 6.3 Proceeds of Insurance.
(a) For so long as any Leasehold Mortgage on the Leased Premises is outstanding: All fire and standard risk or extended coverage (casualty) insurance proceeds shall be applied to the payment of the costs of repairing or rebuilding that part of the Leased Premises damaged or destroyed if (i) Lessee agrees in writing within ninety (90) days after payment of the proceeds of insurance that such repair or rebuilding is economically feasible, and (ii) each Lender permits such repair or rebuilding, provided that the extent of the Lessee's obligation to restore the Leased Premises shall be limited to the amount of the insurance proceeds. (b) If the Improvements are not repaired or rebuilt, all such proceeds shall be applied in a manner consistent with the terms of the Leasehold Mortgages. (c) In the event that no Leasehold Mortgage is outstanding, all insurance proceeds received under the policies set forth in this Article 6 shall be paid to Lessee, provided that Lessee agrees that it shall apply such proceeds for reconstruction or repair of the Improvements unless such repair or reconstruction is not economically feasible. (d) To the extent any of the above provisions are inconsistent with the provisions of any of the Loan Documents, the Loan Documents shall be controlling.

Section 6.4 Limitation of Liability.
(a) In addition to any other indemnities provided in this Lease or the DDLA, Lessee shall indemnify, protect, defend (with counsel reasonably acceptable to Lessor), and hold harmless the Indemnitees from and against all Claims arising out of, attributable to or otherwise occasioned, in whole or in part, by any act or omission of Lessee, its agents, contractors, servants, employees, or invitees, arising from or relating to breach of Lessee's representations and warranties or the operation of the Leased Premises, except to the extent any such Claim arises from the active negligence or willful misconduct of Lessor or the Indemnitees. (b) The provisions of this Section 6.4 shall survive the expiration or termination of this Lease.

ARTICLE 7.

MAINTENANCE, ALTERATIONS, REPAIRS AND REPLACEMENTS
Section 7.1 Maintenance of Leased Premises; Landscaping. During the Term, at Lessee's sole cost and expense, Lessee shall keep and maintain the Leased Premises, all Improvements hereafter developed, and all appurtenances thereunto belonging, in good and safe order, condition and repair, free of debris, waste, and graffiti, in compliance with the terms of all applicable provisions of the City of East Palo Alto Municipal Code, and in accordance with the standard of maintenance of high quality apartment projects within the San Mato County region.

To accomplish the maintenance, Lessee shall either staff or contract with and hire licensed and qualified personnel to perform the maintenance work, including the provision of labor, equipment, materials, support facilities, and any and all other items necessary to comply with the requirements of this Lease. All such maintenance and repair shall conform to and comply with

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all Legal Requirements affecting the Leased Premises. Lessee agrees that Lessor shall not be required to perform any maintenance, repairs or services or to assume any expense in connection with the Improvements and the Leased Premises. Lessee hereby waives all rights to make repairs or to cause any work to be performed at the expense of Lessor as may be provided for in Section 1941 and 1942 of the California Civil Code, if applicable.

Section 7.2 Landscaping Maintenance.
(a) Lessee, at no expense to the Lessor, shall maintain in healthful, attractive and reasonably weed-free manner all the landscaped areas related to the Project as shown in the landscaping plan approved by the City. "Landscaped areas" as used in this Lease shall mean plantings and irrigation systems which have been installed, or are proposed to be installed, pursuant to the City-approved landscaped plan for the Project including those in City rights-ofway. All plantings shall be maintained using generally accepted methods of cultivation to ensure reasonably normal, healthy plant growth. Maintenance shall include replacement of plantings, when necessary, and all ordinary and usual care, including, but not limited to, irrigation, fertilization, pest and disease control, weeding, rotation of plantings and the removal of trimmings, rubbish, debris, and other solid waste. Lessee shall, at no expense to the Lessor, install, maintain, repair, and replace, where necessary, such irrigation systems as are required to provide adequate irrigation in compliance with water conservation practices. (b) If, in the reasonable judgment of the Lessor, Lessee has failed to maintain properly any landscaping as required by this Lease, the Lessor may perform such maintenance, at its option, after thirty (30) days' prior written notice to Lessee of such failure to maintain. In such event, the Lessor's performance of such maintenance shall be at the Lessee's sole expense and Lessee, upon demand by the Lessor, shall pay to the Lessor all reasonable expenses incurred by the Lessor in the performance of such maintenance.
(c) If any maintenance, repair, or replacement of landscaping needs immediate correction as a result of a public safety or health hazard, as reasonably determined by the Lessor, and such maintenance is not performed, or cannot be performed, by Lessee within twenty-four (24) hours of receipt of such notice thereof, the Lessor may perform or cause to be performed such maintenance at Lessee's expense, and Lessee, upon demand by the Lessor, shall pay to the Lessor all reasonable expenses incurred by the Lessor in the performance of such maintenance.

Section 7.3 Alterations to Leased Premises. Lessee may make any additions, alterations or changes (sometimes collectively referred to herein as "Alterations") in or to the Improvements without the prior written approval of Lessor subject to the following conditions:
(a) No Alterations shall be made that would tend to impair the structural soundness of the Improvements;
(b) No Alterations shall be undertaken that are prohibited by, or would cause the Leased Premises, the Improvements, Lessee, or Lessor to be in breach or violation of any Legal Requirements;

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(c) No Alterations shall be undertaken until Lessee shall have procured, to the extent the same may be required from time to time, all permits and authorizations of all applicable Governmental Authorities, all required consents of any Lender, and the written consent of Lessor;
(d) Any Alterations shall be performed in good, skillful and professional manner and in compliance with all applicable Legal Requirements and all applicable Insurance Requirements;
(e) Any and all Alterations shall be consistent with the use of the Leased Premises as authorized under this Lease; and
(f) Any Alteration that (i) will exceed the sum of Fifty Thousand Dollars ($50,000) in cost and either was not included in the annual budget approved by the City or exceeds the cost allocated in the approved annual budget by twenty percent (20%) or more shall require Lessor's advance written consent. In the event the Lessor fails to approve or disapprove any such Alteration within thirty (30) days of receipt of written request from Lessee, such Alteration shall be deemed approved. Any Alteration made pursuant to an emergency shall not require the Lessor's prior consent, but Lessee shall inform Lessor of such work and costs in writing within thirty (30) days of commencing such work.

Section 7.4 Indemnifications. Notwithstanding any other provision of this Lease to the contrary, and in addition to any other indemnities provided in this Lease, to the fullest extent permitted by law, Lessee hereby agrees to indemnify, protect, hold harmless and defend (by counsel reasonably satisfactory to Lessor) the Indemnitees from and against any and all Claims, arising from or relating to Lessee's obligations under this Lease or the construction or operation of the Improvements or any Alterations except to the extent any such Claim arises from the active negligence or willful misconduct of the Indemnitees. In addition, if any contractor or subcontractor which performed any construction work for Lessee or Lessee's affiliates on the Improvements or Alterations shall assert any claim against Lessor on account of any damage alleged to have been caused by reason of acts of negligence of Lessee or Lessee's affiliates, members, partners, officers, directors, affiliates, agents, employees or construction contractors, Lessee shall defend at its own expense any suit based upon such claim; and if any judgment or claim against Lessor shall be allowed, Lessee shall pay or cause to be paid or satisfied such judgment of claim and pay all costs and expenses in connection therewith. The provisions of this Section shall survive the expiration or termination of this Lease.

Section 7.5 Capital Replacement Reserve Account. Lessee shall establish and maintain a capital reserve account at all times during the Term of this Lease (“Capital Reserve Account”). The funds to be placed and maintained in the Capital Reserve Account shall be not less than Sixty-Eight Thousand Dollars ($68,000). The funds in the Capital Reserve Account shall be expended only for capital repairs, improvements, and replacements to the Development fixtures and equipment with a long useful life and which are normally capitalized under generally accepted accounting principles. Capital repairs to and replacement of the Development shall include, without limitation, the following: carpet and drape replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs and showers, toilets, lavatories, sinks, faucets; air

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conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line pipe replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture replacement; and common area repainting. The non-availability of funds in the Capital Reserve Account does not in any manner relieve or lessen Lessee’s obligation to undertake any and all necessary capital repairs, improvements, or replacements and to continue to maintain the Development in the manner prescribed herein. Not less than once per year, Lessee shall submit to Lessor an accounting for the Capital Reserve Account.

Section 7.6 Operating Reserve Account. Commencing upon the conversion of the financing for the Development to permanent financing, Lessee shall establish an operating reserve account (the “Operating Reserve Account”). The funds to be placed and maintained in the Operating Reserve Account shall be not less than three (3) months of operating costs. The Operating Reserve Account shall be used to cover shortfalls between annual Development revenue and actual operating expenses, but shall in no event be used to pay for capital items or capital costs properly payable from the Capital Reserve Account. Lessee shall, not less than once per year, submit to Lessor an accounting for the Operating Reserve Account.

ARTICLE 8.

MORTGAGE LOANS
Section 8.1 Liens and Encumbrances Against the Leasehold Estate. The Lessee shall have the right to encumber the Leasehold Estate and the Improvements with leasehold deeds of trust, mortgages, and regulatory and affordability agreements related to the Approved Loans without Lessor's consent (collectively, "Liens") provided that all documents evidencing such Liens are consistent with the terms and conditions of this Lease and the DDLA and executed attachments thereto.
(a) For as long as there is any Lien securing any Approved Loan:
(1) Lessor shall not agree to any mutual termination or accept any surrender of this Lease, nor shall Lessor consent to any material amendment or modification of this Lease without the prior written consent of the Lenders that have outstanding Approved Loans, if and to the extent required by any such Lenders. In the event that Lessor receives competing or conflicting offers to cure any default under this Lease, Lessor shall accept the offers to cure in the following order: first, Lessee or the limited partner (or members, as applicable) therein, then each Lender in the same relative priority as their respective Liens. (2) Notwithstanding any default by Lessee under this Lease, Lessor shall have no right to terminate this Lease unless Lessor shall have given the Lenders that have outstanding Approved Loans written notice of such default and such Lenders shall have failed to remedy such default or acquire the Leasehold Estate or commence foreclosure or other appropriate proceedings as set forth in, and within the time specified by, this Section 8.1.

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(3) Any Lender that has an outstanding Approved Loan shall have the right, but not the obligation, at any time to pay any or all of the Rent or Additional Rent due pursuant to the terms of this Lease, and do any other act or thing required of Lessee by the terms of this Lease, to prevent termination of this Lease. Each Lender shall have sixty (60) days after receipt of notice from Lessor describing such default to cure the default, which notice shall include, with respect to any monetary default, a detailed statement identifying the amounts due and the obligations to which amounts relate and with respect to any non-monetary default, a detailed statement identifying the obligations breached and the cure expected by Lessor; provided, however, that if the default is not susceptible to cure within such period, the Lender shall have such longer period, not to exceed an additional ninety (90) days, as may be necessary to cure the default, so long as such Lender is diligently prosecuting such cure to completion (the "Initial Cure Period"). All payments so made and all things so done shall be as effective to prevent a termination of this Lease as the same would have been if made and performed by Lessee instead of by the Lender(s).
(4) Lessor shall provide estoppel certificates reasonably requested by lenders or investors which estoppel certificates shall be approved as to form by Lessor. (5) If the Lenders are prohibited, stayed or enjoined by any bankruptcy or insolvency proceeding of any court, including without limitation a court having jurisdiction over Lessee in such proceeding, from commencing or prosecuting foreclosure proceedings, the times specified for commencing or prosecuting such foreclosure or other proceedings shall be extended for the period of such prohibition; provided that any Lender shall have fully cured any default in the payment of any monetary obligations of Lessee under this Lease, including without limitation any monetary obligations to third parties which have become, or threaten to become, liens against the Leased Premises or any portion thereof, and shall continue to pay currently such monetary obligations when the same fall due; provided, further, that, subject to subsection (1) of this Section 8.1(a), such Lender shall not interfere with Lessor's efforts to seek compliance by Lessee with any non-monetary obligation under this Lease. (6) Lessor shall mail or deliver to any Lenders that have any outstanding Approved Loans a duplicate copy of any notice of default which Lessor may deliver to Lessee pursuant to this Lease, provided, the City shall have no liability to such Lenders for its failure to do so. Lessee shall deliver to Lessor the name and contact information for all Lenders that have outstanding Approved Loans, including successors in interest to Approved Loans. (7) The foreclosure of an Approved Loan, any sale thereunder, whether by judicial proceedings or by virtue of any power contained in the leasehold mortgage securing the Approved Loan, or any conveyance of the Leasehold Estate created hereby from Lessee to a Lender through or in lieu of foreclosure (a "Foreclosure Event"), shall not require the consent of Lessor or constitute a breach of any provision of this Lease. In the event any Lender or its Nominee (as defined herein) becomes Lessee under this Lease by such means or pursuant to any new lease obtained under paragraph (9) of this Section 8.1(a) below, Lessor shall recognize the Lender or its Nominee as Lessee hereunder or under such new lease and the Lender shall be personally liable under this Lease or such new lease only for the period of time that the Lender or its Nominee remains Lessee thereunder, provided that the Lender or its Nominee attorns to Lessor and agrees to be subject to the restrictions of this Lease. If a Lender

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or its Nominee becomes the lessee under this Lease or any such new lease, any assignment or sublease of this Lease or such new lease, shall require the prior written consent of the Lessor.

Nothing in this Section shall be construed to obligate any Lender to remedy any default of Lessee, and any failure of any Lender to complete any such cure after commencing the same shall not give rise to any liability of any Lender to Lessor or Lessee. (8) In the event (A) a Lender becomes the legal owner of the Leasehold Estate, (B) Lessor terminates this Lease by reason of any Event of Default (as defined herein) or if (C) this Lease shall otherwise terminate, then, upon written request by Lender given within sixty (60) days after such transfer or receipt of notice of such termination of the Leasehold Estate, Lessor shall execute and deliver a new lease of the Leased Premises to such Lender (the "Nominee"), provided that, if such Nominee is not wholly owned by one or more Lenders, such Nominee is approved by Lessor in its reasonable discretion. Such new lease shall be substantially in the same form as this Lease, shall have a term equal to the remainder of the Lease Term with the same agreements, covenants, reversionary interests and conditions (except for any requirements which have been fulfilled by Lessee prior to termination) as are contained in this Lease and with priority equal to this Lease with respect to encumbrances of Lessor's interest in the Land or the Leased Premises or encumbrances of Lessee's interest in the Leased Premises permitted or caused by Lessor, together with any provisions legally required in the event the Nominee is a governmental entity; provided, however, that any defaults by Lessee susceptible to cure by the Lender have been cured or reasonable assurance has been provided to Lessor that such defaults shall be cured. Upon execution and delivery of such new lease by Lessor and the Nominee, the Nominee shall have acquired all the right, title and interest of Lessee under this Lease prior to its termination. Lessor shall cooperate in taking such action as shall be necessary to cancel and discharge this Lease and to remove Lessee from the Leased Premises.
(9) If a Lender subsequently transfers its interest under this Lease after acquiring such interest by foreclosure or deed in lieu of foreclosure which transfer has been approved by Lessor in writing and, in connection with any such transfer, the Lender takes a mortgage or deed of trust encumbering such leasehold interest to secure all or any portion of the purchase price given to the Lender for such transfer, then such mortgage or deed of trust shall be considered an Approved Loan hereunder provided that Lessor has been provided an opportunity to review and approve the documents evidencing and securing such mortgage or deed of trust and the obligations secured thereby, and the Lender shall be entitled to receive the benefit of and to enforce the provisions of this Lease or the new lease approved pursuant to paragraph (9) of this Section 8.1(a).
(10) Unless the Lenders otherwise consent in writing, Lessor and Lessee each hereby waives, and agrees not to assert or otherwise take the benefit of, that portion of Section 365(d)4, or any other applicable provisions, of the United States Bankruptcy Code (11 U.S.C. Section 101 et seq.), which provides for the deemed rejection of a lease in certain circumstances, so long as the trustee is paying the rent due under the Lease and performs, or causes the performance of, the uses of the Leased Premises for the Project pursuant to this Lease. (11) Subject to the rights of the Lenders, which shall have priority over all persons or entities given rights under this clause (11), any Investor limited partners (or

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members, as applicable) of Lessee shall have the same rights as any Lender authorized under paragraphs (2), (3) and (7) of this Section 8.1(a) of this Lease and any reference to a Lender in paragraphs 2), (3) and (7) of this Section 8.1(a) shall be deemed to include such limited partners (or members, as applicable).
(b) Any Leasehold Mortgage shall be subject to the provisions of this Lease and all rights of Lessor under this Lease. Notwithstanding any contrary provision of this Lease, in no event may any mortgage or other security instrument, including without limitation any Leasehold Mortgage, be recorded against Lessor's fee interest in the Land or reversionary interest in the Improvements without Lessor's prior written consent, which Lessor may grant or withhold in the exercise of Lessor's sole discretion.

Section 8.2 Cost of Approved Loans to be Paid by Lessee. Lessee affirms that it shall bear all of the costs and expenses in connection with (a) the preparation and securing of the Approved Loans, (b) the delivery of any instruments and documents and their filing and recording, if required, and (c) all taxes and charges payable in connection with the Approved Loans.

Section 8.3 Proceeds of Approved Loans. It is expressly understood and agreed that all Approved Loan proceeds shall be paid to and become the property of Lessee, and that Lessor shall have no right to receive any such Approved Loan proceeds.

Section 8.4 Notice and Right to Cure Defaults Under Approved Loans. Upon the recording of a memorandum of this Lease, Lessor may record in the Official Records of the County of San Mateo a request for notice of any default under each Approved Loan. In the event of default by Lessee under an Approved Loan, Lessee or Lessor shall have the right, but not the obligation, to cure the default in accordance with the Loan Documents. Any payments made by Lessor to cure a default shall be treated as Additional Rent due from Lessee hereunder, which shall be paid within thirty (30) days of the date on which the payment was made by Lessor.

Section 8.5 Rights of Investor. The Investor shall have the same notice and cure rights as any Lender for so long as it is a limited partner of Lessee.

ARTICLE 9.

REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 9.1 Representations, Warranties and Covenants of Lessor. As an inducement to Lessee to enter into and proceed under this Lease, Lessor warrants and represents to Lessee as follows, which warranties, representations and covenants are true and correct as of the date of this Lease, to the actual knowledge of Lessor:
(a) Lessor has the right, power and authority to enter into this Lease and to lease the Leased Premises to Lessee in accordance with the terms, provisions and conditions contained in this Lease, and no other party has any right or option to lease the Leased Premises;

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(b) Lessor has received no written notice and has no actual knowledge of any litigation or action, pending or threatened, materially and adversely affecting the Leased Premises;
(c) Lessor has received no written notice and has no actual knowledge of any pending or threatened Taking relating to all or any part of the Leased Premises; (d) the entry by Lessor into this Lease with Lessee and the performance of all of the terms, provisions and conditions contained herein will not, or with the giving of notice or the passage of time, or both, would not, violate or cause a breach or default under any other agreement relating to the Leased Premises to which Lessor is a party or by which it is bound; (e) except as disclosed to Lessee or as is apparent from Lessee's inspection, there is no tenant, lessee or other occupant of the Leased Premises having any right or claim to possession or use of the Leased Premises;
(f) there are no unpaid special assessments of which Lessor has received notice for sewer, sidewalk, water, paving, gas, electrical or utility improvements or other capital expenditures affecting the Leased Premises;
(g) Lessor has received no written notice and has no actual knowledge of any violations of any Legal Requirements affecting any portion of the Leased Premises that materially affect the development of the Improvements;
(h) Lessor makes no representation or warranty with respect to the condition of the Leased Premises or its fitness or availability for any particular use, and Lessor shall not be liable for any latent or patent defect therein.

Section 9.2 Representations, Warranties and Covenants of Lessee. As an inducement to Lessor to enter into and to proceed under this Lease, Lessee warrants and represents to Lessor as follows, which warranties, representations and covenants are true and correct as of the date of this Lease:
(a) Authority. Lessee has the right, power and authority to enter into this Lease and the right, power and authority to comply with the terms, obligations, provisions and conditions contained in this Lease;
(b) No Breach of Obligations. The entry by Lessee into this Lease and the performance of all of the terms, provisions and conditions contained herein will not, or with the giving of notice or the passage of time, or both, would not, violate or cause a breach or default under any other agreements to which Lessee is a party or by which it is bound; (c) Litigation. Lessee has received no written notice and has no actual knowledge of any litigation or action, pending or threatened, materially and adversely affecting Lessee’s ability to carry out its obligations hereunder; and (d) Bankruptcy. Lessee is not the subject of a pending or to its knowledge, threatened bankruptcy proceeding.

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Section 9.3 Hazardous Materials. Lessee (i) shall not cause or permit any Hazardous Materials to be placed, held, located or disposed of on, under or at the Leased Premises or any part thereof, except in commercially reasonable amounts used in the construction and operation of the Improvements and in accordance with Legal Requirements, or as may be authorized by an environmental agency of applicable jurisdiction (e.g., San Francisco Regional Water Quality Control Board), and (ii) shall not cause or permit any Hazardous Materials contamination of the Leased Premises or any part thereof, except as may be authorized by an environmental agency of applicable jurisdiction (e.g., San Francisco Regional Water Quality Control Board.) Lessee shall take commercially reasonable action to prevent the release of any Hazardous Materials into the environment from the Leased Premises. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Lessee shall install and utilize such equipment and implement and adhere to such procedures as are consistent with the standards generally applied by apartment complexes in the County of San Mateo, California, as respects the disclosure, storage, use, removal, and disposal of Hazardous Materials.

Notwithstanding the obligation of Lessee to indemnify Lessor, the City, and their respective officers, officials, members, employees, agents, and representatives pursuant to this section, and provided no Hazardous Materials came to be located on the Leased Premises during Lessor's ownership prior to the Effective Date or as a result of Lessor’s action, Lessee shall, at its sole cost and expense, promptly take (i) all actions required by any federal, state, regional, or local governmental agency or political subdivision or any Governmental Requirements and (ii) all actions necessary to make full economic use of the Leased Premises for the purposes contemplated by the Regulatory Agreement, the DDLA and this Lease, which requirements or necessity arise from the presence upon, about, or beneath the Leased Premises, of any Hazardous Materials. Such actions shall include, but not be limited to, the investigation of the environmental condition of the Leased Premises, the preparation of any feasibility studies or reports, and the performance of any cleanup, remedial, removal, or restoration work.

In the event of a release of any Hazardous Materials into the environment other than those authorized by an environmental agency of applicable jurisdiction, Lessee shall, as soon as possible after it becomes aware of the release, furnish to the Lessor a copy of any and all final reports relating thereto and copies of all correspondence with governmental agencies relating to the release. Upon request of the Lessor, Lessee shall furnish to the Lessor a copy or copies of any and all other environmental entitlements or inquiries relating to or affecting the Leased Premises including, but not limited to, all permit applications, permits, and reports, including, without limitation, those final reports and other matters which may be characterized as confidential, excepting those which are characterized as attorney work product or privileged.

Section 9.4 Hazardous Materials Indemnification. From and after the Commencement Date, Lessee hereby agrees to indemnify, protect, hold harmless and defend (by counsel reasonably satisfactory to Lessor) the Indemnitees from and against any and all Claims arising directly or indirectly, in whole or in part, out of (i) any activity by Lessee, its affiliates or its agents or contractors carried on or undertaken on or off the Leased Premises in connection with the handling, treatment, removal, storage, decontamination, cleanup, transport or disposal of any Hazardous Materials located or present in, on, under or about the Leased Premises; or (ii) the

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failure of Lessee to comply with any Environmental Laws relating to the handling, treatment, presence, removal, storage, decontamination, cleanup, transportation, or disposal of Hazardous Materials into, on, under or from the Leased Premises, except to the extent any such Claim arises from the active negligence or willful misconduct of the Indemnitees. Provided, under no condition shall Lessee have any obligation under this Section 9.4 for Claims arising from or related to negligent or intentional actions of the Lessor or the presences of Hazardous Materials first arising at the Premises during Lessor's ownership and prior to the Effective Date. The provisions of this Section shall survive the expiration or termination of this Lease.

Section 9.5 Prevailing Wage Requirements.
(a) To the extent applicable, the Lessee shall and shall cause its contractors and subcontractors to pay prevailing wages in the construction of the Improvements as those wages are determined pursuant to Labor Code Sections 1720 et seq., and the implementing regulations of the Department of Industrial Relations (the "DIR"), to employ apprentices as required by Labor Code Sections 1777.5 et seq., and the implementing regulations of the DIR and comply with the other applicable provisions of Labor Code Sections 1720 et seq., 1777.5 et seq., 1810-1815 and implementing regulations of the DIR. (b) All calls for bids, bidding materials and the construction contract documents for the construction of the Improvements must specify that:
(1) No contractor or subcontractor may be listed on a bid proposal nor be awarded a contract for the construction of the Improvements unless registered with the DIR pursuant to Labor Code Section 1725.5.
(2) The Development is subject to compliance monitoring and enforcement by the DIR.
(c) The Lessee, as the "awarding body", shall register the construction of the Improvements as required by Labor Code Section 1773.3 as set forth in the DIR's online form PWC-100 within two (2) days after entering into the construction contract and provide evidence of such registration to the Lessor within two (2) days of such registration and any additional registration reporting to the DIR.
(d) In accordance with Labor Code Sections 1725.5 and 1771.1, The Lessee shall require that its contractors and subcontractors be registered with the DIR, and maintain such registration as required by the DIR.
(e) Pursuant to Labor Code Section 1771.4, the construction of the Improvements is subject to compliance monitoring and enforcement by the DIR. The Lessee shall and shall require its contractors and subcontractors to submit payroll and other records electronically to the DIR pursuant to Labor Code Sections 1771.4 and 1776 et seq., or in such other format as required by the DIR.
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as required by Labor Code Section 1777.5 et seq., and shall, from time to time upon the request of the Lessor provide to the Lessor such records and other documentation reasonably requested by the Lessor.
(g) The Lessee shall and shall cause its respective contractors and subcontractors to comply with all other applicable provisions of Labor Code, including without limitation, Labor Code Sections 1720 et seq., 1725.5, 1771, 1771.1, 1771.4, 1776, 1777.5 et seq., 1810-1815 and implementing regulations of the DIR in connection with construction of the Improvements or any other work undertaken or in connection with the Land or the Leased Premises.
(h) Copies of the currently applicable current per diem prevailing wages are available from the DIR website, www.dir.ca.gov. The Lessee shall cause its respective contractors to post the applicable prevailing rates of per diem wages at the Development site and to post job site notices, in compliance with Title 8 California Code of Regulations 16451(d) or as otherwise as required by the DIR.

Section 9.6 Compliance with Laws. Lessee shall carry out and shall cause its contractors and subcontractors to carry out the construction of the Project, and shall operate the Project in conformity with all applicable federal, state and local laws, rules, ordinances and regulations ("Applicable Laws"), including without limitation, all applicable federal and state labor laws and standards, the City's zoning and development standards, building, plumbing, mechanical and electrical codes, all other provisions of the City's Municipal Code, and all applicable disabled and handicapped access requirements. To the greatest extent allowed by law, Lessee shall indemnify, defend (with counsel approved by Lessor) and hold harmless the Indemnitees from and against any and all Claims arising in connection with the breach of Lessee's obligations set forth in this Section whether or not any insurance policies shall have been determined to be applicable to any such Claims. This Section shall survive the expiration or termination of this Lease.

Section 9.7 Affordability and Use Restrictions. Lessee hereby covenants and agrees that the Leased Premises shall be used solely for the operation of a multifamily rental housing development in compliance with the requirements set forth in that certain DDLA, Regulatory Agreement and Notice of Affordability Restrictions recorded against the Lessee’s Estate.

Section 9.8 Non-Discrimination; Compliance with Fair Housing Laws. Lessee shall not restrict the rental, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Leased Premises, or any portion thereof, on the basis of race, color, religion, creed, sex, sexual orientation, disability, marital status, ancestry, or national origin of any person. Lessee covenants for itself and all persons claiming under or through it, and this Lease is made and accepted upon and subject to the condition that there shall be no discrimination against or segregation of any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Leased Premises or part thereof, nor shall Lessee or any person claiming under or through Lessee establish or permit any such practice or practices of discrimination or

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segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in, of, or for the Leased Premises or part thereof.

Lessee shall include such provision in all leases and rental agreements affecting the Leased Premises or part thereof, and shall enforce the same diligently and in good faith.

Section 9.9 Fair Housing. Lessee shall comply with state and federal fair housing laws in the marketing and rental of the units in the Project. Lessee shall accept as tenants, on the same basis as all other prospective tenants, persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing Section 8 program or any successor thereto.

Section 9.10 Management Entity. Lessor approves MidPen Property Management Corporation as the initial property manager. In recognition of Lessor's significant financial contribution to the Project, Lessor shall have the right to review and approve any replacement of the management entity proposed by Lessee for the Project, and shall have the right to review and approve any agreement executed between Lessee and the management entity, which approval of agreement shall not be unreasonably withheld. The contracting of management services to a management entity shall not relieve Lessee of its primary responsibility for proper performance of management duties. Upon Lessor determination and delivery of written notice to Lessee that Lessee has failed to operate the Project in accordance with this Lease, Lessor may, subject to any applicable cure period, require Lessee to contract with a qualified management agent selected by Lessor subject to approval of the Investor and Lenders, if required, to operate the Project, or to make such other arrangements as Lessor deems necessary to ensure performance of the required functions.

Section 9.11 Subleases. All subleases made by Lessee to residents of the individual residential units in the Project (“Resident Subleases”) shall be in compliance with the applicable regulations of the California Tax Credit Allocation Committee and the applicable requirements of the Tax Credit Regulatory Agreement, and shall be subject to the following provisions and restrictions: Each Resident Sublease shall contain a provision, satisfactory to Lessor, requiring the Subtenant to attorn to Lessor upon (a) an Event of Default by Lessee under this Lease, and (b) receipt by such Subtenant of written notice of such Event of Default and instructions to make such Subtenant’s rental payments to Lessor. On any termination of this Lease prior to the expiration of the Term, all of Lessee’s interest as sublessor under any and all existing valid and enforceable Resident Subleases for which Lessor has issued a non-disturbance agreement shall be deemed automatically assigned, transferred, and conveyed to Lessor and subtenants under such Resident Subleases shall be deemed to have attorned to Lessor. Lessor shall thereafter be bound on such Resident Subleases to the same extent Lessee, as sublessor, was bound thereunder and Lessor shall have all the rights under such Resident Subleases that Lessee, as sublessor, had under such Resident Subleases; provided, however, that any amendments to any such Resident Sublease made after the issuance of a non-disturbance agreement to a subtenant shall not be binding on Lessor. Each Resident Sublease shall expressly provide that it is subject to each and all of the covenants, conditions, restrictions, and provisions of this Lease.

ARTICLE 10.

EMINENT DOMAIN

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Section 10.1 Termination of Lease. Lessor and Lessee agree that, in the event of a Taking such that Lessee reasonably determines that the Leased Premises cannot continue to be operated, at reasonable cost, for its then-current use, then, subject to the rights of Lenders, this Lease shall, at Lessee's sole option, terminate as of the date of the Taking.

Section 10.2 Continuation of Lease and Presumption of Restoration. Lessor and Lessee agree that, in the event of a Taking that does not result in the termination of this Lease pursuant to Section 10.1 above, this Lease shall continue in effect as to the remainder of the Leased Premises, and the Net Condemnation Award will be disbursed in accordance with Section 10.4 below to Lessor and Lessee and/or any Lender, if the terms of the applicable Leasehold Mortgage so require, and shall be used so as to make the same a complete, unified and efficient operating unit as nearly as reasonably possible to the condition existing prior to the Taking, subject to any applicable requirements of the Lender.

Section 10.3 Temporary Taking. If there shall be a temporary Taking with respect to all or any part of the Leased Premises or of Lessee's interest in this Lease, then the Term shall not be reduced and Lessee shall continue to pay in full all Rents, Impositions and other charges required herein, without reduction or abatement thereof at the times herein specified; provided, however, that Lessee shall not be required to perform such obligations that Lessee is prevented from performing by reason of such temporary Taking.

Section 10.4 Apportionment of Award. If there is a Taking, whether whole or partial, Lessor and Lessee shall be entitled to receive and retain such separate awards and portions of lump sum awards as may be allocated to their respective interests in any condemnation proceedings, or as may be otherwise agreed, taking into consideration Lessor's fee interest in the Land (as encumbered by this Lease) and reversionary interest in the Improvements upon the expiration of the Term or termination of this Lease. If the Leased Premises are restored as in contemplated in Section 10.2 above, Lessee shall be entitled to recover the costs and expenses reasonably incurred in such restoration out of any Net Condemnation Award payable to Lessee.

Thereafter, if the condemning authority does not make separate awards, the Parties agree that any Net Condemnation Award will be allocated as follows on a proportionate basis reflecting the Parties' respective interests in the Land and Improvements and the remaining duration of the Term as follows:
(A) Award on Total or Substantial Taking. In the event of a total or substantial taking, the award shall be apportioned as follows, in the following order:
(a) To the Lenders in an amount equal to the amounts owing on the Leasehold Mortgages.
(b) To Lessor that portion of the award equal to the fair market value of the Land. Any "bonus value" attributable to this Lease shall be paid to Lessor. (c) To Lessee, that portion of the award equal to the fair market value of the Improvements (subject to Lessor's reversionary interest), less the amount paid to the Lenders pursuant to (a) above.

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(d) The balance, if any, shall be allocated between Lessor and Lessee respectively in that proportion in which (i) the fair market value of the Land bears to (ii) the fair market value of the Improvements, exclusive of Lessor's reversionary interest. (B) Award on Partial Taking. In the event of a partial taking, after application of the Award for restoration, any remaining portion of such award shall be apportioned as follows, in the following order:
(a) To the Lenders in an amount equal to the amounts owing on the Leasehold Mortgages.
(b) To Lessor, that portion of the award attributable to the fair market value of the portion of the Land taken.
(c) To Lessee, that portion of the award equal to the fair market value of the portion of the Improvements taken (subject to Lessor's reversionary interest), less the amount paid to the Lenders pursuant to (a) above, but only to the extent that the proceeds of the award are not used for restoration of the Improvements. (d) The balance, if any, shall be allocated between Lessor and Lessee respectively in that proportion in which (i) the fair market value of the Land bears to (ii) the fair market value of the Improvements exclusive of the reversionary interest of Lessor. Any "bonus value" attributable to this Lease shall be paid to Lessor. (e) Any severance damages awarded or payable because only a portion of the Land and Improvements are taken by eminent domain shall be (a) paid to Lessee during the first

27.5 years of this Lease and (b) equally divided between Lessee and Lessor during the next 27.5 years of this Lease (except to the extent needed to replace any Improvements taken by eminent domain with equivalent Improvements on the remainder of the Land).

Section 10.5 Joinder. If a Leasehold Mortgage exists, the Lenders, to the extent permitted by law, shall be made a party to any Taking proceeding.

Section 10.6 City Reservation of Rights. Notwithstanding any provisions in this Lease to the contrary, nothing herein does or shall be construed to limit or require the City to exercise its ability to condemn any property, including the Leased Premises, in accordance with applicable law. Nothing in this Lease does or shall be construed as requiring the City to pay to Lessee, any Lender, or any other third party with an interest in the Leased Premises, any amount of money, as compensation for alleged condemnation or otherwise, if City (or its successor) seeks to enforce any of the rights and obligations under this Lease and the DDLA and any executed attachments thereto. Except when City exercises its ability to condemn the Leased Premises by adoption of a resolution of necessity and pursuant to other provisions of applicable law, City shall not be a construed as pursuing or effectuating a Taking or acting as a "condemning authority" under this Lease.

ARTICLE 11.

DAMAGE OR DESTRUCTION

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Section 11.1 Damage or Destruction to Leased Premises. Lessee shall give prompt written notice to Lessor after the occurrence of any fire, earthquake, act of God or other casualty to or in connection with the Leased Premises, the Improvements or any portion thereof (hereinafter sometimes referred to as "Casualty"). Subject to Section 11.2 below, if during the Term the Improvements shall be damaged or destroyed by Casualty, Lessee shall repair or restore the Improvements, so long as Lessee and Lessor determine, that it is feasible to do so and in such event Lessee provides or causes to be provided sufficient additional funds which, when added to such insurance proceeds, will fully effect such repair or restoration. Upon the occurrence of any such Casualty, Lessee, promptly and with all due diligence, shall apply for and collect all applicable insurance proceeds recoverable with respect to such Casualty, for the benefit of the Lenders. In the event that Lessee and Lessor shall determine, subject to the rights of the Lenders, by notice to Lessor given within thirty (30) days after receipt by Lessee of any such insurance proceeds, that it is not economically practical to restore the Improvements and/or the Leased Premises to substantially the same condition in which they existed prior to the occurrence of such Casualty, then Lessee may terminate this Lease as of a date that is not fewer than thirty (30) days after the date of such notice. If Lessee terminates this Lease pursuant to this Section 11.1, Lessee shall surrender possession of the Leased Premises to Lessor immediately and assign to Lessor (or, if same has already been received by Lessee, pay to Lessor) all of its right, title and interest in and to the proceeds from Lessee's insurance upon the Leased Premises, subject to the prior rights of any Lender therein, as referenced in Section 11.3 below.

Section 11.2 Damage or Destruction Near End of Term. If, during the last seven (7) years of the Term, the Improvements shall be damaged by Casualty, then Lessee shall have the option, to be exercised within one hundred twenty (120) days after such Casualty:
(a) to repair or restore the Improvements as hereinabove provided in this Article 11; or
(b) subject to the rights of Lenders, to terminate this Lease by notice to Lessor, which termination shall be deemed to be effective as of the date of Casualty. If Lessee terminates this Lease pursuant to this Section 11.2, Lessee shall surrender possession of the Leased Premises to Lessor immediately and assign to Lessor (or, if same has already been received by Lessee, pay to Lessor) all of its right, title and interest in and to the proceeds from Lessee's insurance upon the Leased Premises, subject to the prior rights of any Lender therein, as referenced in Section 11.3 below.

Section 11.3 Distribution of Insurance Proceeds. In the event that this Lease is terminated pursuant to Sections 11.1 or 11.2 hereof, the insurance proceeds received as the result of such Casualty shall be distributed as follows: (a) first, if Leasehold Mortgage(s) are in place, to the Lenders to the extent of any indebtedness then owed to such Lender in order of the Lien priority of the Leasehold Mortgages; (b) second, the balance, if any, of such insurance proceeds shall be paid to Lessee or, as applicable pursuant to Sections 11.1 and 11.2 above, assigned or paid over to Lessor.

Section 11.4 Insurance Requirements. Nothing in this Article 11 does or shall be construed as permitting Lessee to maintain less than the minimum insurance requirements set forth in this Lease.

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ARTICLE 12.

EVENTS OF DEFAULT
Section 12.1 Events of Default. Each of the following shall be an "Event of Default" by Lessee hereunder:
(a) failure by Lessee to pay any Rent or Additional Rent when due if such failure shall continue for a period of thirty (30) days after notice thereof has been given by Lessor to Lessee;
(b) Lessee's default in the performance of any term, provision or covenant under this Lease (other than an obligation enumerated in this Section 12.1), and unless such provision specifies a shorter cure period for such default, the continuation of such default for thirty (30) days in the event of a monetary default or sixty (60) days in the event of a nonmonetary default following the date upon which Lessor shall have given written notice of the default to Lessee, or if the non-monetary default cannot be cured within sixty (60) days, Lessee shall not be in breach so long as Lessee is diligently undertaking to cure such breach and such breach is cured within one hundred twenty (120) days;
(c) Lessee's failure to maintain insurance on the Leased Premises and the Improvements as required hereunder, and the failure of Lessee to cure such default within thirty (30) days;
(d) Subject to Lessee's right to contest the following charges, Lessee's failure to pay taxes or assessments due on the Leased Premises or the Improvements or failure to pay any other charge that may result in a lien on the Leased Premises or the Improvements, and Lessee's failure to cure such default within thirty (30) days of delinquency; (e) Lessee abandons, vacates, or otherwise surrenders the Leased Premises or the Improvements, or is dispossessed (other than dispossession as the result of a Taking subject to Section 10 hereof by process of law or otherwise);
(f) A Transfer occurs, either voluntarily or involuntarily, in violation of this Lease;
(g) The subjection of any right or interest of Lessee in this Lease to attachment, execution, or other levy, or to seizure under legal process, if not released within sixty (60) days;
(h) Lessee shall have voluntarily or involuntarily suspended its business for a period in excess of thirty (30) days for reasons other than Force Majeure, or Lessee shall have been dissolved or terminated;
(i) The appointment of a receiver, to take possession of Lessee's Estate or of Lessee's operations on the Leased Premises for any reason, if such receivership is not terminated, dismissed or vacated within ninety (90) days after the appointment of the receiver;

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(j) Pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors ("Bankruptcy Law"), Lessee or any general partner thereof (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against Lessee or any general partner thereof in an involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for Lessee or any general partner thereof or for the Leased Premises; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due;
(k) The filing against Lessee of any involuntary proceedings under such Bankruptcy Code or similar law, if such proceedings have not been vacated or stayed within ninety (90) days of filing;
(l) The appointment of a trustee or receiver for Lessee or for all or the major part of Lessee's property or the Leased Premises, in any involuntary proceeding, or the taking of jurisdiction by any court over all or the major part of Lessee's property or the Leased Premises in any involuntary proceeding for the reorganization, dissolution, liquidation or winding up of Lessee, if such trustee or receiver shall not be discharged or such jurisdiction relinquished or vacated or stayed on appeal or otherwise stayed within ninety (90) days; (m) Any of Lessee's representations or warranties contained in this Lease or in any financial statement, certificate or report submitted to Lessor in connection with this Lease proves to have been incorrect in any material and adverse respect when made and continues to be materially adverse to Lessor.

Section 12.2 Rights and Remedies.
(a) At any time after the occurrence of an Event of Default hereunder, subject in all respects to the provisions of this Lease with respect to Lessor's rights to cure defaults by Lessee and with respect to the rights of any Lenders, Lessor may, in addition to any other rights and remedies available at law or in equity, terminate this Lease by giving Lessee written notice thereof (with a copy of such notice to the Lenders), setting forth in such notice an effective date for termination which is not less than thirty (30) days after the date of such notice, in which event this Lease and Lessee's Estate created hereby and all interest of Lessee and all parties claiming by, through or under Lessee shall automatically terminate upon the effective date for termination as set forth in such notice, with the same force and effect and to the same extent as if the effective date of such notice had been the date originally fixed in Article 2 hereof for the expiration of the Term. In such event, Lessor, its agents or representatives, shall have the right, without further demand or notice, to re-enter and take possession of the Leased Premises (including all buildings and other Improvements comprising any part thereof) at any time from and after the effective termination date without being deemed guilty of any manner of trespass and without prejudice to any remedies for arrears of Rent or existing breaches of covenants; provided that Lessor shall not be entitled to disturb possession of any Tenants or others in

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possession pursuant to Resident Subleases with Lessee so long as such Tenant or others are not in default thereunder and attorn to Lessor as their lessor. (b) Upon the exercise of Lessor's remedies pursuant to this Section 12.2, Lessee shall execute such releases, deeds and other instruments in recordable form as Lessor shall reasonably request in order to accurately set forth of record the then current status of Lessee's Estate and Lessee's rights hereunder.
(c) If Lessee shall have failed to cure a default by Lessee after expiration of the applicable time for cure of a particular default, Lessor, at its election, but without obligation therefor (i) may seek specific performance of any obligation of Lessee, after which Lessor shall retain, and may exercise and enforce, any and all rights that Lessor may have against Lessee as a result of such default, (ii) from time to time without releasing Lessee in whole or in part from the obligations to be performed by Lessee hereunder, may cure the default at Lessee's cost, (iii) may terminate this Lease, (iv) subject to the rights of Lenders, may have a receiver appointed to take possession of Lessee's interest in the Leasehold Estate with power in the receiver (a) to administer Lessee's interest in the Leasehold Estate, (b) to collect all funds available in connection with the operation of the Project, and (c) to perform all other acts consistent with Lessee's obligations under this Lease, as the court deems proper, and/or (v) may exercise any other remedy given hereunder or now or hereafter existing at law or in equity. Any reasonable cost incurred by Lessor in order to cure such a default by Lessee shall be due immediately from Lessee, together with interest, and may be offset against any amounts due from Lessor to Lessee. (d) Remedies Cumulative. No remedy provided in this Section shall be considered exclusive of any other remedy, but the same shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute, and every power and remedy given by this Lease may be exercised from time to time and as often as occasion may arise or as may be deemed expedient. (e) No Election of Remedies. The rights given in this Section to receive, collect or sue for any rent or rents, moneys or payments, or to enforce the terms, provisions and conditions of this Lease, or to prevent the breach or nonobservance thereof, or the exercise of any such right or of any other right or remedy hereunder or otherwise granted or arising, shall not in any way affect or impair or toll the right or power of Lessor upon the conditions and subject to the provisions in this Lease to terminate Lessee's right of possession because of any default in or breach of any of the covenants, provisions or conditions of this Lease beyond the applicable cure period.
(f) Survival of Obligations. Nothing herein shall be deemed to affect the right of Lessor to indemnification for liability arising prior to the termination of the Lease for personal injuries or property damage or in connection with any other Claim, nor shall anything herein be deemed to affect the right of Lessor to equitable relief where such relief is appropriate.

No expiration or termination of this Lease by operation of law or otherwise, and no repossession of the Leased Premises or any part thereof, shall relieve Lessee of any of its obligations to indemnify and defend the Indemnitees pursuant to the provisions of this Lease, and all such provisions, and all of Lessee's accrued liabilities and obligations hereunder, shall survive such expiration, termination or repossession.

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(g) (g) No Waiver. No waiver by Lessor of any breach by Lessee of any of its obligations, agreements or covenants hereunder shall be deemed to be a waiver of any subsequent breach of the same or any other covenant, agreement or obligation, nor shall any forbearance by Lessor to seek a remedy for any breach by Lessee be deemed a waiver by Lessor of its rights or remedies with respect to such breach.

Section 12.3 Default by Lessor.
(a) Events of Default. Lessor shall be in default of this Lease if it fails to perform any provision of this Lease that is obligated to perform or if any Lessor's representations or warranties is untrue or becomes untrue in any material respect, and if the failure to perform or the failure of such representation or warranty is not cured within sixty (60) days after written notice of the default has been given to Lessor. If the default cannot reasonably be cured within sixty (60) days, Lessor shall not be in default of this Lease if Lessor commences to cure the default within one hundred twenty (120) days and diligently and in good faith continues to cure the default until completion.
(b) Right to Cure; Lessee's Remedies. If Lessor shall have failed to cure a default by Lessor after expiration of the applicable time for cure of a particular default, Lessee, at its election, but without obligation therefor (i) may seek specific performance of any obligation of Lessor, after which Lessee shall retain, and may exercise and enforce, any and all rights that Lessee may have against Lessor as a result of such default, (ii) from time to time without releasing Lessor in whole or in part from the obligation to be performed by Lessor hereunder, may cure the default at Lessor's cost provided that Lessor has been given thirty (30) days advance written notice of Lessee's election to do so and Lessor has not within such time notified Lessee that Lessor will cure the default, and/or (iii) may terminate this Lease.

Section 12.4 Notices. Notices given by Lessor under Section 12.1 or by Lessee under Section 12.4 shall specify the alleged default and the applicable Lease provisions, and shall demand that Lessee or Lessor, as applicable, perform the appropriate provisions of this Lease within the applicable period of time for cure. No such notice shall be deemed a forfeiture or termination of this Lease unless expressly set forth in such notice.

ARTICLE 13.

QUIET ENJOYMENT AND POSSESSION; INSPECTIONS
Section 13.1 Quiet Enjoyment. Lessor covenants and warrants that Lessee, upon payment of all sums herein provided and upon performance and observance of all its covenants herein contained, shall peaceably and quietly have, hold, occupy, use and enjoy, and shall have the full, exclusive and unrestricted use and enjoyment of, all of the Leased Premises during the Term, subject only to the provisions of this Lease and all applicable Legal Requirements.

Section 13.2 Lessor's Right of Inspection. Notwithstanding Section 13.1 above, Lessor, in person or through its agents, upon reasonable prior notice to Lessee, shall have the right, subject to the rights of Tenants, to enter upon the Leased Premises for purpose of reasonable inspections performed during reasonable business hours in order to assure compliance by Lessee

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with its obligations under this Lease, except in the event of an emergency or health and safety related matter, in which case no prior notice is required.

ARTICLE 14.

VACATION OF LEASED PREMISES
Section 14.1 Vacation Upon Termination. Lessee covenants that upon any termination of this Lease, whether by lapse of time or because of any of the conditions or provisions contained herein, Lessee will peaceably and quietly yield and surrender possession of the Leased Premises to Lessor. The foregoing, however, will be subject to the rights of Tenants or others in possession pursuant to Resident Subleases with Lessee, provided that such Tenants are not in default thereunder and attorn to Lessor as their lessor. An action of forcible detainer shall lie if Lessee holds over after a demand for possession is made by Lessor.

ARTICLE 15.

NON-MERGER
Section 15.1 Non-Merger. Except upon expiration of the Term or upon termination of this Lease, there shall be no merger of either this Lease or Lessee's Estate created hereunder with Lessor's fee interest in the Land or Lessee's fee interest in the Improvements by reason of the fact that the same person may acquire, own or hold, directly or indirectly, (a) this Lease, Lessee's Estate created hereunder or any interest in this Lease or the Improvements, and (b) a fee interest in the Land or the Improvements, unless and until the City and all persons, including any assignee of Lessor, having an interest in (i) this Lease or Lessee's Estate created hereunder, and (ii) the fee estate in the Leased Premises or any part thereof, shall join in a written instrument effecting such merger and shall duly record the same.

ARTICLE 16.

TRANSFERS
Section 16.1 Permitted Transfer by Lessee.
(a) Except as provided in this Article 16, Lessee shall have no right to Transfer, assign or sublease any legal or beneficial interest in Lessee's Estate hereunder without Lessor's prior written consent which shall not be unreasonably withheld. Notwithstanding the foregoing, by its execution of this Lease, Lessor is deemed to have consented to the following ("Permitted Transfers"):
(1) Approved Loans and Leasehold Mortgages;
(2) a conveyance of the leasehold interest in the Lessee's Estate resulting from the foreclosure of a Leasehold Mortgage (or an assignment, new lease or deed-inlieu of such a foreclosure) to a Lender;

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(3) any transfer of partnership interests in the Lessee that does not change management or operational control of Lessee or the Project other than to permit the admittance of an affiliate of MidPen Housing Corporation, a California nonprofit public benefit corporation ("MidPen"), or East Palo Alto Community Alliance and Neighborhood Development Organization, Inc., a California nonprofit public benefit corporation ("EPACANDO"), as the managing general partner of Lessee;
(4) the lease of the residential units consistent with the Tax Credit Restrictive Covenant and the Regulatory Agreement;
(5) the transfer of limited partnership interests in Lessee; and (6) in the event that any general partner of Lessee is removed by the Investor for cause following default under Lessee's partnership agreement, the transfer of the general partner interest to an affiliate of the Investor or to a 501(c)(3) tax-exempt nonprofit corporation selected by the Investor and approved by Lessor, in its reasonable discretion, provided that the successor nonprofit corporation has the same or substantially similar experience, assets and access to capital and private funding as Developer (as defined in the DDLA) did as of the Commencement Date; and
(7) a transfer of the Leased Premises or partnership interest from the Lessee to a limited liability company or limited partnership, the managing member or partner of which is MidPen, EPACANDO, or a nonprofit public benefit corporation controlled by MidPen, EPACANDO, or any combination thereof.
(b) Upon the granting of any consent (deemed or otherwise) by Lessor with respect to a Transfer by Lessee, this Lease shall be binding upon and shall inure to the benefit of Lessor and Lessee and their respective heirs, successors, assigns, legal representatives, Lenders, Tenants and other transferees.

ARTICLE 17.

MISCELLANEOUS PROVISIONS
Section 17.1 Consents. Lessor agrees not to unreasonably withhold or delay its consent to matters requiring Lessor's consent hereunder unless the applicable provision of this Lease permits Lessor to exercise Lessor's sole discretion with respect to a particular matter.

Section 17.2 Enforced Delay; Extension of Times of Performance.Time is of the essence in the performance of each of the Parties' respective obligations set forth in this Lease.

Except as expressly set forth in this Section 17.2, performance by any Party hereunder shall not be deemed to be in default and such Party shall be entitled to an extension of time to perform its obligations hereunder where delays in performance are due to causes beyond the reasonable control and without the fault of such Party, including as applicable: war; acts of terrorism, insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God, acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; governmental restrictions or priority; litigation (including suits filed by third parties concerning or arising out of this Agreement), unusually severe weather; inability to secure necessary labor, materials or tools;

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acts of the other Parties; acts or the failure to act of any public or governmental agency or entity (except that acts or the failure to act of the City shall not excuse performance of the City); or other causes beyond the control or without the fault of the Party claiming an extension of time to perform ("Force Majeure"). An extension of time for any cause permitted under this Section

17.2 shall be limited to the period of the enforced delay, which period shall commence to run from the time of the commencement of the cause, if notice by the Party claiming such extension is sent to the other Party within fifteen (15) days of knowledge of the commencement of the cause. If no written notice is sent within fifteen (15) days, for purposes of measuring the extension period for performance of the obligation in question, the period of the enforced delay shall commence to run from the date written notice is sent to the other Party. Times of performance under this Lease may be extended by mutual written agreement of the Parties.

Section 17.3 Interpretation.The terms of this Lease shall be construed in accordance with the meaning of the language used and shall not be construed for or against any Party by reason of the authorship of this Lease or any other rule of construction which might otherwise apply. The Section headings are for purposes of convenience only, and shall not be construed to limit or extend the meaning of this Lease.

Section 17.4 Entire Agreement: Modifications.This Lease supersedes all prior discussions and agreements between the Parties with respect to the leasing of the Leased Premises. This Lease and the DDLA and executed attachments thereto contain the sole and entire understanding between the parties with respect to the leasing of the Leased Premises. This Lease shall not be modified or amended in any respect, except by written instrument specifically referencing such modification or amendment which is executed by or on behalf of the Parties in the same manner as this Lease is executed and, to which each Lender has consented in writing (if required by the applicable Loan Documents).

Section 17.5 Governing Law. This Lease, and the rights and obligations of the Parties hereunder, shall be governed by and construed in accordance with the substantive laws of the State of California without regard to conflict of law principles. Venue for any dispute hereunder shall be in the County of San Mateo, California.

Section 17.6 Binding Effect. This Lease shall inure to the benefit of and be binding upon the Parties hereto, their successors, administrators, executors and permitted assigns.

Section 17.7 Severability. In the event any provision or portion of this Lease is held by any court of competent jurisdiction to be invalid or unenforceable, such holdings shall not affect the remainder hereof, and the remaining provisions shall continue in full force and effect to the same extent as would have been the case had such invalid or unenforceable provision or portion never been a part hereof, except to the extent the rights and obligations of the parties have been materially altered by such unenforceability.

Section 17.8 Further Assurances. From and after the date of this Lease, Lessor and Lessee, at the request of the other Party, shall make, execute and deliver or obtain and deliver all such affidavits, deeds, certificates, resolutions and other instruments and documents, and shall do or cause to be done all such other things that either Party may reasonably require in order to effectuate the provisions and the intention of this Lease.

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Section 17.9 Authority to Execute Agreement. Each Party represents and warrants to the other Party that by proper action the persons executing this Lease on behalf of such Party have been duly authorized to execute and deliver this Lease.

Section 17.10 Lease Administration and Approvals. The City Manager of the City of East Palo Alto, or his or her designee, shall be the person designated by Lessor to administer this Lease on behalf of Lessor. The City Manager of the City of East Palo Alto shall have the authority to consent to any matter requiring Lessor approval or consent as provided in this Lease, and to perform and carry out any activities concerning this Lease, including but not limited to, the execution of any additional agreements, addenda or amendments so long as such actions do not substantially affect the rights and obligations of Lessor as specified herein.

Section 17.11 Captions. All captions, headings, paragraphs, subparagraphs, letters and other reference captions are solely for the purpose of facilitating convenient reference to this Lease, shall not supplement, limit or otherwise vary the text of this Lease in any respect, and shall be wholly disregarded when interpreting the meaning of any terms or provisions hereof.

All references to particular articles, sections, subsections, paragraphs and subparagraphs by number refer to the text of such items as so numbered in this Lease.

Section 17.12 Gender. Words of any gender used in this Lease shall be held and construed to include any other gender, and words of a singular number shall be held to include the plural, and vice-versa, unless the context requires otherwise.

Section 17.13 Exhibits. Each and every exhibit referred to or otherwise mentioned in this Lease is attached to this Lease and is and shall be construed to be made a part of this Lease by such reference or other mention at each point at which such reference or other mention occurs, in the same manner and with the same effect as if each exhibit were set forth in full at length every time it is referred to and otherwise mentioned.

Section 17.14 References. All references to paragraphs or subparagraphs shall be deemed to refer to the appropriate paragraph or subparagraph of this Lease. Unless otherwise specified in this Lease, the terms "herein," "hereof," "hereinafter," "hereunder" and other terms of like similar import, shall be deemed to refer to this Lease as a whole, and not to any particular paragraph or subparagraph hereof.

Section 17.15 Cumulative. Except as expressly limited by the terms of this Lease, all rights, powers and privileges conferred hereunder shall be cumulative and not restrictive of those provided at law or in equity.

Section 17.16 Notices. All notices, requests, demands, or other communications required or permitted to be given hereunder shall be in writing and shall be addressed and delivered by certified mail, return receipt requested; by reputable commercial delivery service; or by hand delivery by a reputable courier, to each Party at the addresses set forth below. Any such notice, request, demand or other communication shall be considered given or delivered, as the case may be, on the date shown on the delivery receipt as the date of delivery, the date delivery was refused or the date the item was returned as undeliverable. By giving prior written notice thereof, any Party, from time to time, may change its address for notices under this Lease.

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To Lessor: City of East Palo Alto
2415 University Avenue
East Palo Alto, CA 94303
Attn: City Manager
With copies to:

City of East Palo Alto
1960 Tate Street
East Palo Alto, CA 94303
Attn: Community & Economic Development Director
and
Goldfarb & Lipman LLP
1300 Clay Street, 11th Floor
Oakland, CA 94612
Attention: Karen Tiedemann

To Lessee: MP 965 Weeks Street Associates, L.P.
c/o MidPen Housing Corporation, Inc.
303 Vintage Park Drive, Suite 250
Foster City, CA 94404
Attention: Chief Real Estate Development Officer
and
c/o East Palo Alto Community Alliance and Neighborhood
Development Organization
2369 University Avenue
East Palo Alto, California 94303
Attn: Executive Director
With copies to:

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Section 17.17 Counterparts. This Lease may be executed in several counterparts, each of which shall be deemed an original, and all such counterparts together shall constitute one and the same agreement.

Section 17.18 Time of Essence. Time is and shall be of the essence in this Lease.

Section 17.19 No Third Party Beneficiaries. Except as expressly set forth herein, nothing contained in this Lease is intended to or shall be deemed to confer upon any person, other than the Parties and their respective successors and assigns, any rights or remedies hereunder.

Section 17.20 Parties Not Co-Venturers; Independent Contractor; No Agency Relationship. Nothing in this Lease is intended to or shall establish the Parties as partners, coventurers, or principal and agent with one another. The relationship of Lessee and Lessor is and shall remain solely that of a tenant and landlord, and shall not be construed as a joint venture, equity venture, partnership or any other relationship. Lessor neither undertakes nor assumes any responsibility or duty to Lessee (except as expressly provided in this Lease) or to any third party with respect to the Project.

Section 17.21 No Personal Liability. Notwithstanding anything contained in this Lease to the contrary, the obligations of Lessor under this Lease (including any actual or alleged breach or default by Lessor) do not constitute personal obligations of the individual officers or employees of Lessor, and Lessee shall not seek recourse against the individual officers or employees of Landlord, or against any of their personal assets for satisfaction of any liability with respect to this Lease.

SIGNATURES ON FOLLOWING PAGE

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IN WITNESS WHEREOF, this Lease is made and entered into in multiple original counterparts on the day and year first above written.

LESSOR:

CITY OF EAST PALO ALTO, a California municipal
corporation
By:

Melvin E. Gaines, City Manager
Attest:
_______________________
City Clerk
Approved as to Form:

By: ______________________
John D. Lê, City Attorney
LESSEE:

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By: East Palo Alto Community Alliance and
Neighborhood Development Organization,
a California nonprofit public benefit
corporation, its member
By: ____________________________
Name: __________________________
Its: _____________________________

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EXHIBIT A
Legal Description of Leased Premises

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EXHIBIT B
Site Plan of Leased Premises
(Attached)

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EXHIBIT C
Form of Memorandum of Lease

RECORDING REQUESTED BY AND WHEN
RECORDED RETURN TO:

WHEN RECORDED RETURN TO:
____________________
____________________
____________________
____________________
Attention: ___________
_____________________________________________________________________________ (SPACE ABOVE THIS LINE FOR RECORDER'S USE)
Tax not shown: R&T code 11932 – See attached Declaration

MEMORANDUM OF GROUND LEASE
(965 Weeks Street Project)
THIS MEMORANDUM OF GROUND LEASE (the "Memorandum") is entered into as of __________________, 20__, by and between the City of East Palo Alto, a California municipal corporation (the "Lessor") and ______________________, L.P., a California limited partnership (the "Lessee"), with respect to that certain Ground Lease dated _____________, 20__ (the "Lease"), between the Lessor and the Lessee. All capitalized terms used in this Memorandum and not defined shall have the meaning set forth in the Lease.

1. Documentary Transfer Tax is not shown pursuant to Revenue and Taxation Code Section 11932. See that certain Statement of Documentary Transfer Tax Due, which shall be affixed to this Memorandum in the Official Records of the County of San Mateo after record of this Memorandum is made and before the original is returned as specified in Government Code Section 27321.

2. Pursuant to the Lease, Lessor leases to Lessee and Lessee leases from Lessor that certain real property, more particularly described in Exhibit A, attached hereto and incorporated herein (the "Leased Premises"). The Lease shall commence on _______________, 20__, and shall remain in effect for the ninety-nine (99) year term of the Lease, unless sooner terminated pursuant to the terms and conditions of the Lease.

3. As more particularly set forth in the Lease, certain development, affordability and occupancy restrictions apply to the use of the Leased Premises.

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4. This Memorandum shall incorporate herein all of the terms and provisions of the Lease as though fully set forth herein.

5. This Memorandum is solely for recording purposes and shall not be construed to alter, modify, amend or supplement the Lease, of which this is a memorandum. In the event of any inconsistency between the terms and conditions of this Memorandum and the terms and conditions of the Lease, the terms and conditions of the Lease shall control.

6. This Memorandum may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts so executed shall together constitute but one and the same instrument. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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IN WITNESS WHEREOF, the parties have caused this Memorandum to be duly executed as of the date first above written.

LESSOR:

CITY OF EAST PALO ALTO, a California municipal
corporation
By: __________________________________
Its: __________________________________
LESSEE:

MP 965 Weeks Street Associates, L.P.,
a California limited partnership
By: MP CANDO Weeks Street, LLC,
a California limited liability company,
its general partner
By: MidPen Housing Corporation, a California
nonprofit public benefit corporation, its
manager
By: ____________________________
Name: __________________________
Its: _____________________________
By: East Palo Alto Community Alliance and
Neighborhood Development Organization,
a California nonprofit public benefit
corporation, its member
By: _______________________________
Its: _______________________________

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[SIGNATURES MUST BE NOTARIZED]

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EXHIBIT D

SCOPE OF DEVELOPMENT
The following describes the 965 Weeks Street Apartments Project (“Project”) proposed by MidPen Housing Corporation, a California nonprofit public benefit corporation ("Midpen") and East Palo Alto Community Alliance and Neighborhood Development Organization, Inc., a California nonprofit public benefit corporation ("EPACANDO" and together with Midpen, the "Developer"). While this summary presents the program currently envisioned for the proposed development, it is understood that modifications may be made with mutual agreement between Developer and City of East Palo Alto (“City”).

1. Proposed Onsite & Offsite Improvements
The 965 Weeks Street Apartments Project site is a 2.52 acre vacant site, currently owned by the City, and the project site is bordered by the Bay Trail pedestrian/bike path, multi-family residences, a commercial business, and vacant land to the north, light industrial uses to the east, Weeks Street and a single-family neighborhood to the south, and commercial uses and a wellness center along Clark Avenue to the west. On this vacant site, MidPen shall construct a the onehundred and thirty-six (136) units of affordable housing for income-eligible households, including one (1) manager's unit that is not subject to affordability or occupancy restrictions, and related onsite improvements, parking garage, office space for property management and resident services staff, community am amenities, including a community room with kitchen, outdoor play areas, and space for an after school program for resident children, landscaping and other improvements.

The Project shall include 136 units, subject to City’s approval. If necessary, Developer shall apply for and obtain City approval of a General Plan Amendment for the project site and a density bonus. The Project will include 8 studio units, 19 one-bedroom units, 75 two-bedroom units, and 27 three-bedroom units, and 7 four-bedroom units, subject to City approval. Due to funding source requirements, the proposed development will be required to have a certain percentage of larger bedroom types, including the two and three-bedroom units, which may be revised with mutual approval of the Parties. The unit mix shall be as follows:

Overall Unit Mix
Studio 8 units
1 bedroom 19 units
2 bedroom 75 units
3 bedroom 27 units
4 bedroom 7 units
TOTAL UNITS 136
The approximate parking ratio will be an average of 1.5 spaces per unit as adjusted by unit size.

Developer shall underground all existing overhead utilities within or along the perimeter of the Property. Developer shall comply with the requirements of local utility agencies, such as

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_____________________and _____________________, with respect to offsite improvement work to service the Project.

2. Resident Amenities and Open Space
The Project shall include various indoor and outdoor amenities available to residents living at the Property, including a community room, playground, after-school program room, computer lounge, and outdoor seating with a BBQ area. The Project will include an office for Developer Property Management and Services for staff working at the property and to meet with residents.

3. Tentative and Final Parcel Map
Developer will prepare a tentative and final parcel map for the Project for the approval of the City, to merge the existing multiple parcels.

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EXHIBIT E

FINANCING PLAN

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CITY OF EAST PALO ALTO

FIRST SOURCE AGREEMENT

CONSTRUCTION CONTRACTS
THIS AGREEMENT is entered into on the date stated below by and between the CITY OF EAST PALO ALTO, a municipal corporation (“City”), and MP 965 Weeks Street Associates, LP, a California limited partnership, (“Contractor”).

WHEREAS, the Contractor and the City have entered into a Disposition, Development, and Loan Agreement whereby the City has agreed to lease the property located at 965 Weeks Street (“Property”) to the Contractor and to provide a below market rate interest loan to the Contractor to facilitate the development of an affordable housing development on the Property (”Project”); WHEREAS, the City has adopted First Source Hiring requirements with respect to certain projects subsidized by the City or subject to a lease with the City codified at the East Palo Alto Municipal Code Chapter 5.11 which establishes goals that (i) a minimum of 20% of the total work hours for the construction project subsidized by the City be performed by East Palo Alto residents, (ii) a minimum of 20% of all new hires for the construction contract be East Palo Alto residents, of which 5% will be disadvantaged workers who are East Palo Alto residents, as those terms are defined in the Municipal Code;
WHEREAS, in accordance with the City’s First Source Hiring requirements, the Contractor is required to enter into this First Source Agreement (“FSA”) with the City; NOW, THEREFORE, the parties hereto mutually agree as follows:

1. Contractor will comply with the terms of Chapter 5.11 of the East Palo Alto Municipal Code, First Source Hiring Program (“Ordinance”), a copy of which is attached hereto and incorporated by reference, and shall require that all of Contractors subcontractors comply with the Ordinance, including but not limited to Contractor’s General Contractor for construction of the Project. Contractor shall incorporate into any contracts it enters into with the General Contractor or others performing work on the Property or the Project the terms of this Agreement and the Ordinance.

2. Liaison. Contractor shall designate a liaison for issues related to the Ordinance and this FSA. The liaison shall work with designated City staff to facilitate effective implementation of the Ordinance and this FSA.

3. First Source Hiring Process. Contractor shall take the following steps regarding hiring covered by the Ordinance:

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(a) Long-Range Planning. Contractor shall, prior to hiring covered by the Ordinance, and as soon as practicable, provide to the designated City staff or other entity designated by the City the approximate number and type of hires that it will make for employment, the basic qualifications necessary for each projected hire, the dates of expected hiring and any other information requested by the City regarding the hires. (b) Dual Notification Process. Where the Contractor or its subcontractor has entered into a signatory agreement with a local union and the associated craft, Contractor shall work with the local union and the City to fill those positions. The Contractor shall forward to the City a copy of all personnel requests made to the trade unions, specifying the residency of personnel requested. In the dual notification process, the Contractor shall utilize the "name call," "rehires," “transfers,” "sponsorship," and other available options in maximizing the participation of Richmond residents.
(c) Notification of job opportunities. Where the Contractor has not entered into a signatory agreement with a local union, then prior to hiring covered by the Ordinance, Contractor shall notify the designated City staff, by email, of available job openings and provide a description of job responsibilities and qualifications, including expectations, salary, work schedule, duration of employment, required standard of appearance, and any special requirements, e.g., language skills, driver’s license, etc. Job qualifications shall be limited to skills directly related to performance of job duties.
(d) Filling of job opportunities. Where the Contractor has not entered into a signatory agreement with a local union, then prior to announcing or advertising in any form and by any means (except for compliance with internal posting procedures) the availability of an employment position covered by the Ordinance, and prior to hiring for such a position, the Contractor shall notify the City in writing of such position, including a general description of the position and Contractor's minimum requirements for qualified applicants, and shall request the City to refer qualified applicants for such position to Contractor. The Contractor shall refrain from any general announcement or advertisement of the availability of such position, and shall refrain from hiring anyone other than an East Palo Alto resident for such position, for a period of forty eight (48) hours after notification to the City. This forty-eight (48) hour period shall be known as the "Advance Notice Period.”
(e) Job Site Applications. In the event that any persons seek employment with the Contractor at the job site, the Contractor shall have the person complete a Job Site Application consisting of name, address, telephone number, social security number and trade.

The Contractor will then submit this information to the City.

4. Quarterly Reports. Contractor shall, on a quarterly basis until the Certificate of Completion is issued for the Project, furnish certified payroll sheets to the City. Failure to provide the City with this information may result in delay in disbursement of loan funds or a finding that the Contractor is noncompliant with the terms of this Agreement and/or the

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Ordinance.

5. Quarterly Reports. Each Contractor shall prepare quarterly reports detailing the number of hires for employment covered by the Ordinance during the quarter and stating what percentage of such hires were Residents and which were disadvantaged workers. Contractor may provide the requested information in a format proposed by Contractor unless the City provides a form for such information. Reports shall be filed with the City within thirty (30) days after the completion of each quarter. Reports may include a description of any difficulties the Contractor is having with obtaining qualified referrals through the Designated City staff.

6. Non-compliance Procedure. In the event the City believes the Contractor may not be in compliance with the requirements of this FSA, the following procedure will be followed:
(a) The City Manager or his or her designee shall cause to be delivered to the Contractor a written “Notice of Non-Compliance.” This Notice shall specify the matters which constitute the non-compliance; the specific action required to correct the non-compliance; and the time period during which such correction shall occur. In no event shall this time period be more than thirty (30) days after receipt of the Notice of Non-Compliance by the Contractor. If the Notice of NonCompliance is mailed, it will be deemed received five (5) days after the date of mailing. (b) If the Contractor disagrees with the Notice of Non-Compliance, the Contractor shall have the burden of proving compliance with the provisions of the Ordinance and shall submit any evidence and argument to the City Manager or designee to establish compliance no more than thirty (30) days after receipt of the Notice of Non-Compliance by the Contractor.
(c) In the event the City Manager or designee subsequently agrees that compliance has occurred, the City Manager or designee shall cause to be delivered promptly to the Contractor a written “Notice of Correction of Non-Compliance,” specifying the original non- compliance which has been corrected.
(d) In the event the City Manager or designee does not agree that compliance has occurred, the City Manager or designee shall promptly notify the Contractor by a written “Notice of Failure to Correct Non-Compliance,” describing the facts constituting the non-compliance. (e) After the issuance of a written Notice of Failure to Correct NonCompliance, the Contractor shall have the right to request a hearing before the City Council, or a mutually agreed upon arbitrator who shall make the final determination. The request for a hearing must be made within ten (10) working days after receipt of the Notice of Failure to Correct Non-Compliance. If the Notice of Failure to Correct Non-Compliance is mailed, it will be deemed received five (5) days after the date of mailing. The hearing shall be held no sooner than twenty (20) and no later than thirty (30) days after receipt by the City of the Request for

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Hearing, unless otherwise agreed to by the parties. At the hearing, the Contractor will be allowed to present any evidence and argument it believes proves compliance The City Council or neutral arbitrator shall issue their final determination no later than ten (10) business days after the hearing. The Contractor must exhaust this administrative remedy prior to commencing further legal action.
(f) In the event no Request for Hearing is timely made, the determination of failure to correct non-compliance shall be deemed to be final. (g) Should the Contractor fail to comply with the Notice of Non-Compliance as specified above, and a final determination of non-compliance is made, the City may exercise any of its powers as specified in §5.11.080 of the Ordinance.

Executed this day of , .

Contractor
By:

CITY OF EAST PALO ALTO
By:

Melvin E. Gaines, City Manager
Approved as to form:
_________________
John D. Lê,
City Attorney

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EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: A Proclamation Celebrating Deborah Lewis-Virges and Clyde Lewis-Virges for Pastor Appreciation Day
Recommendation
Present the proclamation.

Attachments

1. Lewis Virges Proclamation

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EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: A Proclamation Recognizing Mr. George Smith Sr.

Recommendation
Present the proclamation.

Attachments

1. Mr. Smith Proclamation

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the

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EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: City Hall Feasibility Study
Recommendation
Receive the presentation.

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EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Karen Camacho, Housing & Economic Development Manager SUBJECT: Inclusionary Housing In-Lieu Fee Update
Recommendation
Adopt a resolution updating the Inclusionary Housing In-Lieu Fees for Fiscal Year 2023-24, an amount of $259,600 for Ownership/For-Sale and $289,000 for Rental, or some other alternative approved by Council.

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
· Promote Housing, Economic and Workforce Development
Background
On November 19, 2019, the City Council adopted Ordinance No. 425 - Inclusionary Housing Ordinance (IHO), adding Chapter 18.37 to the City of East Palo Alto Development Code. The IHO applies to all new residential development and requires developments of five (5) or more units to provide 20% of the total units at specified levels of affordability.1 The IHO also created an In-Lieu Fee requirement, which applies in the following scenarios:
· Developments of fewer than five units;
· Developments where the inclusionary requirement results in a fraction of a unit (e.g., in a 7-unit development, the inclusionary requirement would result in 1.4 units, with the fractional unit of .4 requiring an In-Lieu Fee payment); and · Developments where an In-Lieu Fee payment is provided as the Alternative Compliance Option, as approved by City Council (Alternative Compliance Options have a 25% inclusionary requirement).

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Section 18.37.050 provides for In-Lieu Fees for both rental and for-sale units, which are adopted by the City Council by resolution each year to take effect on or after July 1 of that year. The purpose of the In-Lieu Fee is to fulfill the developer’s obligation to produce affordable units; rather than build affordable units, the developer would pay the City with funds for 1.) future development of affordable rental housing or 2.) future subsidy to moderate-income homebuyers.2
An analysis by David Rosen & Associates (DRA) is included in the Inclusionary Housing Guidelines (“Guidelines”) as Chapter 2C, as adopted by the City Council on October 20, 2020, by Resolution No. 141-220 (see Attachment 3).3 This analysis sets the methodology for calculating Inclusionary In-Lieu Fees and subsequent increases.4 The first Inclusionary In-Lieu Fees were adopted by the City Council on October 20, 2020, by that same resolution.5 The Analysis section below provides an explanation for the new methodology being recommended for calculating Inclusionary In-Lieu Fees and subsequent increases (also see Attachment 2).

The data used to calculate the Inclusionary In-Lieu Fees is not released in time to be included in the City’s Master Fee Schedule update which typically occurs in April. For this reason, Inclusionary In-Lieu Fees are considered through a separate resolution each year.

The purpose of this staff report is to update the Inclusionary In-Lieu Fees for both Ownership/For-Sale and Rental and to recommend City Council adoption of the fees for Fiscal Year 2023-24. The current Fiscal Year 2022-2023 (FY 22-23) In-Lieu Fee for an Ownership/For-Sale unit is $190,000 and the In-Lieu Fee for a Rental unit is $259,000. The recommended Fiscal Year 2023-2024 (FY 23-24) In-Lieu Fees are $259,600 for an Ownership/For-Sale unit and is $289,000 for a Rental unit.

Analysis
The recommended FY 23-24 In-Lieu Fees are calculated with different methodologies from those outlined in the City’s Inclusionary Housing Ordinance’s initial Guidelines (see Attachment 2). The initial Guidelines’ methodology, explained below, results in In-Lieu Fees for an Ownership/For-Sale unit increasing 104-percent from $190,000 to $386,700 per unit. The California Department of Housing and Community Development (HCD) provided concerns about the impact of the City’s IHO in their comments on the City’s proposed Housing Element.6 The Council may study the issue to determine the cost impacts of this and other fees and set the level of this and other fees accordingly. Alternatively, staff recommends that the Council approve an alternative methodology that would increase the In-Lieu Fee for Ownership/ForSale units by less than what the Guidelines allow, as explained more fully below.

The Guidelines’ methodology for calculating In-Lieu Fees for Rental units, also explained below, requires a data source that is no longer available. Therefore, staff recommends an alternative data source be used to calculate the In-Lieu Fee for Rental units.

Inclusionary Housing Guidelines and In-Lieu Fees
The IHO provides direction on the methodology by which In-Lieu fees will be calculated. The actual In-Lieu Fee calculations are provided in detail in the Guidelines, the companion document to the IHO that clarifies and elaborates upon the IHO requirements. The Guidelines are intended to assist potential developers and stakeholders by outlining instructions and further clarifying key components of the IHO.

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The City Council reviewed and adopted the first edition of the Guidelines on October 20, 2020.

Thereafter, pursuant to East Palo Alto Municipal Code Section 18.37.090(D), the City Manager is authorized to update the Guidelines, including reviewing and approving any changes or updates. If there are any inconsistencies between the Guidelines and the IHO, the IHO takes precedent. The full set of the Guidelines is provided on the City’s website on the Inclusionary Housing page.7
The Inclusionary In-Lieu Fees are updated by Housing Division staff on an annual basis using the methodology provided in the Guidelines. The initial methodology, including the calculation of the first In-Lieu Fees, was outlined in detail in a staff report8 that was presented at the October 20, 2020 City Council meeting. Each year thereafter, the City Council adopts the updated Inclusionary In-Lieu Fees at a public hearing, and they subsequently are published on the City’s website.

Since adoption of the IHO, the Inclusionary In-Lieu Fees have been as follows:

Table 1: Inclusionary In-Lieu Fees
Since Inclusionary Housing Ordinance Adoption
FY 2021-
2022
FY 2022-
2023
Potential FY
2023-2024
(Initial
Methodology)
Recommended
FY 2023-2024
(New Proposed
Methodology)
Ownership/For-Sale InLieu Fee$197,880 $190,000 $386,700 $259,600 Rental In-Lieu Fee $255,000 $259,000 Not Available $289,000 In last year’s FY 22-23 update, the Ownership/For-Sale In-Lieu Fee decreased from $197,000 to $190,000 due to a combination of multiple factors that go into the calculation, but primarily because interest rates decreased from 3.5% to 3.22%. The Rental In-Lieu Fee increased due to the increase in new home sales prices from $1,429,009 in 2020 to $1,452,688 in 2021.

Initial Method to Calculate Ownership/For-Sale In-Lieu Fee The Ownership/For-Sale In-Lieu Fee represents the gap between the market sales price of a “prototypical” unit in East Palo Alto and the sales price affordable to a household at or below 80% or 120% Area Median Income (AMI). The affordable housing cost is defined as 30% of the maximum household income at the specified income level (adjusted by household size).

An illustrative calculation of the Ownership/For-Sale In-Lieu Fee is provided in Chapter 2A of the Guidelines.9 Please note in Chapter 2A, the figures are displayed without decimals and only show the nearest whole number. The in-lieu fee is not rounded until the very end of the calculation. The DRA memo, dated April 27, 2020 and provided in the Guidelines as Chapter 2C (see Attachment 3), further discusses the For-Sale In-Lieu Fee methodology in detail.

The In-Lieu Fee calculation includes the following baseline assumptions: 1.) a household size of 2.5, which reflects an average condominium size using the occupancy standard of number of bedrooms plus one; and 2.) a maximum household income of 100% AMI, which is the average of the two affordability levels required by the IHO. For the calculations in Table 2,

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below, the 100% AMI amounts used were $140,000 for a 2-person household and $157,500 for a 3-person household, taken from the 2023 HCD State Income Limits.10 The affordable sales price is a multi-step calculation requiring updated inputs on an annual basis. The initial calculation of the affordable housing cost for a maximum household income at 100% AMI is made separately for household sizes of 2 and 3 persons. To arrive at a single affordable sales price for a 2.5-person household at 100% AMI, a weighted average based on the distribution of prototypical condominium types (1- and 2-bedroom units) is calculated from the 2- and 3-person household AMI.

From this initial income calculation, deductions are made to estimate total monthly housing costs: utilities, HOA fees, insurance, and property taxes. This adjusted affordable housing cost is used to calculate the maximum supportable monthly mortgage amount, assuming a down payment of 5% and a fixed-rate, 30-year amortizing mortgage, with the interest rate taken from the Freddie Mac Mortgage Market Survey in the first week of January of the calendar year.

The market sales price is calculated as a weighted average of condominium sales in East Palo Alto over the previous 3-year period. The difference between the affordable sales price and the market sales price is the In-Lieu Fee.

The updated FY 23-24 Ownership/For-Sale In-Lieu Fee is summarized below:

Table 2: Fiscal Year 2023-2024
Ownership/For-Sale Housing In-Lieu Fee Calculation*
Affordable Price for 100% AMI Household $412,000
Market Sales Price $792,000
Gap for In-Lieu Fee (100% AMI) $379,000 per unit
2% Increase Due to Delay $8,000 per unit
Ownership/For-Sale In-Lieu Fee $386,700 per unit
*Figures are rounded to the nearest thousandth in this chart, with exception of the in-lieu fee, which is rounded to nearest hundredth. Note that numbers are not rounded in actual calculation until the end.

Challenges with the Current Ownership/For-Sale In-Lieu Fee Calculation Methodology The principal challenge with continuing using the initial Guidelines’ methodology is that a slight percentage change in interest rates from one year to another creates a more volatile change in Ownership In-Lieu Fees. For example, the Ownership In-Lieu Fee would increase by 104% from FY 22-23 to FY 23-24 if the City Council chose the methodology used in the initial Guidelines. The main factor causing the 104% increase is, in addition to other factors, the change in interest rates for 30-year loan terms from 3.22% to 6.48%. Given HCD’s guidance in the Housing Element on reducing governmental constraints, the City Council may wish to consider an alternative method. A three-year average approach, as described in the next section, may anchor the interest rate to the previous three years, creating more continuity between in-lieu fee updates.

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Summary of Ownership/For-Sale In-Lieu Fee Trend:
· Ownership/For-Sale In-Lieu Fee for FY 21-22 = $197,880 (initial calculation) · Ownership/For-Sale In-Lieu Fee for FY 22-23 = $190,000 (-0.28% in 30-year loan term interest rates; -$7,880 or -4% in per unit fees)
· Ownership/For-Sale In-Lieu Fee for FY 23-24 = $387,700 (+3.26% in 30-year loan term interest rates; +$197,700 or +104% in per unit fees)
Alternative Method to Calculate Ownership/For-Sale In-Lieu Fee An alternative method for calculating the Ownership/For-Sale In-Lieu Fee is, all else being the same, taking a three-year average of the 30-year loan term interest rates taken from the Freddie Mac Mortgage Market Survey. A three-year average would help reduce volatility and increase the FY 23-24 In-Lieu Fee by only thirty-seven percent.

The recommended Alternative Ownership/For-Sale In-Lieu Fee is summarized below:

Table 3: Alternative Fiscal Year 2023-2024 Ownership/For-Sale Housing In-Lieu Fee Calculation with Three-Year Average Interest Rate*
Affordable Price for 100% AMI Household $537,000**
Market Sales Price $792,000
Gap for In-Lieu Fee (100% AMI) $255,000 per unit
2% Increase Due to Delay $5,000 per unit
Ownership/For-Sale In-Lieu Fee $259,600 per unit
*Figures are rounded to the nearest thousandth in this chart, with exception of the in-lieu fee, which is rounded to nearest hundredth. Note that numbers are not rounded in actual calculation until the end. **Calculated based on three-year average of 30-year loan term interest rates.

Rental In-Lieu Fee

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As discussed in the DRA memo, provided in the Guidelines as Chapter 2C, the In-Lieu Fee estimates for rental housing represent the financing gap required to develop housing affordable to households at 35% AMI, 50% AMI, and 60% AMI, in the percentages required by the IHO.

The development and operating cost assumptions were used to calculate the gap for a “prototypical” multifamily housing development in East Palo Alto are based on a review of historical project costs and an analysis of 2017-19 applications for the Low Income Housing Tax Credit program. These can be found in detail in Table A-3 of the DRA memo in Chapter 2C of the Guidelines.

The annual gross rent calculation was based on 30% of the maximum household income at specified AMI levels and household size, less utilities. The final gap calculation, shown in Table A-10 of the DRA memo, also assumes tax credit equity from 4% tax-exempt bonds.

The Rental In-Lieu Fee is adjusted annually by staff based on the percentage change in new home prices in San Mateo County, as published in the Northern California Real Estate Construction Report by the Real Estate Research Council of Southern California at California State Polytechnic University, Pomona (RERCSC). This report is no longer available. In addition, staff were unable to find an alternative data source that calculates the percentage change in new home prices in San Mateo County.

As an alternative data source, staff is recommending updating the annual increase adjustment using the Construction Cost Index (CCI), already used at the City for calculating impact fees.

The CCI can help reduce volatility by using construction costs, rather than new home prices, as an index. The calculation of the updated FY 23-24 In-Lieu Fee is shown below; the calculation of the initial Rental In-Lieu Fee is provided in Chapters 2B and 2C of the Guidelines.

The initial calculation of the Rental In-Lieu Fee, starting in 2020, came to $255,000 per unit.

Last year, the Rental In-Lieu Fee increased by 1.66%, as new home prices in San Mateo County increased from a $1,429,009 to $1,452,688 in 2021. Had the CCI been used last fiscal year, the Rental In-Lieu fee would have increased by 7.25% to $273,800.

The Rental In-Lieu Fee and methodology used last year (in FY 2022-23) is summarized below:

Table 4: FY 2022-2023 Rental Housing In-Lieu Fee Calculation* FY 2021-22 Rental In-Lieu Fee  $255,000
New Home Prices Fourth Quarter 2020  $1,429,009
New Home Prices Fourth Quarter 2021  $1,452,688
Difference  $23,679
Percentage Change  1.657%
2022 Rental In-Lieu Fee (1.657% increase) $259,000 per unit *Figures are rounded in this chart. Rental In-Lieu Fee rounded to nearest hundredth.

Given that the CCI was not used as the index last year, the increase for FY 23-24 is set based on the increase in CCI between 2020 and 2022.

8.1 Packet Pg. 291
Table 5: Alternative Rental Housing In-Lieu Fee Calculation in Fiscal Year 2023-2024 Using CCI
FY 2021-2022 Rental In-Lieu Fee  $255,000
December 2020 CCI 11,626
December 2022 CCI 13,175
Percentage Change  +13.32%
FY 23-24 Rental In-Lieu Fee (13.32%
increase)
$289,000
*Figures are rounded in this chart. Rental In-Lieu Fee rounded to nearest hundredth.

In-Lieu Fee Payments
All In-Lieu Fee payments will be calculated by Housing Division staff and must be paid by the developer prior to issuance of a Building Permit for any unit in the development. If there is a requirement to pay an In-Lieu Fee in addition to building units or any other combination of compliance options, then the requirement will be noted in the Inclusionary Housing Agreement, a document that lays out all inclusionary obligations and is recorded against all units in the development.

To date, no developer has paid the In-Lieu Fee under the Inclusionary Housing Ordinance.

Most entitled projects have chosen to comply with the IHO by building on-site units or another Alternative Compliance Option.

According to the IHO, In-Lieu Fees collected by the City will be placed into a fund that will be spent in accordance with applicable law.

Next Steps
If City Council adopts the proposed resolution approving the recommended In-Lieu Fees, effective through FY 22-23, staff will publish them on the City’s website. If approved, in summary, the In-Lieu Fees will change from the current to the following:

First In-Lieu
Fee
Previous Year Calculation
Using Initial
Methodology
Staff
Recommended
Alternative
FY21-22 FY 22-23 FY 23-24 FY 23-24
For-Sale $197,880 $190,000 $386,700 $259,600
Rental $255,000 $259,000 Not Available $289,000
The effective date for the In-Lieu Fees is July 18, 2023.

Fiscal Impact
There is no immediate fiscal impact associated with the actions in this staff report. Future residential developments that are subject to the IHO will require the payment of In-Lieu Fees if they fit one of the descriptions provided above. In-Lieu Fee payments will not impact the General Fund but will be set aside as affordable housing funds.

Given the current housing pipeline, it is not anticipated that significant In-Lieu Fee revenue will

8.1 Packet Pg. 292
be generated in FY 23-24. However, there are some small projects that have been entitled since the In-Lieu Fees came into effect. If these projects proceed to the Building permit stage, the City will receive a fee payment. If needed, staff will provide an update on projected revenue for FY 23-24.

Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available on the City’s website. Public notice was also provided in the July 7, 2023 San Mateo Daily Journal. Additionally, updated Chapters 2A and 2B of the Inclusionary Housing Guidelines detailing the fee calculations were posted as drafts on the City’s website.

Attachments

1. Resolution

2. Draft Chapters 2A and 2B

3. Chapter 2C DRA Report

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1 of 3
RESOLUTION NO. ____ -2023

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO
ADOPTING INCLUSIONARY HOUSING IN-LIEU FEES THROUGH FISCAL YEAR 2023-24 WHEREAS, on November 19, 2019, the City Council adopted Ordinance No. 425, lnclusionary Housing Ordinance ("Ordinance"), adding Chapter 18.37 to the East Palo Alto Municipal Code; and
WHEREAS, the Ordinance requires that 20% of all units in new market-rate residential developments be affordable to 35% AMI income households, very low-income, low-income, median- income and moderate-income households; and
WHEREAS, the Ordinance requires, under specified conditions, the payment of a fee to the City in-lieu of constructing rental or for-sale inclusionary units within a residential development ("In-Lieu Fees"); and
WHEREAS, the Ordinance provides that these In-Lieu Fees shall be established and amended from time-to-time by resolution of the City Council; and WHEREAS, the Ordinance further provides that In-Lieu Fee payments shall be placed into an affordable housing fund and shall be expended exclusively to provide rental housing affordable to low income households (or below), ownership housing affordable to moderateincome households (or below), and any special needs populations in the City, consistent with the goals and policies contained in the City's Housing Element, and for administration and compliance monitoring of the lnclusionary Housing program, as approved by the City Council; and
WHEREAS, on October 20, 2020, the City Council held a properly noticed public hearing to adopt the In-Lieu Fee methodology as provided in a report commissioned by the City from David Rosen & Associates and set the In-Lieu Fees through Fiscal Year 2021-22; and WHEREAS, these In-Lieu Fees must be updated on an annual basis and adopted by City Council resolution, to the methodology outlined in the Report and in the Guidelines, which may be updated from time to time by the City Manager; and .

WHEREAS, the Rental In-Lieu Fee was adjusted annually by staff based on the percentage change in new home prices in San Mateo County, as published in the Northern California Real Estate Construction Report by the Real Estate Research Council of Southern California at California State Polytechnic University, Pomona (RERCSC);
WHEREAS, the RERCSC data is no longer available, and the City was unable to find an alternative data source that calculates the percentage change in new home prices in San Mateo County in the same manner as the RERCSC data; and
WHEREAS, the City has determined that the Construction Cost Index (CCI) is a reasonable alternative index to the RERCSC data for calculating the Rental In-Lieu Fee increase, which when applied results in a Rental In-Lieu Fee of $289,000 for Fiscal Year 2023-2024; and WHEREAS, on an April 25, 2023 comment letter regarding the City’s draft 2023-2031

8.1.a
Packet Pg. 294 Attachment: Resolution (2730 : Inclusionary Housing In-Lieu Fee Update) 2 of 3
Housing Element, the California Department of Housing and Community Development (HCD) provided guidance to analyze and modify the City’s inclusionary requirements to reduce governmental constraints; and
WHEREAS, in light of HCD’s comment letter, the City has determined it is in the best interest of the City to decrease fee volatility by using in its calculations a three-year average of interest rates from 30-year amortizing loans taken from the first week of January of the Freddie Mac Mortgage Market Survey, resulting in an Ownership/For-Sale In-Lieu Fee of $259,600 for Fiscal Year 2023- 2024.

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO THAT IT HEREBY:

1. Finds the foregoing recitals are true and correct, and are incorporated by this reference into this action; and

2. Adopts the lnclusionary In-Lieu Fees for Ownership/For-Sale and Rental Units commencing July 18, 2023 through the 2023-24 Fiscal Year, as shown in Exhibit A, attached and incorporated by reference.

PASSED AND ADOPTED this 18th day of July 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED: ________________________
Lisa Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney

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Packet Pg. 295 Attachment: Resolution (2730 : Inclusionary Housing In-Lieu Fee Update) 3 of 3
Exhibit A
lnclusionary In-Lieu Fees
Ownership/For-Sale In-Lieu Fee $259,600 per Unit
Rental In-Lieu Fee $289,000 per Unit
The lnclusionary In-Lieu Fees shall be updated by resolution by the City Council on an annual basis and published on the City of East Palo Alto website.

8.1.a
Packet Pg. 296 Attachment: Resolution (2730 : Inclusionary Housing In-Lieu Fee Update) CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.23 Date of Publication: _________ 1
Chapter 2A Calculation of Ownership/For-Sale In-Lieu Fees - Section 18.37.050 (B) This attachment to the Guidelines describes the method utilized in calculating the ForSale In-Lieu Fee. The figures below reflect the In-Lieu Fee through Fiscal Year 2023- 2024, effective July 18, 2023.

City of East Palo Alto
Ownership/For-Sale Housing In-Lieu Fee Calculation*
Affordable Price for 100% AMI Household $537,000**
Market Sales Price (3-Yr SMC Association
of Realtors Average)
$792,000
Gap for In-Lieu Fee (100% AMI) $255,000 per unit
2% Increase Due to Delay $5,000 per unit
Ownership/For-Sale In-Lieu Fee $259,600 per unit
*Figures are rounded to the nearest thousandth in this chart, with exception of the in-lieu fee for FY 2023-2024, which is rounded to nearest hundredth. Note that numbers are not rounded in actual calculation until the end. **Note change in methodology to average three-year interest rate for loan term. \Illustrative Calculation for the For-Sale In-Lieu Fee for FY 2023-24 2-Person Household 100% AMI 3-Person Household 100% AMI $140,000 $157,500
The final calculation in Section II below will reflect a household size of 2.5. This will be a weighted average, where the 1-bedroom sales price is weighted as 23% of the total and the 2-bedroom sales price is weighted as 77% of the total based on the assumed distribution of dwelling units by bedroom count in the prototype (See Table A-2 in Attachment 2, Condominium column).

I. Annual 100% San Mateo County Income Limit for a 2 and 3-Person Household

8.1.b
Packet Pg. 297 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.2023 Date of Publication: ________ 2
II. Calculation of the Annual and Monthly 100% Affordable Payment 2-Person Household
100%AMI
3-Person Household
100%AMI
Explanation
$140,000 $157,500 100% of AMI for 2.5-person
household
X .30 X .30 Affordable housing cost not to
exceed 30% of annual income
= $42,000 = $47,250 Maximum affordable payment
Divided by 12 Divided by 12
= $3,500 = $3,938 Maximum monthly affordable
payment
III. Assumptions to Calculate the Affordable Housing Cost for the For-Sale In-Lieu Fee
After the initial adoption of In-Lieu Fees, which were effective through Fiscal Year 2021- 22, the following elements of the affordable housing cost calculation will be assumed each year, based upon relevant data pertaining to each. These elements will be determined by referencing industry standard sources. For Fiscal Year 2023-24, the Housing Division has determined the following values:

ITEM VALUE RARATIONALE/DATA SOURCE SOU O DATE SET
Interest Rate 4.12%
Freddie Mac Primary Mortgage
Market Survey (PMMS)
http://www.freddiemac.com/pmms/
pmms_archives.html
3-Year Average,
first week of
January
Down Payment 5%
Industry standard/David Rosen &
Associates NA
Property
Tax/Special
Assessments

1.2% David Rosen & Associates
NA

8.1.b
Packet Pg. 298 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.2023 Date of Publication: __________ 3
Homeowner
Associations
Dues (HOA)
$200 Average of monthly HOA dues for
prototypical developments in East Palo
Alto/David Rosen & Associates
Annually, first week
of January
Utilities
$230-
288
Weighted average of monthly estimated
utility costs for County of San Mateo
Housing Authority (by bedroom count)
Annually, first week
of January
Property
Insurance
$100 Includes homeowners insurance (fire,
hazard, etc.)/David Rosen & Associates
NA
IV. Determination of Purchase Related Costs & Affordable Monthly Mortgage Payment (The figures used in this section are based upon the above chart) 2-Person Household
100% AMI
3-Person Household
100% AMI
Explanation
Maximum monthly affordable
payment of $3,500 less:

Maximum monthly affordable
payment of $3,938 less:

See Part II above
[-] $788 [-] $792 Property taxes and
assessments (per month) 1.2%
[-] $200 [-] $200 Homeowner’s association dues
(per month) $200
[-] 230 [-] $288 Utility allowance (per month)
[-] $100 [-] $100 Property insurance (per month)
[-] $1,318 [-]$1,380 Subtract the sum of all housing
related expenses
= $2,182 =$2,558 Remaining amount for
maximum monthly mortgage
payment

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Packet Pg. 299 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.23 Date of Publication: ________ 4
V. Determination of Affordable Housing Cost (aka Maximum Sales Price) The maximum sales price is calculated by adding the maximum monthly mortgage payment amount to the assumed down payment that will be contributed by the borrower.

The maximum mortgage amount will be based on a fixed rate, 5% down, fully amortizing, widely available owner-occupied loan, and the above calculated maximum monthly mortgage payment allowable. The calculation functions as follows:
2-Person Household
100% AMI
3-Person Household
100% AMI
Explanation

4.12% 4.12% 3 yr avg interest rate, 30 yr loan term
$2,182 $2,558
allowed
$450,500 $528,100
$23,700 $27,800
$474,200 $555,900
household (rounded to nearest thousandth) prototype
The market-rate sales price is based on a weighted 3-year average of median home prices in San Mateo County provided by the San Mateo County Association of Realtors.

East Palo Alto City CouncilJuly 18, 2023

East Palo Alto City Council
July 18, 2023