DATE:
April 18, 2023
TO:
Paul Buddenhagen, City Manager
FROM:
Charles S. Bryant, Community Development Director
SUBJECT:
3600 San Pablo Avenue Affordable Housing Project:
Resolution Of The City Council Of The City Of Emeryville Appropriating A Total Of $4,264,320 From The Low And Moderate Income Housing Fund (Fund 298), The Affordable Housing Fund (Fund 299), And The Affordable Housing Impact Fee Fund (Fund 239) To The Fiscal Year 2022-2023 Operating Budget To Support The 3600 San Pablo Avenue Affordable Housing Project; With A Total Of $3,529,891 To Be Reimbursed To Funds 298, 299 And 239 By Proceeds From The Sale Of The City Of Emeryville 2023 General Obligation Bonds.
Resolution Of The City Council Of The City Of Emeryville Authorizing The City Manager To Execute The Amended And Restated Loan Agreement By And Between The City Of Emeryville And Evoy, L.P., An Affiliate Of Resources For Community Development, A California Nonprofit Public Benefit Corporation, For The Development Of Affordable Housing At 3600, 3610 And 3620 San Pablo Avenue, Increasing The Loan Amount By $12,247,486 To A Total Amount Not To Exceed $16,747,486 (CEQA Determination: Exempt Pursuant To California Government Code Section 8698.4(a)(4) And State CEQA Guidelines Sections 15268(a), 15269(c), 15332, And 15061(b)(3)).
Recommendation
Staff recommends that the City Council adopt the two above-entitled resolutions. The first resolution will appropriate available fund balances from the Low and Moderate Income Housing Fund, Affordable Housing Fund, and Affordable Housing Impact Fund to the Operating Budget for Fiscal Year 2022-2023. The second resolution will authorize the City Manager to execute the Amended and Restated Loan Agreement with Evoy, L.P., an affiliate of Resources for Community Development (“RCD”) for the development of the 3600 San Pablo Avenue Affordable Housing Project, known as the Nellie Hannon Gateway.
Background
Property History
The parcels known as 3600, 3610 and 3620 San Pablo Avenue (together, the “Site”) are located on the east side of San Pablo Avenue between 36th Street to the south and 37th Street to the north. Residential properties are adjacent to the east. The Site is comprised of three separate but contiguous parcels: 3600 San Pablo Avenue (APN 049-0950-006-01, 0.14 acres), 3610 San Pablo Avenue (APN 049-0950-008-01, 0.11 acres), and 3620 San Pablo Avenue (APN 049-0950-001-00, 0.14 acres) for a total area of 0.39 acres. 3600 San Pablo Avenue was formerly a restaurant (Doug’s Barbeque) and is currently vacant. 3610 San Pablo Avenue is currently leased to the Emeryville Citizens Assistance Program (“ECAP”), a community services organization that provides food, household goods, and services to the homeless and near-homeless. The front portion of 3620 San Pablo Avenue was formerly the location of a locksmith (Golden Gate Key and Lock) while the rear portion is warehouse space; both are currently vacant.
Property Acquisition
The Site fell into foreclosure and later the owner filed for bankruptcy. On August 1, 2019, the bankruptcy court approved a purchase agreement between the former owner and RCD for the Site and designated RCD as the “stalking horse bidder” for a sale of the Site.
On September 17, 2019, the City Council directed staff to move forward with preparing loan documents and any associated regulatory documents to facilitate RCD’s acquisition of the Site for the purpose of developing affordable housing.
On November 22, 2019, the City entered into a Predevelopment Loan Agreement with Evoy, L.P. (a subsidiary of RCD) to provide $2,000,000 for RCD’s acquisition of the Site. As a condition of the Predevelopment Loan Agreement, RCD is to redevelop the property into affordable housing with at least 25% of the units set aside for permanent supportive housing and to provide a dedicated space for ECAP’s operations. The Predevelopment Loan Agreement is described in further detail below.
Development Funding Commitment/No Place Like Home Application In November 2020, RCD submitted a request to the City for a $14,747,486 development loan, of which $1,500,000 was proposed to be used for predevelopment expenses. On January 19, 2021, the City Council adopted Resolution No. 21-01, authorizing the City Manager to commit a total of $16,747,486 in permanent development financing (inclusive of the $2,000,000 loaned for acquisition as described above) towards the Project in support of a No Place Like Home (“NPLH”) competitive funding application that was due to the California Housing and Community Development Department (“HCD”) on January 19, 2021. The application for NPLH funding was successful and this program will provide $19,528,038 towards development of the Site.
On March 2, 2021, the City Council adopted Resolution No. 21-13 approving the Affordable Housing Bond Administration and Expenditure Plan (the “Expenditure Plan”). The Expenditure Plan guides the City’s allocation of Measure C General Obligation Affordable Housing Bond proceeds as well as additional resources available to the City to support affordable housing. The Expenditure Plan includes the City Council’s commitment of $14,747,486 to the Project by programming $5,920,760 from the Low and Moderate Income Housing Fund (Fund 298), $4,562,506 from the Affordable Housing Fund (Fund 299), $734,329 from the Affordable Housing Impact Fund (Fund 239), and $3,529,891 from bond proceeds to the 3600 San Pablo Avenue project.
Predevelopment Loan
As noted above, the Predevelopment Loan was initially issued for $2,000,000 at an interest rate not to exceed 3% for a term of three years and loan proceeds were used for RCD’s acquisition of the Site. The loan is secured by a deed of trust recorded against the Site incorporating an Affordable Housing Agreement which requires the Site to be used for low-income housing for a term of 75 years, unless required by other lenders to be 55 years.
On June 1, 2021, the City Council adopted Resolution No. 21-48 which authorized the execution of the First Amendment to Predevelopment Loan Agreement updating the milestones in the agreement and providing an additional $1,500,000 for predevelopment costs for an amended total of $3,500,000. The Predevelopment Loan Agreement was further amended administratively, twice: once to extend the term of the agreement and update development milestones, and once to provide an additional $1,000,000 for predevelopment costs, bringing the total amount of funding provided under the Predevelopment Loan Agreement to $4,500,000.
Entitlements
RCD proposed the project be processed under the provisions of Senate Bill (“SB”) 35 and Assembly Bill (“AB”) 1763. Zoning applications processed under SB35 are subject to ministerial approval (i.e. staff level) and AB1763 requires no density limit for projects within one-half mile of transit. On October 20, 2020, the Community Development Director ministerially approved the zoning application in compliance with SB35 and AB1763 to develop a new seven-story building with 89 affordable residential units and one resident manager’s unit, with ground floor commercial space for ECAP (the “Project”).
Project Description
The entitled Project includes a seven-story apartment building containing 90 residential units and 4,600 square feet of commercial space for ECAP to continue providing food distribution for low-income residents. All of the units, except the manager’s unit, will be affordable to extremely low- and low-income households (i.e. 20-60% of Area Median Income). Community spaces will include a community room with a common kitchen, flexible amenity space and outdoor space located on the second floor. Property management and resident services offices will also be located on-site. The Project will also include 30 parking spaces and secure storage for at least 90 bicycles. Fifty percent of the units (27 studio units and 18 one-bedroom units) will be reserved for special needs populations including formerly homeless households. An RCD Resident Service Manager will serve all residents and a third-party case management provider will serve formerly homeless households. Upon securing financing, construction is anticipated to start in Summer 2023 and be complete in approximately 24 months.
Article 34 Authority
Article XXXIV of the Constitution of the State of California (“Article 34”) provides that “no low-rent housing project shall … be developed, constructed or acquired in any manner by any state public body until a majority of the qualified electors of the city … in which it is proposed to develop, construct, or acquire the [project], voting upon such issue, approve such project by voting in favor thereof at an election to be held for that purpose, or at any general or special election”. On June 5, 2018, the voters in the City of Emeryville approved Measure C, which provides for the issuance of up to $50,000,000 in general obligation bonds for affordable housing programs and provided the approval required by Article 34, authorizing an additional 500 affordable housing units. The City will restrict the affordability of 89 of the housing units in the Project to low-income households, thereby utilizing 89 of the City’s 500 units of Article 34 Authority. On June 1, 2021, the City Council adopted Resolution No. 21-48 which documented the City’s allocation of 89 units of Article 34 authority to the Project.
Affordable Housing and Sustainable Communities Application On February 26, 2021, HCD and the California Strategic Growth Council (“SGC”) released a Notice of Funding Availability for Cycle 6 AHSC with up to $30 million available per project for Transit-Oriented Affordable Housing Developments and Transportation Related Infrastructure projects. The AHSC Program is part of the State’s California Climate Investments Program, a statewide program that uses Cap-and-Trade auction proceeds to fund projects and programs that reduce Greenhouse Gas emissions, strengthen the economy, and improve public health and the environment, particularly in disadvantaged communities.
RCD proposed a collaboration with Bay Area Rapid Transit District (“BART”) and the City to submit a joint application for $20,015,822 in AHSC funds to support the Project, acquisition of a new BART train car, and bicycle and pedestrian improvements associated with the 40th and San Pablo Bus Hub Project. On April 8, 2021, the Transportation Committee provided support for the AHSC application and on April 20, 2021, the City Council also provided unanimous support in moving forward with the application process for AHSC funds. The application for AHSC funds was successful, and this program is providing $10,123,184 towards development of the Site, and $9,892,638 for the transportation-related elements of the AHSC application.
California Housing Accelerator Program Application
In April 2022, RCD submitted an application for funding from the California Housing Accelerator Program. The California Housing Accelerator Program is intended to provide forgivable loans to expedite the construction and production of qualified projects that have an existing loan commitment from one or more state loan programs but are unable to move forward due to funding gaps due to the current shortage of tax-exempt bond allocations and low-income housing tax credits. The application for California Housing Accelerator Program funds was successful, and this program is providing $44,124,677 towards development of the Site.
Discussion
Amended and Restated Loan Agreement
As noted above, on January 19, 2021, the City Council authorized the commitment of a total of $16,747,486 for the Project. Of this amount, $4,500,000 has been expended on predevelopment costs (including acquisition) under the terms of the Predevelopment Loan Agreement, as amended. The Project is fully entitled and, with the award of California Housing Accelerator Program funds described above, RCD has obtained the necessary financing to proceed with construction.
Staff and RCD have negotiated the Amended and Restated Loan Agreement (see Exhibit A to the second attached Draft Resolution) consistent with the terms of the City’s prior commitment. Specifically, the Amended and Restated Loan Agreement provides a total of $16,747,486 in permanent development financing, inclusive of the $4,500,000 already committed and expended for predevelopment costs. New funding provided under the Amended and Restated Loan Agreement totals $12,247,486. As indicated in the City’s prior commitment, the terms of the loan include 3% simple interest and the loan is repaid through the City’s share of residual receipts over a 75-year term. The loan is secured by a Deed of Trust and Regulatory Agreement, which were previously negotiated as part of the Predevelopment Loan Agreement and are to be modified to reflect the Amended and Restated Loan Agreement.
The following tables depict the proposed uses and sources of development funding for the Project:
DEVELOPMENT USES
AMOUNT
Acquisition
2,988,283
New Construction
53,587,820
Architectural Fees
1,953,000
Survey & Engineering
880,961
Construction Interest & Fees
4,950,873
Permanent Financing
15,000
Legal Fees
135,182
Reserves
13,884,436
Permits and Fees
4,255,858
Construction Contingency
3,758,517
Other
3,664,040
Developer Fee
2,200,000
Insurance
355,000
Total Uses
$92,628,970
DEVELOPMENT SOURCES
AMOUNT
City Acquisition Loan
2,000,000
Accrued Deferred Interest - City CIP Acquisition Loan
53,652
Proposed City Development Loan
14,747,486
Accrued Deferred Interest - City Development Loan
395,465
HCD Housing Accelerator Program Loan
44,124,677
HCD AHSC Loan
10,123,184
HCD AHSC Grant
268,004
HCD NPLH Loan
12,072,057
HCD NPLH Capitalized Operating Reserve
7,455,981
DTSC Equitable Community Revitalization Grant
575,000
Donated Land Value
650,000
Rent Revenue
163,484
Total Sources
$92,628,970
Budget Appropriations
As outlined above, the Expenditure Plan programmed a total of $14,747,486 in City funds (which amount excludes the $2,000,000 acquisition loan that predated the Expenditure Plan) to the Project as follows:
Fund
Amount
Low and Moderate Income Housing Fund (298)
$5,920,760
Affordable Housing Fund (299)
$4,562,506
Affordable Housing Impact Fee Fund (239)
$734,329
Measure C Affordable Housing Bond (TBD)
$3,529,891
Total
$14,747,486
Of this amount, $2,500,000 in Low and Moderate Income Housing Funds have already been expended through the Predevelopment Loan Agreement, consequently the Amended and Restated Loan Agreement provides an additional $12,247,486 in new funding, $3,529,891 of which is to be funded by Measure C Affordable Housing Bond (“2023 General Obligation Bond”) proceeds.
On February 21, 2023, the City Council adopted Resolution No. 23-22 which authorized the issuance and sale of up to $50,000,000 of the City’s 2023 General Obligation Bonds and related actions. On April 4, 2023, the City Council adopted a resolution authorizing the distribution of a Notice of Intention to Sell Bonds, Notice of Sale, and a Preliminary Official Statement in connection with the issuance and sale of up to $50,000,000 in 2023 General Obligation Bonds. The bonds are anticipated to be sold and proceeds available to the City on May 10, 2023, and, in recognition of the timing of the Project, the authorizing resolutions and related documents allow for the City to advance funds to eligible projects prior to the sale of the bonds and be reimbursed from bond proceeds once available.
In order to execute the Amended and Restated Loan Agreement in advance of the sale of the bonds, staff proposes appropriation of funds from available cash balances in the Low and Moderate Income Housing Fund, Affordable Housing Fund, and Affordable Housing Impact Fee Fund to the Fiscal Year 2022-2023 Operating Budget for “Loans to Developers” (Fund number as applicable, account 88120), with $3,529,891 reimbursed to these funds upon sale of the bonds, as follows:
Fund 298
Fund 299
Fund 239
Bond Fund
Total
Available FY23 Budget
3,420,760
4,562,406
0 N/A
7,983,166
Proposed Appropriation
1,346,240
1,800,080
1,118,000
N/A
4,264,320
Proposed Loan (budget plus appropriation)
4,767,000
6,362,486
1,118,000
0 12,247,486
Bond Reimbursement
1,346,240
1,799,980
383,671
-3,529,891
N/A
Final Amounts (post-reimbursement)
3,420,760
4,562,506
734,329
3,529,891
12,247,486
Staff notes that while the appropriations outlined above are required in order to approve the Amended and Restated Loan Agreement in advance of the sale of the bonds, RCD will not require all of the funds immediately at closing of financing. Rather, RCD estimates a closing draw of approximately $4,500,000 and the remainder of the loan will be drawn over the course of construction of the Project. If the bonds are sold as planned in May 2023, RCD will not draw any of the advanced funds, but rather will draw the bond funds as programmed in the Expenditure Plan.
ENVIRONMENTAL REVIEW
This project is exempt from environmental review under California Government Code Section 8698.4(a)(4), which applies to actions taken by a City that has declared a shelter crisis to provide financial assistance to a homeless shelter; State CEQA Guidelines Section 15268(a), which applies to ministerial projects; State CEQA Guidelines Section 15269(c), which applies to specific actions necessary to prevent or mitigate an emergency; State CEQA Guidelines Section 15332, which applies to in-fill development projects; and the “general rule” at State CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility that the proposal may have a significant effect on the environment.
Fiscal Impact
As outlined in the preceding sections of this report, the amount proposed to be loaned to RCD for the Project is consistent with the Affordable Housing Bond Administration and Expenditure Plan adopted by the City Council on March 2, 2021. The proposed budget appropriations would advance available fund balances from the Low and Moderate Income Housing Fund, Affordable Housing Fund, and Affordable Housing Impact Fee Fund to allow the execution of the Amended and Restated Loan Agreement prior to the sale of Measure C Affordable Housing Bonds. The impact of this action is that until the Measure C Affordable Housing Bonds are sold (expected in May 2023) and the funds are reimbursed for this advance, the City will not have approximately $3,500,000 in cash balances that otherwise would have been available for appropriation for affordable housing projects and programs.
Staff Communication with the Public
On December 2, 2020, the Housing Committee voted to recommend that the City Council approve RCD’s request for a total commitment of $16,747,486 to support the Project. On April 8, 2021, the Transportation Committee voted to recommend that the City Council support RCD’s application for AHSC funding.
Conflict of Interest
None.
Conclusion
Staff recommends that the City Council adopt the attached resolution appropriating a total of $4,264,320 in available fund balances from the Low and Moderate Income Housing Fund, Affordable Housing Fund, and Affordable Housing Impact Fund to the Operating Budget for Fiscal Year 2022-2023 for the 3600 San Pablo Avenue Affordable Housing Project.
Staff also recommends the City Council adopt the attached resolution authorizing the City Manager to execute the Amended and Restated Loan Agreement with RCD for the development of the 3600 San Pablo Avenue Affordable Housing Project, converting the previously-executed Predevelopment Loan Agreement into permanent financing and increasing the total loan amount by $12,247,486 to an as-amended total of $16,747,486, consistent with the City’s prior commitment to the Project and the Expenditure Plan.
PREPARED BY: Valerie Bernardo, Community and Economic Development Coordinator II REVIEWED BY: Chadrick Smalley, Deputy Director of Community Development
APPROVED AND FORWARDED TO THE
CITY COUNCIL OF THE CITY OF EMERYVILLE:
Paul Buddenhagen, City Manager
ATTACHMENTS
Draft Resolution – Appropriating Available Fund Balances from Fund 298, 299, and 239 to the Fiscal Year 2023-2023 Operating Budget Draft Resolution – Authorizing Execution of the Amended and Restated Loan Agreement with RCD Exhibit A – Amended and Restated Loan Agreement
3600 San Pablo Avenue Affordable Housing Project
Budget Appropriations and Amended & Restated Loan Agreement | April 18, 2023
City of Emeryville
CALIFORNIA
MEMORANDUM