Attachment 3 - Proposal from HEART — Foster City City Council, May 4, 2026

City of Foster City
RFP Title: Below Market Rate Accessory Dwelling
Unit Loan Program
“Foster City Affordable ADU Program”
Loan Administration Only
Submission Date: Feb 20, 2026
Attn:

Nori Jabba, City of Foster City
Community Development
610 E. Hillsdale Blvd.

Foster City, CA 94404
650-286-3230
[email protected]
Firm Name: HEART of San Mateo County
Principle Contact Person: Tim Davis, Director,
Housing Consulting Services
Mailing Address: 2905 S. El Camino Real,
San Mateo, CA 94303
Phone Number: (650) 204-0958
Email Address: [email protected]
B
Cover Letter
Company Background and Experience
Project Team and Key Personnel
Conflict of Interest
C
D
E
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_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5 Acknowledgement of Business License
Requirement
Acknowledgment of Attachment A, Agreement
F
G
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Acknowledgement of Attachment B, Program
Guidelines
H
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Acknowledgement of Additional Requirements
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Scope of Work
J _________________________________________7
Cost Proposal
K
Contract Exceptions
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_________________________________________12
__________________________________13
Appendix
M __________________________________14
February 18, 2026
Nori Jabba, City of Foster City
Community Development
610 E. Hillsdale Blvd.

Foster City, CA 94404
RE: Proposal Submission – Below Market Rate Accessory Dwelling Unit Loan Program “Foster City Affordable ADU Program”
Dear Nori,
The Housing Endowment and Regional Trust of San Mateo County (“HEART”) is pleased to submit this response to the Request for Proposals (“RFP”) for the management of Foster City’s Affordable ADU Program. HEART is interested in supporting the City of Foster City in providing “Loan Administration Only” program, Program Type A.

HEART is a 501(c)(3) and Joint Powers Authority, created by the County of San Mateo and the county’s 20 municipal jurisdictions. HEART is located at 2905 S El Camino Real San Mateo, CA 94403, where all services will be performed.

Founded over 20 years ago, HEART has been chiefly known for its role as lender to 100% affordable projects within San Mateo County. In late 2023, HEART created the Housing Consulting Services Program (“HCS”), which contracts with local jurisdictions.

Under the HCS program, HEART is contracted to eight cities under a retainer model, and we are now expanding some of our services to other Cities, including loan administration. Our relevant experience includes:

Working with the County of San Mateo to launch and manage the Mobile Home Loan Program. In this program we administer loan amounts of up to $100,000. We drafted and implemented eligibility and underwriting terms and conducted community outreach that resulted in 40+ inquiries and the installation of 18 new units in a span of a year. We provided extensive technical assistance as they selected a vendor for their new home, and HEART staff spent a significant number of hours working with park owners to ensure that the new homes met park specifications. 2905 S. El Camino Real San Mateo, CA 94303 | (650) 204-0958. | www.heartofsmc.org A
Working with the City of Brisbane to oversee a HUD funded home repair program.

This program provides grants of up to $25,000 each for 20 low-income homeowners to make health and safety repairs and/or energy upgrades to their homes. While Good City served as the direct contact for homeowners, HEART reviewed eligibility and workplans, and as Good City’s contract expires, HEART will be taking on the efforts to work with homeowners to complete the repairs and close out the program.

Worked with 21 Elements and its Housing Managers working group to create a model BMR Manual that includes best practices for ADU’s, which we are now implementing with our contracted cities.

HEART is building its capacity to become a leader in the Bay Area on BMR unit management. In some cities, we are taking on a role that has been held by more established firms, working with developers on initial sales and lease ups of units, eligibility determinations, and annual recertifications. To manage this growth, HEART is acquiring the software and web capabilities needed to streamline the application and income certification process for BMR applicants and property managers. This technology will allow us to perform credit checks and income verifications. which we will also use for loan administration.

HEART is committed to assisting its member jurisdictions to fulfill their housing goals and create effective housing policies and programs. As such, HEART Is well positioned to be a reliable partner for the City of Foster City, as it launches this affordable ADU program.

Sincerely,
Armando Sanchez
Executive Director
2905 S. El Camino Real San Mateo, CA 94303 | (650) 204-0958. | www.heartofsmc.org B
HEART is a 501(c)(3) that was founded in 2003 as a Joint Powers Authority and public/private partnership among the cities in San Mateo County, the County, and the business, nonprofit, education, and labor communities to create more affordable housing in San Mateo County. To date, HEART has invested over $27 million to fund 1,632 affordable homes. To operate this loan program, HEART staff maintain expertise in affordable housing lending.

HEART’s ADU, Housing Consulting Services, and Mobile Home Loan Program are all relevant to work Foster City is hoping to accomplish through the Affordable ADU program. In 2018, through an award for climate protection funding from the Bay Area Air Quality Management District, HEART launched its ADU Program (“GLADUR”).

Through a 2-year intensive process, including 4 Open Houses, a specialized Ad Hoc Committee made up of key public and industry leaders, and a robust RFP process, HEART partnered with Open Scope Studios to create 4 green, all-electric, ADU designs that could be downloaded by the public at no cost. The goal was to remove the early obstacles of creating designs from scratch, which cost up to $30,000 and took several months, which would not only incentivize the development of green, all-electric ADUs.

In addition, HEART created a comprehensive online, green ADU handbook that provides key information and resources, and HEART partnered with local jurisdictions to pre-review the designs, to streamline the permitting process.

In late 2023, HEART launched its Housing Consulting Services (“HCS”) program, with the mission of providing housing policy and program services for cities in San Mateo County. Now entering its third year, the program has ongoing contracts with eight cities and is ready to take on work for other San Mateo County communities. HCS provides a full range of assistance to cities in their efforts to implement their Housing Elements and address the housing needs in their community. As part of this work, HCS is building its capacity to manage BMR units, from entitlement through to marketing, lease up/sale, and monitoring.

In cooperation with the County of San Mateo, HEART launched the Mobile Home Loan Program in late 2024 and has now completed 18 loans under this program.

C o m p a n y B a c k g r o u n d a n d E x p e r i e n c e C
1 For the Mobile Home Loan Program:

Nila Kim
Housing & Community Development Specialist
County of San Mateo Department of Housing
Office: 650.802.5002
[email protected]

For the Brisbane Home Repair Program & Housing
Consulting Services:

Julia Ayres
Acting Director, Community Development
City of Brisbane
Direct: (415) 508-2129 | Cell: (415) 519-0165
Email: [email protected]

For Housing Consulting Services:

Karen Camacho
Housing & Economic Development Manager
Phone (650) 853-3195
Email [email protected]
References
The following references are provided because the following individuals are most familiar with HEART’s efforts, like the work being proposed here.

C o m p a n y B a c k g r o u n d a n d E x p e r i e n c e :

R e f e r e n c e s
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2 The HEART Team
HEART’s project team brings together seasoned leadership, experienced program managers, and dedicated administrative support to ensure high-quality, compliant, and responsive BMR program administration for the City of Foster City.

Armando Sanchez, Executive Director, HEART of SMC
Armando joined HEART in 2016. He is a recognized housing professional with over 30 years of experience in real estate development, finance, management, and marketing. His background includes extensive consulting for government and non-profit agencies in the housing field, including BMR Administration for cities across California. He holds a BA from the University of California, Berkeley, and an MBA from the University of Washington, Seattle.

Project Role: Armando will provide Contract-Level Oversight, serving as HEART’s authorized representative for contractual decisions. He will be available to resolve high-level issues, support coordination with City leadership, and ensure that the services delivered meet the City’s expectations and contractual requirements.

Tim Davis, Director of Housing Consultant Services, HEART of SMC Tim joined HEART in 2023, having recently moved to the Bay Area from Boston, Massachusetts, where he served as the Deputy Director for Policy Development & Research at the City of Boston Mayor’s Office of Housing.

With over 30 years of experience working in housing across a range of organizations including non-profits, local government, a large community foundation, and as a consultant, Tim has been engaged in a range of programs and issues including homebuyer initiatives, affordable housing development, inclusionary housing requirements, affirmatively furthering fair housing, and housing policy development and implementation. Tim holds a BA from Macalester College (St. Paul, MN), and an MPA from the Harvard Kennedy School of Government (Cambridge, MA). Tim currently oversees all of HEART’s housing consulting services and BMR administration efforts.

Project Role: Tim will provide program oversight and policy direction while supervising the Program Manager and reviewing complex eligibility or compliance cases. Tim will ensure that all ADUs comply with Foster City Municipal Code Chapter 17.78 and the City’s Below Market Rate Housing Program Requirements.
3 P r o j e c t T e a m a n d K e y P e r s o n n e l D
Boris Vatkin, Director, Housing Programs
Boris joined HEART in 2017 to help manage and grow HEART’s housing programs. Boris currently directs all of HEART’s housing programs. He also works with the Executive Director to develop the organization’s corporate and program strategy and in the development of long-range programs, including the Mobile Home Loan Program. He has a background in real estate law and has worked in residential and commercial real estate, including for a Fortune 500 company. He holds a BS from the University of California, Berkeley, and a JD from Brooklyn Law School. Relevant to this RFP, Boris has overseen HEART’s efforts to provide owners with free ADU construction plans and is currently overseeing the Mobile Home Loan Program.

Project Role: Given Boris’s prior experience with HEART’s ADU program, as well as the leadership he provides to the Mobile Home Loan Program, Boris will advise on the terms of the ADU loan program, as well as where necessary during the loan underwriting process.

Alex Waggoner, Project Manager of Housing Consultant Services, HEART of SMC
Alex joined HEART in late 2024. Alex is an experienced housing policy professional, working at the Oakland Housing Authority, Los Angeles City Council, and many other government agencies and nonprofits. During his time with the Oakland Housing Authority, Alex worked on income certifications for a variety of different HUD programs, including HCVs, PBVs, and other housing related programs. He also worked with property managers to certify annual occupancy and eligibility reports and ensure adequate record keeping and resident satisfaction. Alex has worked on various topics including policy development and implementation, operations, language services, and data analysis. Alex holds a BA and master's in public administration from the University of Southern California. Relevant to this RFP, Alex currently oversees the day-to-day activities of HEART’s Mobile Home Loan Program.

Project Role: Alex will lead HEART’s efforts in this program, and will complete many of the same tasks that he had undertaken for the Mobile Home Loan Program, including outreach efforts, processing loan applications (including determining eligibility and underwriting the loans), managing loan closings, providing assistance to borrowers during the contracting and construction/installation process, and overseeing loan repayments.
4 C o n f l i c t o f I n t e r e s t
No Conflict of Interest
HEART presently has no interest and will not acquire any interest—direct or indirect, financial or otherwise—that would conflict in any way with the performance of the services described in this Request for Proposals (RFP) and will not employ any person having such an interest.

HEART agrees to advise the City immediately if any conflict arises. HEART further understands that the agency and their staff must abide by all applicable statutes, rules, and regulations regarding conflicts of interest, including the Political Reform Act, Government Code Section 1090, and all implementing regulations, including Title 2, Division 6, Section 18700 of the California Code of Regulations.

Enclosed are the most recent annual report and audited financial statements.

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5 A c k n o w l e d g e m e n t o f B u s i n e s s L i c e n s e R e q u i r e m e n t
HEART will maintain a Foster City business license for the term of the contract.

F
A c k n o w l e d g m e n t o f A t t a c h m e n t A , A g r e e m e n t HEART hereby acknowledges and agrees that it has reviewed the City’s standard Professional Services Agreement, including Exhibits A, B, and C. HEART is suggesting the following changes to the insurance requirements:

Pg. 24: Under General Liability Insurance, HEART has insurance of $2 million per occurrence and $4 million aggregate, which is higher than the $5 million required.

Pg. 25: HEART seeks a lower level of professional liability insurance, at $2 million (down from $5 million).

G
6 After reviewing the program guidelines, HEART, if selected, would like to address the following in the program guidelines.

1. Homeowner Applicant Qualifications
The program allows an income eligible homeowner to occupy the ADU. Is the intent here that the owner of the entire property would be allowed to live in the ADU and rent out their main house? This should be clarified. (pg 35).

AB 1033 allows a city to opt into allowing an owner of a home and ADU to create a two-unit condominium and sell the ADU, as a condominium unit. We assume that this is not an intended use of the program. If so, this prohibition should be included. (ADD TO PAGE 35)

3. Project Requirements (PG 39)
e) Applicant/Homeowner Obligations
It appears the landlord is responsible for certifying/recertifying tenant eligibility.

Given that these are not traditional landlords, HEART recommends that the City or its designee (which could be HEART) will take on this task.

Application and Selection Process (PG 41)

2. Pre-Loan Application Steps
As HEART is taking on the loan administration aspects of the program, and not the construction aspects, HEART will need to discuss with the City and any additional partners what HEART’s role will be in assessing feasibility of a particular site for an ADU, especially if the program is one in which the homeowner, on their own, is selecting an ADU model and contractor/vendor.

A c k n o w l e d g e m e n t o f A t t a c h m e n t B , P r o g r a m G u i d e l i n e s
H
A c k n o w l e d g e m e n t o f A d d i t i o n a l R e q u i r e m e n t s HEART acknowledges the following requirements and will:

1.Maintain a filing system that meets the funding sources’ requirements.

2.Participate in any program reviews or audits.

3.Maintain accounting of available project funds and process clients based on funding availability.

4.Provide data for any required quarterly and annual funding reports.

5.Manage program workflow to ensure the timely completion of work.

6.Confer with the City to review any proposed revisions of program guidelines as necessary.

I
HEART will fulfill the scope of work for tasks 1-5, according to the schedule below. It is anticipated that all guidelines and documentation will be completed before the end of the second quarter. Outreach and program marketing would begin in the last part of the second quarter. While the initial applicants may be reviewed as early as the third quarter, actual loan closings may not occur until year two, given the time it will take for applicants to secure a contractor and permits.

S c o p e o f W o r k
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7 J e s u s a n d G r i s e l d a L o p e z s t a n d i n f r o n t o f t h e i r n e w m o b i l e h o m e , w h i c h w a s r e p l a c e d u s i n g a s u b s i d i z e d l o a n f r o m t h e H E A R T o f S a n M a t e o C o u n t y ’ s M o b i l e H o m e L o a n P r o g r a m . ( P h o t o c o u r t e s y o f H E A R T o f S a n M a t e o C o u n t y ) a s s e e n i n T h e M e r c u r y N e w s : h t t p s : / / w w w . m e r c u r y n e w s . c o m / 2 0 2 5 / 1 2 / 0 4 / s u b s i d i z e d - m o b i l e - h o m e - l o a n s - s a n - m a t e o - c o u n t y / YEAR 1
Task Quarter 1 Quarter 2 Quarter 3 Quarter 4
Project Initiation
and Project
Management
Complete kick-off
meeting;
Review objectives,
roles,
communication
procedures, and
reporting
expectations.

Refine project
timeline
Task completed
Program
Administration
and
Homeowner
Intake
Develop loan
applications.

Draft outreach
materials
Finalize outreach
materials

Begin program
outreach
Work with initial
applicants to
complete
applications
Continue work with
applicants
Loan Origination,
Underwriting and
Servicing
Draft loan
documents,
underwriting
procedures, and
criteria,

Identify private
financing options

Evaluate program
guidelines
Finalize loan
documents,
underwriting
procedures, and
criteria.

Finalize program
guidelines

Establish loan re-
use account
Underwrite initial
applications

Make initial loan
commitments
Continue
underwriting and
loan commitments
Affordability
Compliance and
Reporting
Draft affordable
housing
agreements
Finalize
affordable
housing
agreements
Reporting and
Records
Management
Establish systems
for tracking loans
and affordable
housing
agreements
Prepare year-end
report on progress
and status of any
loan commitments
8 Task YEAR 2 YEAR 3
Program Administration
and Homeowner Intake
Ongoing outreach

Check in at end of year two on
program progress/need for
changes
Ongoing outreach

If changes are proposed, roll
out changes
Loan Origination,
Underwriting and Servicing
Continue underwriting

Close first loan (early in 2nd year)

Begin servicing of first loan

As part of year two check in,
examine and, if needed, change
loan terms
Continue underwriting,
closings, and servicing of loans

Rollout any changes in
underwriting
Affordability Compliance
and Reporting
Finalize first tenant income
certifications
Ongoing: income certifications
and recertifications
Reporting and Records
Management
Prepare quarterly reports for City
on spending and fund
availability, semi-annual reports
on more general activities.

Prepare quarterly reports for
City on spending and fund
availability, semi-annual reports
on more general activities.

During years two and three, the work will focus on maintaining and overseeing the program, while also providing opportunities for HEART and the City to check in on whether changes should be made to the program.
9 The individual tasks are outlined in more detail below.

Task 1: Project Initiation and Project Management
HEART will undertake the scope of work related to Task 1, which is outlined in the RFP as:

At the start of the project, the consultant will participate in a kick-off meeting with City staff to review objectives, roles, communication procedures, and reporting expectations.

The Contractor will work with staff to refine and confirm the project timeline. Ongoing project management responsibilities include regular check-ins, progress updates, coordination, budget tracking, and responsive communication.

Task 2: Program Administration and Homeowner Intake
HEART will create a process for outreach, intake, and selection of homeowners based on City guidelines and relevant state and federal law to create an efficient, equitable, and responsive process. HEART will draft clear process documents for intake, selection, and loan signing, as well as an outreach strategy with sample documents. The Mobile Home Loan Program is the model we will use, and which required regular communication with the County of San Mateo, while also working closely with vendors monitoring the installation of new units housing units.

Additionally, HEART has contracted with RentManager as a secure database for income verification, loan documents, and communication with applicants.

Task 3: Loan Origination, Underwriting, and Servicing

The loan sizes anticipated under this program (up to $150,000) are similar to those HEART underwrote for the Mobile Home Loan Program (MHLP). As with the MHLP, HEART determined eligibility and underwrote the loan for each participant. In the case of this ADU loan program, it is understood that determining eligibility will focus on:

The type of property and suitability for the construction of an ADU, Current monetary encumbrances on the property,
The use of funds,
The type, size, and design of ADU proposed, and
The owner’s commitment to lease the ADU to a low-income tenant.

HEART staff are familiar with the legal documents required to secure the loan on the property and place a 10-year rent restriction on the ADU.

HEART will manage loan repayments made to the re-use account and provide reports to the City no less than annually on loan payments and the re-use account balance. HEART, as a housing endowment trust, is well positioned to manage these funds, as it has done for the funds it loans out to affordable development projects. 1 0
Task 4: Affordability Compliance and Reporting
HEART Through the Housing Consulting Services and Mobile Home Loan Programs, HEART has gained experience certifying program eligibility and monitoring annual compliance, for both homeowner and rental units, as well as for homeowners in the Brisbane Home Repair Program and for participants in the Mobile Home Loan Program.

Based on this experience, HEART is launching new web-based systems which will be used to track both homeowners and their ADU tenants, securely store certification and program documentation, and create compliance reports, as needed. HEART will report no less than quarterly on the status of loans, ADU construction status, and regular monitoring. HEART will contact the City promptly to address any program or compliance concerns.

Task 5: Reporting and Records Management
HEART has a secure and reliable records management system through RentManager, which has separate records for each homeowner and their tenants, where we will store and retain all relevant records for easy access as necessary. HEART will meet with staff quarterly to update on the status of the program, discuss progress, and any issues.

Further, HEART will submit an annual report with relevant details, challenges, and successes.
1 1
C o s t P r o p o s a l
K
1 2
Expense Cost Notes
Homeowner Loans $1,100,000 Assumes four loans at $125,000 and four loans at $150,000
Contractor Fees
Marketing
Vendor Relations (if
needed)
Applicant Outreach/
Assistance
Application Review
Pre-Closing
Closing
Installation/Inspections
Meetings and Reports
Contingency
Total 370 Hours $51,070
25 Hours $3,225
60 hours $7,740

70 Hours $9,030

80 Hours $10,320
30 Hours $3,870
30 Hours $3,870
50 Hours $6,450
25 Hours $3,225
7% $3,340
Include the applicant selection and
approval process, preparing loan
documents, underwriting and
closing loans, and managing loan
disbursements during the
construction process.

Loan Servicing Fees
Total: $2,240
Loan Set Up: $440
Loan Monitoring (est):

Up to $1,800
Loan monitoring only needed for
non-compliant loans
Affordable Monitoring
Services
Total: $4,800
$500 per lease up (8) $4,000
$200 – recerts (4) $800
Assumes HEART will complete
tenant certifications and
recertifications
TOTAL: $1,158,110 Total, inclusive of homeowner
loans
Contract Exceptions
Upon review of the Professional Service Agreement, HEART is suggesting the following changes to the insurance requirements:

Pg. 24: Under General Liability Insurance, HEART has insurance of $2 million per occurrence and $4 million aggregate, which is higher than the $5 million required.

Pg. 25: HEART seeks a lower level of professional liability insurance, at $2 million (down from $5 million).

After reviewing the program guidelines, HEART, if selected, would like to address the following in the program guidelines.

AB 1033 allows a city to opt into allowing an owner of a home and ADU to create a two-unit condominium and sell the ADU, as a condominium unit.

We assume that this is not an intended use of the program. If so, this prohibition should be included. (ADD TO PAGE 35)

3. Project Requirements (PG 39)
e) Applicant/Homeowner Obligations
It appears the landlord is responsible for certifying/recertifying tenant eligibility. Given that these are not traditional landlords, HEART recommends that the City or its designee (which could be HEART) will take on this task.

Application and Selection Process (PG 41)

C o n t r a c t E x c e p t i o n s
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2 EXHIBIT C

SAMPLE INSURANCE REQUIREMENTS

CONTRACTOR shall provide, in addition to the Ce rtificates of Insurance, original Endorsement affecting the coverages specified in herein on the attached form. No substitute form will be accepted.

This is an Exhibit to, and made a part of and incorporated by reference to the Agreement dated Date of Agreement, by and between Consultant Name , hereinafter referred to as " Consultant”, and the City of Foster City, hereinafter referred to as " City", providing for professional services.

1. Consultant's Duty to Show Proof of Insurance. Consultant, in order to protect City and its Council members, officials, agents, officers, and employees against all claims and liability for death, injury, loss and damage as a result of Consultant's acts, errors, or omissions in connection with the performance of Consultant's obligat ions, as required in this Agreement, shall secure and maintain insurance as described below. Co nsultant shall not perform any work under this Agreement until Consultant has obtained all insurance required unde r this section and the required certificates of insurance and all required endorsements have been filed with the City's authorized insurance representative, insurance Tracking Services Inc. (ITS ). Receipt of evidence of insurance that does not comply with all applicable insurance requirements shall not constitute a waiver of the insurance requirements set forth herein. The required do cuments must be signed by the authorized representative of the insurance company shown on the certificate. Upon re quest, Consultant shall supply proof that such person is an authorized repr esentative thereof, and is authorized to bind the named underwriter(s) and their company to the co verage, limits and termin ation provisions shown thereon, Consultant shall prompt ly deliver to ITS a certificate of insurance, and all required endorsements, with respect to each renewal policy, as necessary to demonstrate the maintenance of the required insurance coverage for the term sp ecified herein. Such certificates and endorsements shall be delivered to ITS prior to the expiration da te of any policy and bear a notation evidencing payment of the premium thereof if so requested. Consultant shall immediately pay any deductibles and self-insured retentions under all required in surance policies upon the submission of any claim by Consultant or City as an additional insured.

1.1 Insurance Requirements

Commercial General Liability Insurance

Commercial General Liability Insurance including, but not limited to, Contractual Liability Insurance (specifically concerning the indemn ity provisions of this Agreement with the City ), Products-Completed Operations Haza rd, liability for slander, false arrest and invasion of privacy arising out of professi onal services rendere d hereunder, Personal Injury (including bodily injury and death), and Property Damage for liability arising out of Consultant's performance of services under this Agreement. The Commercial General Liability insurance shall contain no exclusions or limitation for independent contractors working on the behalf of the named insured. Consultant shall ma intain the Products- Completed Operations Hazard coverage for the longest period allowed by law following

3 termination of this Agreement. The amount of said insurance coverage required by this Agreement shall be the policy limits, which shall be at least two million dollars ($2,000,000) each occurrence and fourfive million dollars ($45,000,000) aggregate.

*Please note, the City will require a separate additional insured endorsement for the Commercial General Liability policy, listing the “City of Foster City, its Council members, officials, agents, officers, and employees”.

☒ Business Automobile Liability Insurance

Automobile Liability Insurance ag ainst claims of Personal Inju ry (including bodily injury and death) and Property Damage covering any vehicle and/or all owned, leased, hired and non-owned vehicles used in the performance of Services pursuant to this Agreement with coverage equal to the policy limits, which shall be at least two million dollars ($2,000,000) each occurrence.

☒ Workers' Compensation Insurance

Consultant shall submit written proof that Consultant is insured against liability for workers' compensation in accordance with th e provisions of section 3700 of the California Labor Code. Consultant shall require an y Subconsultants to provide workers' compensation for all of the Subconsultan ts' employees, unless the Subconsultants' employees are covered by the insurance afforded by Consultant. If any class of employees engaged in work or services performed under this Agreement is not covered by California Labor Code section 3700, Consultant shall prov ide and/or require each Subconsultant to provide adequate insurance for the covera ge of employees not otherwise covered.

Consultant shall also maintain employer's liability insu rance with limits of one million dollars ($1,000,000) for bodily injury or disease.

☒ Professional Liability Insurance

Professional Liability (Errors and Omissions) Insurance, for liability arising out of, or in connection with, all negligent ac ts, errors or omissions in co nnection with services to be provided under this Agreement, with no exclusion for claims of one insured against another insured, with coverage equal to the poli cy limits, which shall not be less than twofive million dollars ($ 52,000,000) per occurrence and twofive million dollars ($ 52,000,000) aggregate.

☒ Installation Floater

Installation Floater, covering the work perf ormed under this Contract , against all risks of direct physical loss. The policy shall cover the Contractor’s labor, materials and equipment, including materials and equipment in transit or away from the project site, to be installed in the existing structure(s). The coverage shall be writte n for an amount equal to the initial contract amount plus the value of any subsequent change orders, subject to

4 a deductible of not more than [$10,000] payable by Contractor.

□ Cyber Liability Insurance

Cyber Liability Insurance, covering network risk and cyber liability (including coverage for unauthorized access, failure of security, breach of privacy perils, as well at notification costs and regulatory defense) in an amount of not less than $1,000,000. Such insurance shall be maintained in force at all times during the term of the Contract and for a period of two years thereafter for services comple ted during the term of the Contract.

1.2 Self-Insured Retention

Any self-insured retentions in excess of $100 ,000 must be declared on the Certificate of insurance or other docume ntation provided to City and must be approved by the City Risk Manager.

1.3 Claims-Made Basis Coverage

If any of the insurance coverages required under this Agreement is written on a claims-made basis, Consultant, at Consultant's option, shall either (i) maintain said coverage for at least five (5) years following the termination of this Agreement with coverage extending back to the effective date of this Agreement; (ii) purchase an extended reporting period of not less than five (5) years following the term ination of this Agreement; or (iii) acquire a full prior acts provision on any renewal or replacement policy.

2. City as Additional Insured

On Consultant's Commercial General Liability a nd Automobile policies, the City, its Council members, officers, directors, agents, empl oyees, and volunteers , shall be named as additional insured's, but only with respect to liability arising out of the activities of the named insured. Any endorsement shall be provided using one of the following three options:
(i) on ISO form CG 20 10 1 1 85; or (ii) on IS O form CG 20 37 10 01 plus either ISO form CG 20 10 10 01 or CG 20 33 10 01; or (iii) on such other forms which provide coverage at least equal to or better than form CG 20 10 1 1 85.

3. Insurance terms and conditions:

3.1 Cancellation of Insurance

The above stated insurance coverages required to be maintained by Consultant shall be maintained until the completion of all of Co nsultant's obligations under this Agreement except as otherwise indicated herein. Each in surance policy supplied by Consultant shall not be suspended, voided, cancelled or reduced in coverage or in limits except after ten (10) days written notice by Consultant in the case of non-payment of premiums, or thirty (30) days written notice in all other ca ses. This notice requirement does not waive the insurance

5 requirements stated herein. Consultant shall immediately obtain replacement coverage for any insurance policy that is terminated, cancel ed, non-renewed, or whose policy limits have been exhausted or upon insolvency of the insurer that issued the policy.

3.2 All insurance shall be issued by a company or companies admitted to do business in California and listed in the current "Best's Ke y Rating Guide" publication with a minimum rating of A-; VII Any exception to these requi rements must be approv ed by the City Risk Manager.

3.3 If Consultant is, or becomes during the te rm of this Agreement, self-insured or a member of a self-insurance pool, Consultant shall provide coverage equivalent to the insurance coverages and endorsements required above. The City will not accept such coverage unless the City determines, in its sole discretion and by written acceptance, that t h e c o v e r a g e p r o p o s e d t o b e p r o v i d e d b y C o n sultant is equivalent to the above-required coverages.

3.4 For any claims related to the Agreement, the Consultant’s insurance coverage shall be primary insurance coverage at least as broad as ISO CG 20 01 04 13 as respects the City , its officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by the City, its officers, officials, employees, or volunteers shall be excess of the Consultant’s insurance and shall not contribute with it.

3.5 Insurance coverages in the minimum amounts set forth herein shall not be construed to relieve Consultant for any liability, whether wi thin, outside, or in excess of such coverage, and regardless of solvency or insolvency of the insurer that issues the coverage; nor shall it preclude the City from taking such other ac tions as are available to it under any other provision of this Agreement or otherwise in law.

3.6 Failure by Consultant to maintain all such insurance in effect at all times required by this Agreement shall be a material breach of th is Agreement by Consulta nt. City, at its sole option, may terminate this Agreement and obtain damages from Consultant resulting from said breach. Alternatively, City may purchase such required insurance coverage, and without further notice to Consultant, City shall deduc t from sums due to Consultant any premiums and associated costs advanced or paid by City for such insurance. If the balance of monies obligated to Consultant pursuant to this Agreement are insufficient to reimburse City for the premiums and any associated co sts, Consultant agrees to reimburse City for the premiums and pay for all costs associated with the purchase of said insurance. Any failure by City to take this alternative action shall not relieve Consultant of its obligation to obtain and maintain the insurance coverages requ ired by this Agreement.

3.7 Should any of the required insurance (other than errors and omis sions insurance) be provided under a form of coverage that includes a general annual aggregate limit or provides that claims investigation or legal defenses co sts be included in such general aggregate limit,

6 such general annual aggregate limit shall be double the occurrence or claims limit specified above.

3.8 City may (but is under no obligation to) se cure project-specific insurance, wrap-up insurance, or administer an owner controlled insurance program ("OCIP"), in which case Consultant and its subconsultan ts shall communicate this fact to their insurance carriers and request that the risk of this project be excluded from their practice policies. Consultant's fees under this Agreement (and the fee of its subconsultants under subconsultant agreements) shall be reduced by the amount of insurance premiums that may be avoided by Consultant and its subconsultants by virtue of the City's obtaining the project-specific insurance, wrap-up insurance or administering an OCIP, and the exclusion of this project from coverage of Consultant's and subconsultants policies. Construction Manager and its subconsultants shall afford City access to their books and records and cooperate with City in verifying the amount of savings realized.

7 DRAFT PROGRAM GUIDELINES

8 CITY OF FOSTER City of Foster City

BELOW MARKET RATE ACCESSORY DWELLING UNIT LOAN PROGRAM
“FOSTER CITY AFFORDABLE ADU PROGRAM”

DRAFT PROGRAM AND LOAN UNDERWRITING GUIDELINES

PROGRAM SUMMARY
The City of Foster City’s (“City”) Below Market Rate Accessory Dwelling Unit Loan Program, known as the Affordable ADU Program (“Program”) provides financial incentives for Foster City Homeowners to build an affordable Accessory Dwelling Unit on their property if they agree to rent the ADU at below market rates to lower income households for a period of 10 years.1

The City will enter into an agreement with a third-party contractor (“Contractor”) pursuant to which the City will provide a portion of financing for a minimum of eight (8) ADU projects at no interest to the homeowner for eligible projects within Foster City. E ligible homeowners will be selected on a first-come, first-served basis.

The Contractor will serve in one of the following roles:

A. Provide and manage financing only – homeowners find their own ADU general contractor/provider (“Program A”)
B. Contractor will serve as both the general contractor for custom-built ADUs and provide and manager of financing of the ADUs for the homeowners (“Program B”), or C. Contractor will serve as the seller for pre-manufactured or prefabricated ADUs, manager of installation, and manager of the financing of the ADUs for the home owners (“Program C”).

If Contractor provides both management of financ ing and serving as the general contractor for the ADU project, Contractor may construct custom-built or pre-manufactured ADUs through its sales division or general contracting division or have or will have an agreement with an ADU builder or manufacturer to construct/install ADUs.

Eligible projects include single story detached or garage conversion accessory dwelling units (ADUs) on the homeowner’s property purchased through the Contractor. Junior (inter ior) ADUs are not eligible for the program at this time.

Through this Program, the City provides funding to the Contractor, subject to oversight provisions and other terms and conditions specified in the Agreement, that the Contractor will then use to issue no-interest interest loans for terms up to 20 years for up to $125,000 at no interest to Foster City Homeowners Figure 1. Example of a pre-
manufactured ADU for illustrative
purposes only
toward the cost of building/installing the ADU. The City financing incentive increases to $150,000 if the Homeowner agrees to rent their ADU with a preference for those with special needs (as defined in the

1 See program rules. ADU may be rented to Homeowner’s family member(s) or may be owner-occupied provided the occupants of the ADU are income qualified. Lower income is defined as earning less than 80% of Area Median Income.

City of Foster City Affordable ADU Program RFP
9 From the 2023-2031 Housing Element, page HE-94: H-D-4-b ADU/JADU Financial Incentive Program. Provide or partner with another organization to provide a financial incentive program for single-family homeowners to construct an ADU/JADU that is restricted for lower-income households for 10-15 years, with an additional incentive amount for units subject to a preference for identified categories of special needs people who would benefit from coordinated onsite services, including but not limited to people with developmental disabilities. program guidelines). In addition, the program provid es expedited permitting and reduced permit fees.

The applicant will be able to select from a variety of quality ADU designs available from the Contractor.

The selected Contractor’s ADU designs for this program will be pre-reviewed by the City to accelerate permitting.

In return for the no-cost financing and accelerated permitting, participating homeowners must agree to rent their ADU at below market rates to income-qualified occupants or for a period of 10 consecutive years and agree to Program terms and conditions

2. Low-income homeowners have the option of
occupying their ADU and renting out their home.

The program is provided to implement the City’s 2023-2031 Housing Element, Program H-D-4-b, ADU/JADU Financial Incentive Program (page HE-94), which calls for the City to provide or partner with another organization to provide a financial incentive program for single-family homeowners to construct ADUs that are restricted for lower-income households for 10-15 years, with an additional incentive amount for units subject to a preference for identified categories of special needs people who would benefit from coordinated onsite services, including but not limited to people with developmental disabilities

PROGRAM GOAL
The goal of the Program is to facilitate financing of a minimum of eight (8) affordable ADUs to support the City’s 2023-2031 Housing Element Program H-D-4-b, which calls for eight (8) income-restricted ADU units to be financed by 2031 as part of the City’s goal of 24 ADUs constructed by 2031.

PROGRAM PARTICIPANTS
 Contractor: For programs A, B, and C, the Contractor manages the applicant selection and approval process, prepares loan documents, underwrites loans, issues and manages loans and manages the projects Contractor finances the project through their own financing Program using funds received from the City. For program B and C, the Contractor also provides construction of custom or installation of manufactured ADUs. Contractor team may consist of a team including but not limited to a) a licensed contractor and sub-contractors, b) a manufactured ADU manufacturer and/or seller, c) a loan servicing and/or loan underwriting service provider, d) a financing entity that provides loans. The type(s) of ADUs provided may be more limited than as specified in these Program Guidelines.

2 The homeowner may occupy the ADU themselves for any period of time during the 10-year periods, provided their household income is below the low-income limit. No rent is required for owner-occupied units.

City of Foster City Affordable ADU Program RFP
10  City of Foster City – issues funds for the Program; conducts oversight; provides annual ADU compliance
services to ensure ADU occupants meet low-income
requirements and rent of the ADU is set at affordable
rates for the 10-year period through a third-party or City staff.

 Homeowner – agrees to lease ADU at below market
rental rates to income-qualified occupants for 10 years.

Occupants may include family members or the
homeowner provided they are income qualified.

Homeowners must qualify as stated in the underwriting
guidelines below and agree to Program terms and
conditions.

PROGRAM INCENTIVES
 Incentive 1: Approved Foster City Homeowners
(“Homeowner” or “Applicant”) commit to renting their
ADU to qualified low-income tenant(s) for a period of 10 years at below market rental rates. In exchange, the
homeowner receives a no-interest loan to finance up to
$125,000 of the cost to purchase and install their ADU.  Incentive 2: Eligible Homeowners who agree to rent
their ADU with a preference for identified categories of special needs people who would benefit from
coordinated onsite services, including but not limited to people with developmental disabilities, will receive a no- interest loan to finance up to $150,000 of purchase and installation costs of their ADU. This additional incentive is provided to support the City’s approved 2023-2031
Housing Element, Program H-D-4-b.
 Incentive 3: The city provides accelerated permit
processing and for the building permit through the pre- reviewed plans.

PROGRAM AND LOAN UNDERWRITING GUIDELINES

1. HOMEOWNER APPLICANT QUALIFICATIONS

SAMPLE $300,000 PRE-

FABRICATEDADU

PROJECT

 Applicant must be an owner or be a trustee of a trust which owns the property for which applicant is applying.
 Only one loan per Applicant through the Program.

City Financing: $125,000, 0%
interest, loan term up to 20
years. Payments may be
deferred up to 10 years.

Contractor Financing:
$175,000, 6% financing, 20
years.

Homeowner buys ADU from
Contractor.

Contractor prepares
foundation, manages permits,
and installs ADU.

Homeowner agrees to rent
ADU only to qualified, low-
income renters for 10 years.

Tenants can be family
members or owner-occupied
as long as the occupant
income qualifies.

ADU Rent must be under the
maximum chargeable rent for
a low-income unit.

The City regulates the unit
under the City’s Below Market
Rate Housing Program.

City of Foster City Affordable ADU Program RFP
11  Applicant understands that the Program is limited to eight (8) loans in total unless funds remain available for additional loans.
 Applicants must commit to renting at below market rental rates for 10 years.  Applicants must commit to using Contractor to purchase and install or build the ADU, if the City’s program combines the City’s financing and ADU general contractor services.  Applicants must agree to complete Fair Housing training prior to completion of construction of the ADU.
 Applicants must comply with Foster City’s Anti-Displacement Strategy and Municipal Code Section 17.90 once the ADU is constructed and rented.
 Applicants must not have any liens or levies on title (court ordered judgements, tax liens, credit card, medical debt, etc.) of the Property.
 Before reviewing if the Applicant meets the qualifications for the Program, a preliminary title report will be obtained to confirm ownership of the Property, identify any relevant encumbrances, and confirm and there is no lien or levy from creditors or other parties on the Property. If the preliminary title report show s any liens or levies from creditors, or encumbrances which would interfere with the project or create added risks for lender, the application filed by the Applicant will be denied. However, they will be invited to re-apply if the Applicant satisfactorily resolves the issue and funds are still available.  Homeowner agrees to comply with the following ADU occupancy requirements:
o Homeowner must submit a report to the City annually by June 30 through the City’s BMR Rental Registry providing information on the unit, including rental rate, rental rate increase, occupancy, and lease terms.
o Homeowner must rent to an income qualified renter and enter into a 12-month initial lease.
o Homeowner must rent the unit for a minimum of $100 per month (except for owner- occupied units) and a maximum of the published rate as issued by the City of Foster City annually.
o Rental rates of occupied units are limited to a 5% rental rate increase per 12-month period. Vacant units are not subject to the 5% rate increase cap. o All occupants of a rented ADU must be on the lease.
o Occupants of the ADU are subject to the City’s occupancy standards as specified in the BMR Guidelines.
o Units cannot be vacant for more than 90 days in a calendar year unless owner can demonstrate a continuous good faith effort to rent the unit during the vacancy period. o ADUs in the Program can be owner-occupied if the owner is income-qualified to occupy the unit.
o For rented ADUs, Homeowner must agree to comply with the City’s minimum and maximum rental rates issued annually and effective July 1 of each year. o Homeowner must comply with the City’s BMR Guidelines. o Homeowner may rent the unit to an income-qualified family member or friend provided a lease is issued and all requirements are complied with. o For Homeowners agreeing to rent the unit with a preference for a household member with special needs, special needs is defined as supportive housing as stated in the City’s Municipal Code, Chapter 17.04.020:

City of Foster City Affordable ADU Program RFP
12 AB 1033 allows a city to opt into allowing an owner of a home and ADU to create a two-unit condominium and sell the ADU, as a condominium unit. We assume that this is not an intended use of the program. If so, this prohibition should be included City of Foster City Affordable ADU Program RFP
13 Additional information about supportive housing is available from the City.

2. ADU PROJECT ELIGIBILITY

a) Eligible Properties
 Single dwelling unit or duplex property located in Foster City where an ADU can be constructed and comply with the requirements of City Municipal Code section 17.78 (“Property”).
 The homeowner’s property shall not have more than two other loans (including a mortgage) and a loan-to-value that is no higher than 90% for all loans, excluding the ADU.  Property must meet Contractor’s eligibility requirements for the property and the project.

b) Eligible Uses of Loan Funds
 Loan funds may be used for construction, purchase, and/or installation of the ADU, site preparation, foundation construction, associated materials, demolition, installation, site work and labor of a new legal and feasible ADUs, including lot maximums, zoning, permitting, and any other requirements in Foster City Municipal Code section 17.78 for the Project (up to a maximum amount of $150,000 for the City’s loan for the project). This amount includes any applicable building permit fees or other fees charged by a public agency or utility as a result of the Project.
 Construction may be a prefabricated studio, one, or two-bedroom detached ADU that meets all City and State requirements and building codes and complies with the City’s zoning code.

See Foster City Municipal Code Chapter 17.78, Accessory Dwelling Units.  Eligible costs include:
o Purchase cost of the ADU
o Construction materials and labor
Municipal Code, Chapter 17.04.020
“Supportive housing” means housing with no limit on length of stay, that is occupied by the target population as defined in Section 65582 of the California Government Code, and that is linked to on- or off-site services that assist the supportive housing residents in retaining the housing, improving his or her health status, and maximizing his or her ability to live and, when possible, work in the community.

Target population, as defined in Section 65582 (p) as follows:
“Target population” means persons with low incomes who have one or more disabilities, including mental illness, HIV or AIDS, substance abuse, or other chronic health condition, or individuals eligible for services provided pursuant to the Lanterman Developmental Disabilities Services Act (Division 4.5 (commencing with Section 4500) of the Welfare and Institutions Code) and may include, among other populations, adults, emancipated minors, families with children, elderly persons, young adults aging out of the foster care system, individuals exiting from institutional settings, veterans, and homeless people.

City of Foster City Affordable ADU Program RFP
14 o Project management
o Demolition necessary for the construction of the foundation for the ADU o Site work, such as water/sewer/septic connections, utility improvements, or site leveling as is necessary for the construction of an ADU o Installation of the ADU
o Other hard or soft costs approved at the discretion of the City

c) Ineligible Projects/Uses of Funds
 Legalization of an existing ADU, JADU or conversion ADU.  Installation of an ADU not associated with the Contractor.  Interior home ADU (called a JADU) such as conversion of a bedroom to an ADU.

3. PROJECT REQUIREMENTS

a) Project Size
 ADU size shall be limited to requirements as stated in Foster City Municipal Code Chapter

17.78.

b) Design
 ADU must conform to any homeowner association (HOA) requirements, if applicable.  Applicant shall agree to Contractor’s design parameters, with the ability to select from a limited range of choices for certain aspects of the project such as floor plans, paint colors and interior and exterior finishes.
 ADU must meet all building codes comply with Foster City Municipal Code Chapter 17.78.  All permits and approvals are required.
 Project must be submitted through the Foster City Planning Department’s TRAKiT Program.

c) Rent Restriction
 Rent of the ADU unit shall be restricted to households earning less than 80% of AMI, using income limits established by the State of California Department of Housing and Community Development (HCD) adjusted for household size as follows: studio: 1 person, one-bedroom: 2 people; two bedroom: 3 people. The rental restriction shall be for a minimum of 10 consecutive years after the issuance of the temporary occupancy certificate.  Rent increases limited to 5% per year and cannot occur more than once in a 12-month period.
 Rent charged by Homeowner cannot exceed the maximum amount established by the City and issued annually by July 1. Rental amount, if any, shall be determined by the Applicant, subject to the maximum rental rate issued by the City.  Minimum rent is $100 per month, except for owner-occupied units.

d) Lease Requirements
 Minimum lease term is 12 months for initial lease.
City of Foster City Affordable ADU Program RFP
15  The lease form must comply with all applicable local, state, and federal regulations and other requirements as specified in the City’s BMR Guidelines, available online at Landlord/Property Manager Resources | Foster City California. The City must approve the lease form.  The lease must include an affordable housing addendum explaining the provisions of the Program and obligations regarding occupancy standards and rental rate restrictions. The lease addendum must state that the unit is a below market rate unit regulated by the City of Foster City and include length of the affordability restriction, ongoing tenant obligations, occupancy standards, and other provisions as specified in the City’s BMR Guidelines.

e) Applicant/Homeowner Obligations
 It appears the landlord is responsible for certifying/recertifying tenant eligibility. Given that these are not traditional landlords, HEART recommends that the City or its designee (which could be HEART) will take on this task. 
 Applicant must acknowledge that Contractor and/or the City shall have the right to audit tenant files and complete annual unit inspections subject to state notice regulations.  Applicant must acknowledge the unit is a regulated below market rate (BMR) unit regulated by the City and subject to Municipal Code 17.90 and the City’s BMR Guidelines. This includes submittal of an annual report in the City’s BMR Rental Registry by June 30 annually. The City provides training for using the rental registry software.  Applicant agrees to notify City through the BMR Rental Registry of any of the following occurs:
o New tenant
o Lease renewal or new lease with current tenant
o New rental rate as approved by the Housing Authority
o Tenant notification to move out
o Notice to pay or quit or eviction notice issued to tenant o Change in tenant’s voucher status, if applicable
o Changes in property management providers and/or homeowner contact information o Tenant/occupant that no longer qualifies for eligibility due to being over the income limit
 Applicant must enter into a loan agreement with the lender and repay the loan per the payment schedule with any accrued interest at the time of a qualifying repayment event or upon Applicant’s decision to exit the Program.
 Applicant must maintain hazard insurance that names City as loss payee annually for the term of the loan.
 Applicant shall keep all buildings located on the Property insured against loss by fire.  Subject to the rights of any senior lienholder, the proceeds collected under any insurance policy may be applied by Beneficiary to any indebtedness secured hereby and in such order as Beneficiary may determine, or at the option of Beneficiary, the entire amount so collected or any part thereof may be released to Borrower; provided however, if Borrower is not in default under the Loan Documents, the proceeds shall be released to Borrower to repair or rebuild the Improvements provided that sufficient additional sources of financing to complete such repair or rebuilding are available to complete such work. Such application or release shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice.
City of Foster City Affordable ADU Program RFP
16  Applicant must adhere to Fair Housing regulations and complete Fair Housing training prior to execution of the first lease and every three (3) years thereafter. The City will post links to Fair Housing Training on the City’s website. Training is available at no cost through the State of California Civil Rights Department or through the City’s Fair Housing Workshop held annually.
 Applicant understands that a vacant ADU unit cannot be vacant for more than 90 days and must be rented to an income-qualified tenant to remain in the Program. Exceptions are granted by the City for documented repair and maintenance work or other reasons on a case- by-case basis.
 Homeowner is responsible for managing the Tenant-Landlord relationship and enforcing the Lease Terms. City and Contractor will not be parties to the lease, and will not be responsible for selecting a tenant, or enforcing the lease terms. These are the sole obligation of  Applicant. For example, if a tenant moves in and does not pay rent, it will be Applicant’s sole responsibility to address the situation at Applicant’s own expense.  Homeowner is responsible for reviewing the City’s Municipal Code, BMR Guidelines, and related ordinances.

f) Tenant Household Obligations to be included in the Lease  If Tenant is a voucher holder, Tenant must agree to Housing Authority terms of their voucher.  Tenant household size must comply with the City’s standard occupancy standards. Tenants that do not meet occupancy standards will be given 90 days’ notice to vacate.  Family members are allowed to occupy the ADU if they are otherwise qualified and added to the lease.
 Tenants found to be over the income limit upon annual income recertification will have 90 days to vacate the unit.
 Tenant must comply with the terms of their lease in order to remain in the unit.

g) General Contractor’s Obligations for ADU Projects, if applicable  Must follow all local, state, and federal laws, including but not limited to lending, building, licensing, and prevailing wage laws, as applicable.
 Must obtain all required local approvals, permits, and entitlements for the Project.  Must use construction materials, finishes and fixtures shall be of good quality and manufacture and design.
 Must hold the City harmless throughout the contract term, and for construction defects during and after the contract term.
 Contractor must provide a construction warranty of a minimum of ten years for materials, parts, and labor for each ADU.
 Must maintain records per local, state and federal laws. 
 Must hold a valid general contractor’s license in the State of California.  Must hold a valid business license with the City of Foster City during the term of the project.

h) Contractor’s Obligations for Loan Administration
 Must provide the City with annual reports on loan administration.  Must make payments to the City as required by the executed Agreement with the City to repay the City-funded portion of the loans.
City of Foster City Affordable ADU Program RFP
17  Must maintain records per local, state and federal laws.  Must hold a valid business license with the City of Foster City during the term of the project.

4. LOAN PROVISIONS AND TERMS

a) Affordability Restriction Term
 10 years
 Affordability is included in a recorded covenant that runs with the property until the end of the affordability restriction term.

b) Loan Terms for City Financing
 Loan of up to $125,000 per Project ($150,000 for homeowners who agree to rent the ADU with a preference for supportive housing).
 Loan term: up to 20 years.
 No downpayment required.
 No interest (0%).
 Interest payments, if applicable, may be waived, and principal payments deferred, during the 10-year affordability restriction period, at the election of the Borrower.  Payment schedule shall be determined by Contractor and specified in loan documents.  Contractor shall collect payments for City-funded portion of loan and repay City on a schedule as agreed to in executed Agreement with Contractor, accounting for deferred payments during the affordability restriction period, if elected by Borrower. During the term of the Agreement with the Contractor, loan payments from homeowners shall be paid into a re-use account established by the Contractor.
 Upon termination of the Agreement with the Contractor any funds remaining in the re-use account shall be reimbursed to the City within 30 days. The City may elect to transfer loans still in effect to a loan servicing provider.
 The lump sum of the balance due on the loan is due to the City upon a qualifying Repayment Event.

c) Qualifying Repayment Events
 Change in Property title.
 Expiration of the loan term.
 The lot is split.
 The ADU is no longer approved for occupancy.
 The ADU is vacant or no longer rented to a Qualified Tenant for 90 or more days (exceptions for repairs or lack of qualified candidates provided by homeowner).  Borrower’s breach of any other provisions of the Loan Documents that remains uncured for more than 60 days.
 Homeowner fails to comply with Municipal Code 17.90 or the BMR Guidelines.  Tenant is no longer qualified, and Homeowner allows tenant to remain in the BMR ADU during the 10-year affordability restriction period of the loan term.  Homeowner performs unpermitted work on the Property, and the City issues a Stop Work Order on the property after the Project is completed.
 Homeowner files for bankruptcy.

City of Foster City Affordable ADU Program RFP
18  A mortgage holder repossesses the property for auction.

d) Subordination
 Subordination to the property’s primary mortgage and home equity loan/line of credit is acceptable. Other situations are subject to written approval by the City. However, in the event of bankruptcy or foreclosure by the senior lender(s), the affordability requirements built into the deed of Trust between the Homeowner and Contractor will not survive and the unit will be removed from the City’s Affordable ADU Program. The lien would be on the whole property, not just the ADU.

e) Completion of Project
 Construction of the Project is required to be completed within 12 months following loan approval.
 ADU is complete upon issuance of the Certificate of Occupancy by the City. The Homeowner may begin the process of leasing the unit at that time.

f) Funding Process
 City will pay the Contractor engaged by the City to administer the Affordable ADU Program the lump sum of the contractor amount within 30 days of receipt of an invoice.  The Contractor will establish the loan fund and re-use account to disburse payments for issuing loans and for administration and lending fees.

APPLICATION AND SELECTION PROCESS

1. Application Process
 Any Foster City homeowner can apply for the program through the Contractor as a Loan Applicant. (“Loan Applicant”). Contractor determines methods for application and selection of applicants and issuing loans.
 The City shall promote the program on its website, at City Hall, through the City’s electronic newsletter, and through the Foster City Islander.
 Contractor shall issue loans to qualified Loan Applicants on a first-come, first-served basis.

After a Loan Applicant is notified by Contractor that they have been selected from the waitlist:

1. Contractor shall schedule a Feasibility Consultation with Loan Applicant. During this consultation, Loan Applicant will meet with Contractor to determine feasibility and initial cost estimate of the project. Initial consultation may be virtually or by phone, but Contractor must visit the property before approving a feasibility report. Consultation is provided at no cost to homeowners.

City of Foster City Affordable ADU Program RFP
19 2. Contractor, in its sole discretion, shall determine the feasibility and estimated cost of the project and notify the Loan Applicant. Projects that are not feasible will be denied.

3. Application Steps
Upon completion of an approved feasibility report and cost estimate, Loan Applicant shall:

1. Submit a complete loan application to Contractor. Loan application materials shall be developed by Contractor.

2. Execute an intent to commit to a ten-year affordability covenant on the ADU.

3. Upload a signed feasibility report and project budget.

4. Contractor staff will review and provide pre-approval authorization, reserving available Loan funds for the individual project for a period of 90 days.

5. During the 90-day Pre-Approval period, Contractor shall confirm feasibility, approve the final project budget, and conduct underwriting of the Loan Application. Underwriting shall include review of a title report for applicant’s property.

6. Homeowners will also have access to no-cost “office hours” with a Contractor Technical Assistance advisor to answer any questions about their ADU project.

4. Review and Consideration of Applications

1. Contractor shall manage the applicatio n process to select eligible Applicants.

A p p e n d i x
M

ANNUAL REPORT
FY 2023-24
The Housing Endowment and Regional Trust of San Mateo County Dear Friends,When the cities and County of San Mateo established HEART, they granted theorganization a powerful mandate: to lead the way in fundraising, planning,financing, and overseeing workforce and affordable housing initiatives acrossthe county.

Since our founding, HEART has been dedicated to raising funds to support thedevelopment of new affordable housing. We are proud of our impact—havinginvested over $35 million to help develop and preserve 1,743 housing units.

PUBLIC OFFICIALS

BOARD OF DIRECTORS

COMMUNITY LEADERS
Nancy Magee
Superintendent, San Mateo
County Office of Education
Sara McDowell
Mayor
City of San Carlos
Diane Howard, Vice Chair
Councilmember
City of Redwood City
Karyl Eldridge
Faith in Action
Robert Morehead
Citizens Private Bank
Larry Franzella
Intero Real Estate Services
Bart Pantoja
San Mateo County Building
& Construction Trades
Council
Noelia Corzo
Vice President, Supervisor
County of San Mateo
Elan Scheinman
Primavera Partners
David N.P. Hopkins
Sares Regis Group of
Northern California
Elaine Breeze
SummerHill Apartment
Communities
Jack Matthews
John Matthews Architects
Michael Brownrigg, Chair
Vice Mayor
City of Burlingame
Anders Fung
Mayor
City of Millbrae
Mary Bier
Mayor Pro Tem
City of Pacifica
Cliff Lentz
Mayor
City of Brisbane
Armando F. Sanchez
Executive Director
2 HEART of San Mateo County Annual Report FY 2023-24
James Coleman
Councilmember
City of South San Francisco
Lisa Gauthier
Supervisor
County of San Mateo
However, the vision for HEART has always been broader. Our founders envisioned an organization thatwould not only finance housing but also acquire, hold, and lease property; issue bonds and notes forhousing initiatives; advise member agencies on housing policies; and educate the public on housingchallenges and solutions.

In 2023-24, we took bold steps toward realizing that greater vision. As you will read in this report,HEART acquired its first property—an eight-unit apartment building—to pilot innovative housingpreservation strategies. We are also providing consulting services to eight cities to support theirhousing programs and, in partnership with the County of San Mateo, have begun developing a low-costloan program to help mobile homeowners replace aging, unsafe units with modern, secure models.

We are excited about this new chapter, and we hope you are too. Thank you for your continued supportin making this important work possible.

Armando F. Sanchez
Executive Director
Warm regards,
Glenn R. Sylvester, Treasurer
Vice Mayor
City of Daly City
Lisa Diaz Nash
Councilmember
City of San Mateo

To honor the legacy of Don Horsley, a dedicated advocate for young people and affordable housing, HEART established the Don Horsley Housing Fellowship.“
This program aims to inspire and equip the next generation of housing professionals, addressing the growing need for skilled experts in the field while making a meaningful impact on the community. This year, we are proud to welcome two fellows who will contribute to the future of affordable housing.” ARMANDO SANCHEZ, EXECUTIVE DIRECTOR Alex Waggoner joined HEART in October 2024 after previously working with the Oakland Housing Authority and in Los Angeles local government.

He has extensive experience in affordable housing, legislative research, and in policy and administrative support for housing related programs. He has successfully developed and implemented many housing related policies, such as a Language Assistance Policy for the Oakland Housing Authority and other long form policy documents for federal approval.

HEART of San Mateo County Annual Report FY 2023-24 3
Audrey Washington graduated from Stanford University with a degree in Urban Studies and joined HEART in September 2024. Before joining HEART, she worked in renewable energy development, heavy-duty trucking electrification, and community engagement. These experiences have shaped Audrey’s interest in urbanism—how we live in and build urban centers. Housing is a vital component of any urban area.

While discriminatory housing policies have contributed to inequities, the Bay Area has a unique opportunity to promote equity through the built environment by providing quality, affordable housing.

DON HORSLEY AFFORDABLE HOUSING FELLOWS
Audrey Washington
Alex Waggoner
Audrey Washington on a site visit at
Colibri Commons in East Palo Alto.

He also brings experience working with elected officials at the city, state, and federal level. He holds a master’s degree in public administration as well as a BA in International Relations from the University of Southern California. Alex was inspired to work in housing in San Mateo County by his family’s story. His family moved to San Mateo County as new immigrants to this country and found economic and social mobility to reach their goals and develop a community.

Audrey joined HEART to work with an organization actively advancing these opportunities by increasing access to
affordable housing for low- and moderate-income residents in San Mateo County.

SIZE
8 units
Seven 1-bedroom
One 2-bedroom
HIGHLIGHTS OF HEART’S WORK THROUGH JUNE 2024 INCLUDE:

In July 2024, HEART completed its first NOAH acquisition. This mixed-income development serves families earning between 30% and 120% of the Area Median Income (AMI) and was made possible through a combination of public and private funding.

Preserving Naturally Occurring Affordable Housing
(NOAH) properties can be both costly and complex. To
address this challenge, HEART has leveraged its
extensive expertise in commercial brokerage, property
acquisition, project underwriting, and construction
management to launch a NOAH Preservation Program.

Preservation Program

HEART PROGRAMS
HEART’s goal is to raise capital and acquire more buildings in 2025. 4 HEART of San Mateo County Annual Report FY 2023-24
Authored and secured City Council passage of an Affordable Housing Strategy Completed the Below Market Rate homeowner monitoring for cities Worked with a city to create an anti-displacement housing strategy Designed the Mobile Home Loan Program with the County, which will provide 20 mobile homeowners with very low-cost loans to replace their aging mobile homes Created a user-friendly guide to housing resources and worked with cities to improve their housing resource web pages
Housing Consulting Services Program
HEART launched the Housing Consulting Services
Program in January of 2024 to meet the need for
housing staff support across the county. Eight
communities are contracted with HEART to provide a
range of housing program and policy services.

Cities and towns in San Mateo County are
experiencing increasing demand on their
housing staff due to new housing legislation
and a surge in developments.

PURCHASE DATE
July 29, 2024

ACQUISITION COST
$2,850,000
$356,000 per unit
Stambaugh
Project Details

DEVELOPER
TOTAL
30% AMI*
50% AMI
DEVELOPERS HEART-SV, a HEART affiliate organization
TOTAL
1 Ridge at Ralston
* Area Median Income
678 Ralston Avenue, Belmont, CA
CRP Affordable Housing and
Community Development
STATUS Predevelopment
64 1-BEDROOM
30 2-BEDROOM
19 ACQUISITION LOAN$3,000,000
PREDEVELOPMENT LOAN $1,000,000
HEART contributions:
17 35

AVERAGE AMI

49.54%units units
Stambaugh Street, Redwood City, CA
Stambaugh
BRIDGE LOAN $450,000
AVG. AMI
65%
30% AMI*
1unit
60% AMI
3units
80% AMI
1unit
120% AMI
3unitsRent Levels
Affordable Units 8
1-BEDROOM
7 2-BEDROOM
Rent Levels
Affordable Units
HEART of San Mateo County Annual Report FY 2023-24 5

HEART PROGRAMS
Developer Loan Program
3-BEDROOM
16 80% AMI
12units
HEART contributions:
and the California Department of Housing and Community
Development (HCD) Local Housing Trust Fund (LHTF) Program PERMANENT FUNDING $1,900,000from HEART Trust Fund
It was a pleasure connecting with the housing community in San Mateo County and reflecting on HEART’s accomplishments over food and drinks. We hope to see everyone again in 2025!
Photos: Scott Buschman6 HEART of San Mateo County Annual Report FY 2023-24 Thank you to our
generous sponsors!
Platinum $10,000
Primavera Partners
Bronze $1,500
IBEW Local Union 617
Intero Real Estate
MidPen Housing
Plumbers Local 467
Recology
Robert and Christine Morehead
Signature Realty
Community Bank of the Bay
All of our work is made
possible by your support.

THANK YOU to all the sponsors, community members, and
volunteers who joined us for HEART’s Annual Event on
October 10, 2024, at Devil’s Canyon Brewing Company.

MEDIA SPONSOR San Mateo Daily Journal
LOCATION SPONSOR Devil‘s Canyon Brewery

ANNUAL EVENT
Silver $2,500
PG&E
CORE
SummerHill HomesGold $5,000
Brookwood Group/Brookwood
Partners
Citizens Bank
Kaiser Permanente
SC Properties
Your contributions are helping to advance affordable housing options for residents of San Mateo County, whether through loans to build new affordable housing, consulting services for one of our contracted cities, or health and safety improvements to existing affordable units.

Connect With Us
(650) 204-5640
[email protected]
heartofsmc.org
heart-of-smc
@HeartofSMC
@HeartofSMC
ASSETS 2024 2023
Cash and Cash Equivalents $9,732,172 $10,130,466
Receivables (net)
Interest $1,665,692 $1,311,665
Loans $12,834,504 $9,809,489
Accounts $104,739 $162,343
Temporarily Restricted
Cash and Cash Equivalents $421,359 $414,960
TOTAL ASSETS $24,758,467 $21,828,923
REVENUES 2024 2023
Operating Grants and Contributions
Member Agencies $236,363 $236,286
Donors $2,081,483 $1,823,882
Charges for Services $663,162 $4,800
General Revenues
Investment Earnings $320,583 $416,173
TOTAL REVENUES $3,301,591 $2,481,141
Thank you to our member cities, towns,
and the County for your partnership.

Armando Sanchez
Executive Director
Boris Vatkin Director,
Housing Programs
For the Years Ended June 30, 2024 and 2023*For the Years Ended June 30, 2024 and 2023*

STATEMENT OF NET POSITIONSSTATEMENT OF ACTIVITIES
NET POSITION 2024 2023
HEART Staff
Town of Atherton
City of Belmont
City of Brisbane
City of Burlingame
Town of Colma
City of Daly City
City of East Palo Alto
City of Foster City
City of Half Moon Bay
Town of Hillsborough
City of Menlo Park
City of Millbrae
City of Pacifica
Town of Portola Valley
City of Redwood City
City of San Bruno
City of San Carlos
City of San Mateo
City of South San Francisco
Town of Woodside
County of San Mateo
LIABIILITIES 2024 2023
Accounts Payable $78,910 $63,390
Long-Term Liabilities $5,000,000 $4,620,000
TOTAL LIABILITIES $5,078,910 $4,683,390
NET POSITION 2024 2023
Restricted Pledge Account $421,359 $411,960
Unrestricted $19,258,198 $16,731,573
TOTAL NET POSITION $19,679,557 $17,143,533
EXPENSES 2024 2023
General Management and Programs $933,913 $671,139
Legal Services $1,069 $9,773
Interest on Long-Term Debt $92,758 $83,212
Miscellaneous $201 $135
TOTAL EXPENSES $1,027,941 $764,259
Change in Net Positions $2,533,024 $1,716,882
Net Positions - Beginning $17,146,533 $15,429,651
Net Positions - Ending $19,679,557 $17,146,533
* 2024 Unaudited Financial Statements

FINANCIAL STATEMENT

MEMBER AGENCIES
HEART is a non-profit organization and joint-powers
authority (JPA). The County and all twenty cities and
towns in San Mateo County are members of HEART.

Tim Davis Director, Housing
Consulting Services
Mac Hart Program Manager,
Preservation Program
Audrey Washington Don Horsley
Affordable Housing Fellow
Alex Waggoner Don Horsley
Affordable Housing Fellow
HEART of San Mateo County Annual Report FY 2023-24 7
The Housing Endowment and Regional Trust of San Mateo County 2905 S. El Camino Real, San Mateo, CA 94403
Provided significant funding for HEART
Quickstart Developer Loan Program
Provided significant funding for
HEART’s Preservation Program
© 2025 HEART of San Mateo
County All Rights Reserved
HEART proudly serves as a 501(c)(3) nonprofit organization.

Federal ID: 72-1589835
$1,000-$2,500
Up to $250 Heather Peters
Jack Matthews
Jean-Marie Houston
Jeff Schmidt
Jeffrey Smith
John Matthews Architects
Joshua Abrams
Karon Knox Franzella
Karyl Eldridge
Larisa Ocanada
Lee Ginsburg
Mark Moulton
Mary Bier
Melissa Lukin
Nila Kim
Paul Krupka
Perez, Cecilia
Rick Bonilla
Ronald Collins
Sailesh Mehra
Sandra Council
Sara McDowell
Sarah Veeser
Serena Ip
Tim Hood Davis
Timothy Clark
2023-24 DONORS
General Support
Laura Peterhans
Robert and Cristine Morehead
Alexander Kobayashi
Andrew Buhrmann
Anna Alekseyeva
Chris Sturken
Christine Boles
Christopher O'Connor
Diana Reddy
Diane Dittmar
Diane Howard
Donna Colson
Dulce Fernandez
Fred Hansson
Harvey Rarback

HOUSING ENDOWMENT AND REGIONAL TRUST

OF SAN MATEO COUNTY
Financial Statements and
Independent Auditors’ Report
June 30, 2024 and 2023

HOUSING ENDOWMENT AND REGIONAL TRUST

OF SAN MATEO COUNTY
JUNE 30, 2024 and 2023

TABLE OF CONTENTS
Independent Auditors’ Report 1 - 4
Management’s Discussion and Analysis 5 - 10
Basic Financial Statements:

Government-Wide Financial Statements
Statements of Net Positions 13
Statements of Activities 14
Fund Financial Statements
Balance Sheets – governmental fund 17
Statements of Revenues, Expenditures and
Changes in Fund Balance – governmental fund 18
Reconciliation of the Statements of Revenues,
Expenditures and Changes in Fund Balance of
Governmental Fund to the Statements of Activities 18
Notes to the Financial Statements 21 - 30
Required Supplementary Information:

Schedule of Revenues, Expenditures and
Changes in Fund Balance – Budget and Actual
Governmental Fund 33
Notes to the Required Supplementary Information 34
Supplementary Information:

Status of Funds 37
Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ............................................................. 39-41 INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
of the Housing Endowment and Regional Trust
of San Mateo County
San Mateo, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the Housing Endowment and Regional Trust of San Mateo County, California (HEART), as of and for the years ended June 30, 2024 and 2023, and the related notes to the financial statements, which collectively comprise HEART’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of HEART, as of June 30, 2024 and 2023, and the respective changes in financial position thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of HEART and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements HEART’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about HEART’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 1 To the Board of Directors
of the Housing Endowment and Regional Trust
of San Mateo County
San Mateo, California

Page 2 ends

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:
 Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of HEART’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about HEART’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
2 To the Board of Directors
of the Housing Endowment and Regional Trust
of San Mateo County
San Mateo, California

Page 3 ends

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information on pages 5-9 and 33-34 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements.

We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise HEART’s basic financial statements. The status of funds schedule is presented for purposes of additional analysis and is not a required part of the basic financial statements.

The status of funds schedule is the responsibility of management and is derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the status of funds schedule is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 31, 2025 on our consideration of HEART’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering HEART’s internal control over financial reporting and compliance.

Badawi and Associates, CPAs
Emeryville, California
August 31, 2025
3 This page intentionally left blank
4 Housing Endowment and Regional Trust of San Mateo County Management’s Discussion and Analysis

As management of the Housing Endowment and Regional Trust of San Mateo County (HEART), we offer our readers of HEART’s financial statements this narrative overview and analysis of its financial activities for the fiscal year ended June 30, 2024. We encourage readers to consider the information presented here in conjunction with the basic financial statements and related notes.

Financial Highlights

• HEART’s total net position as of June 30, 2023 amounted to $19,627,530, an increase of $2,480,997 from the prior year. This increase was the result of receiving $1.8 million in grants to assist in the development of affordable housing, an increase of $354,000 in accrued interest , and the balance from operations.

• Consistent with prior year s, HEART’s net position primarily made up of $14.5 million in outstanding interest and loan receivables from affordable housing developers.

• Cash and cash equivalents are $ 9.68 million. This amount is largely c omprised of $2, 000,000 in borrowed funds from the County of San Mateo Measure-K loan, $7,258,787 in HEART Trust Funds, and $421,359 in restricted funds. Of the total $9.68 million in cash and cash equivalents, $8.5 million can only be used to develop or preserve affordable housing.

• During the fiscal year HEART made two loans totaling $6 million dollars to support the development of affordable housing. During the year, HEART received one loan repayment in the amount of $3 million.

• Total operating and program revenue for the year amounted to $2,580,071 comprised of $2 million in grants restricted for affordable housing, $236,363 in contributions from member agencies and the balance of $262,225 from loan origination fees and charges to cities for HEART’s City staffing program.

Overview of the Financial Statements

HEART’s basic financial statements consist of three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

Government-Wide Financial Statements

The government-wide financial statements are designed to provide the reader with a broad overview of HEART’s finances, in a manner similar to a private-sector business.

The statements of net positions present information on HEART’s assets and liabilities, with the difference reported as net positions. Over time, increases or decreases in net positions may serve as a useful indicator of whether the financial position of HEART is improving or deteriorati ng.

The statements of activities report how HEART’s net positions changed during the most recent two fiscal years. Changes in net positions are reported as soon as underlying events occur, regardless of the timing of the related cash flows. Thus, some revenues and expenses reported in this statement may result in cash flows only in future periods. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

The government-wide financial statements can be found on pages 13 and 14 of this report.

5 Housing Endowment and Regional Trust of San Mateo County Management’s Discussion and Analysis

Fund Financial Statements

A fund is a group of related accounts that is used to control resources that have been segregated for specific activities or objectives. HEART uses fund accounting to ensure compliance with various legal requirements, such as the annually adopted budget. Accordingly, a budgetary comparison schedule has been included in the supplementary information section of the financial statements to demonstrate compliance with budget.

Fund financial statements report essentially the same information as the government -wide financial statements. However, unlike the government -wide financial statements, fund financial statements focus on near-term inflows and outflows of expendable resources, as well as on balances of expendable resources available at the end of the fiscal year.

As required by accounting principles, the financial transactions of HEART are accounted for in a Special Revenue Fund, a governmental fund, as monies received by it are legally restricted to specific use. Monies allocated and disbursed to HEART can be expended only for purposes authorized under the Agreement.

The fund financial statements can be found on pages 17 through 18 of this report.

Notes to the Financial Statements

The notes to the financial statements on pages 21 through 30 provide additional information that is essential to the full understanding of the data provided in the government-wide and fund financial statements.

Other information

This report also presents certain required supplementary information concerning compliance with HEART’s annual budget. This information, as well as associated notes, immediately follows the basic financial statements and the accompanying notes.

6 Housing Endowment and Regional Trust of San Mateo County Management’s Discussion and Analysis

Financial Analysis – Government-Wide Financial Statements

Assets
Cash and cash equivalents
Receivables, net:

Interest
Loans
Accounts
Restricted assets:

Temporarily restricted:

Cash and cash equivalents
Total Assets
Liabilities
Accounts payable
Long-term liabilities
San Mateo County Measure-K Loan
Paycheck Protection Program Loan
Total Liabilities

Net Position
Restricted for:

Homebuyer Assistance Loan Program – pledge
account
Unrestricted
Total Net Positions

2024
$ 9,680,146

1,665,692
12,834,489
104,754

421,359
24,706,440

78,910

5,000,000
0 5,078,910

421,359
19,206,171
$ 19,627,530

2023
$ 10,130,466

1,311,665
9,809,489
162,343

414,960
21,828,923

62,390

4,620,000
0 4,620,000

411,960
16,731,573
$ 17,146,533

• HEART’s total assets are $24,706,440, an increase of $2,877,517 from the previous year. This is an increase of 11.6% compared to the prior year. A $1.7 million grant from the California Department of Housing and Community Development and a $1.3 million grant from the City of Daly City are largely responsible for the net $2.9 million asset increase from the previous year.

• Cash and cash equivalents decreased from $10.1 million to approximately $ 9.7 million. HEART experienced large cash inflow and outflows during the fiscal year. This included receiving $3 million in grants, making $6 million in loans, receiving $3 million in loan repayments and drawing down a $380,000 loan from the County of San Mateo. The net effect of these flows and total operations was a net decrease of $450,300 in cash and cash equivalents.

• Loans outstanding increased by a net amount of approximately $3 million due to a new loan to CRP The Ridge at Ralston for a development project in the City of Belmont.

• Total liabilities for the current year are $ 5,078,910. This re presents an increase of $ 458,920 from the previous year. The increase is largely due to drawing $380,000 from HEART’s Measure-K loan from the County of San Mateo, bringing the total loan from the County to $5 million. The remaining 7 Housing Endowment and Regional Trust of San Mateo County Management’s Discussion and Analysis

$78,910 in liabilities includes $65,923 in payroll liabilities for accrued vacation and payroll taxes, and $12,987 in accounts payable to consultants and miscellaneous vendors.

• Net position of governmental activities is $ 17,146,533, an increase of $ 1,716,882, or 11% more compared to the previous fiscal year . The increase in net position was due to a $ 1.7 million grant from the California Department of Housing and Community Development for the development of Colibri Commons, and affordable housing development in the City of East Palo Alto.

Changes in Net Positions

Revenues:

Program Revenues:

Operating grants and contributions
Member Agencies
Donors
Charges for Services
Total Program Revenues

Expenses:

General management and admin support
Legal services
Interest on long-term debt
Miscellaneous
Total Expenses

Net Program Revenue
General Revenues – Investment Earnings

Change in Net Positions

Net positions – beginning
Net positions – ending

2024

$ 236,363
2,081,483
262,225
2,580,071

993,913
1,069
92,748
201
1,027,941

1,552,130

928,867

2,480,997

17,146,533
$ 19,627,530

2023

$ 236,286
1,823,882
4,800
2,064,968

669,638
11,274
83,212
135
764,259

1,300,709

416,173

1,716,882

15,429,651
$ 17,146,533

• Total operating and program revenue during the current period was $2,580,071, higher than the prior year’s amount of $ 2,064,968. This is an increase of 25% or $519,1033. The increase is due to an increase of $257,601 in contributions received and an increase of $257,425 in charges for services .

Grants of $1.7 million the previous year and a similar amount the current year for the Colibri Commons development in East Palo Alto round out the total program revenue .

• The $257,601 in contribution noted above is the result of two contributions from the County of San Mateo: a contribution of $85,436 to HEART’s Trust Fund from the County’s impact fees and a contribution of $114,949 from the County to support the HEART’s City Staffing Program. 8 Housing Endowment and Regional Trust of San Mateo County Management’s Discussion and Analysis

• The increase of $257, 425 in charges for services is largely comprised of $171,000 in fees charged to cities for HEART’s City Staffing Program, and $90,069 in developer loan fees.

• Total expenses incurred during the current period amounted to $1,027,941, an increase of $263,682, or 24.5% more, than the previous year. Most of the increase in expenses is due to the addition of more staff at HEART to meet the increased program work load of HEART’s City Staffing Program.

Budgetary Analysis

Total Revenues and Other
Financing Sources

Total Expenditures and Other
Financing Uses

Net Change in Fund Balance
Budgeted Amount
Final

$ 1,336,253

1,446,392

$ (110,139)
x
Actual Amount –
Budgetary Basis

$ 2,966,132

1,027,941

$ 2,318,191
Variance -Positive
(Negative)

$ 1,629,879

418,451

$ 2,428,330

• Actual revenues wer e higher than budget ed by $1,629,879. While HEART’s individual revenue sources fluctuated and differed from the budgeted amounts, the $1.7 million grant awarded to HEART for affordable housing development w as responsible for generating the large positive variance.
• Operating expenses were lower than budgeted by $418,451 . Expenses were lower largely due the lower utilization than expected of outside contract and consulting services.

Beyond FY 2024

In 2025 HEART is planning to continue making loans to affordable housing developers with its Trust Fund.

Currently, is planning on making $3 million in loans two affordable housing projects. Additional funds will be available to make more loans through out 2025. These loans will help HEART achieve its mission of creating more affordable housing units, while increasing its revenue from developer loan origination fees.

Over the next year HEART will also expend significant resources creating new programs to create and preserve affordable housing by financing the acquisition of privately owned, existing apartment buildings and by providing staffing help to cities to assist them with carrying out their affordable housing programs .

HEART has also developed a loan program to help mobile homeowners replace their units with new ones and anticipates making $1 million in loans to mobile homeowners in 2025.

Due to continuing high interest rates, it is likely HEART’s first-time homebuyer down payment loan program, “Opening Doors,” will continue to see low demand for its loans. HEART will continue to present community workshops for first time homebuyers and work with realtors and cities to help buyers prepare for a time when homebuying becomes feasible again.

9 Housing Endowment and Regional Trust of San Mateo County Management’s Discussion and Analysis

Requests for Information

This financial report is designed to provide a general overview of HEART’s finances for all those interested.

Questions concerning any of the information provided in this report, or requests for additional financial information should be addressed to Housing Endowment and Regional Trust of San Mateo County, Attn:

Executive Director, 2905 S. El Camino Real, San Mateo, CA 94403. 10 BASIC FINANCIAL STATEMENTS
Government-Wide Financial Statements
11 This page intentionally left blank
12 Housing Endowment and Regional Trust of San Mateo County Statements of Net Position
June 30, 2024 and 2023
2024 2023
Assets
Cash and investments 9,680,146$ 10,130,466$
Receivables, net:

Interest 1,665,692 1,311,665
Loans 12,834,489 9,809,489
Accounts 104,754 162,343
Restricted assets:

Temporarily restricted:

Cash and cash equivalents 421,359 414,960
Total Assets 24,706,440 21,828,923
Liabilities
Accounts payable 78,910 62,390
Long-term liabilities:

San Mateo County Measure K loan 5,000,000 4,620,000
Total Liabilities 5,078,910 4,682,390
Net Position
Restricted for:

Home Buyer Assistance Loan Program -
pledge account 421,359 414,960
Unrestricted 19,206,171 16,731,573
Total Net Position 19,627,530$ 17,146,533$
Governmental Activities
The notes to the financial statements are an integral part of this statement. 13 2024 2023
Expenses
General management and administrative support 933,913 669,638$ Legal services 1,069 11,274
Interest on long-term debt 92,758 83,212
Miscellaneous 201 135
Total Expenses 1,027,941 764,259
Program Revenues
Operating grants and contributions:

Member agencies 236,363 236,286
Donors 2,081,483 1,823,882
Charges for Services 262,225 4,800
Total Program Revenues 2,580,071 2,064,968
Net Program Revenue (Expenses) 1,552,130 1,300,709 General Revenues
Investment earnings 928,867 416,173
PPP Loan forgiveness - -
Total General Revenues 928,867 416,173
Change in Net Positions 2,480,997 1,716,882
Net Positions - beginning 17,146,533 15,429,651
Net Positions - ending 19,627,530$ 17,146,533$
Housing Endowment and Regional Trust of San Mateo County Statements of Activities
For the Years Ended June 30, 2024 and 2023
Governmental Activities
The notes to the financial statements are an integral part of this statement. 14 BASIC FINANCIAL STATEMENTS
Fund Financial Statements
15 This page intentionally left blank
16 2024 2023
Assets
Cash and investments 9,680,146$ 10,130,466$
Receivables, net:

Interest 1,665,692 1,311,665
Loans 12,834,489 9,809,489
Accounts 104,754 162,343
Cash - restricted 421,359 414,960
Total Assets 24,706,440$ 21,828,923$
Liabilities, Deferred Inflows of
Resources, and Fund Balance
Liabilities
Accounts payable 78,910$ 62,390$
Total Liabilities 78,910 62,390
Deferred Inflows of Resources
Unavailable revenues 1,665,692 1,311,665
Total Deferred Inflows of Resources 1,665,692 1,311,665 Fund Balance
Nonspendable 12,834,489 9,809,489
Restricted 421,359 414,960
Unassigned 9,705,990 10,230,419
Total Fund Balance 22,961,838 20,454,868
Total Liabilities, Deferred Inflows of Resources, and Fund Balance 24,706,440$ 21,828,923$ Reconciliation of Fund Balance Sheets to the Statements of Net Position:

Total Fund Balance - Governmental Fund 22,961,838$ 20,454,868$ Long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the fund
Interest receivable 1,665,692 1,311,665
Long-term liabilities were not due and payable in the current period. Therefore, they were not reported in the Governmental Fund Balance Sheet County of San Mateo-Measure-K loan (5,000,000) (4,620,000) Net position of governmental activities 19,627,530$ 17,146,533$ Housing Endowment and Regional Trust of San Mateo County Balance Sheets - Governmental Fund
June 30, 2024 and 2023
The notes to the financial statements are an integral part of this statement. 17 Housing Endowment and Regional Trust of San Mateo County Statements of Revenues, Expenditures, and Changes in Fund Balance For the Years Ended June 30, 2024 and 2023
2024 2023
Revenues
Member agency contributions 236,363$ 236,286$
Donor contributions 2,081,483 1,823,882
Charges for services 262,225 4,800
Investment earnings 574,840 223,415
Total Revenues 3,154,911 2,288,383
Expenditures
General management and administrative support 933,913 669,638 Legal services 1,069 11,274
Miscellaneous 201 135
Debt service:

Interest and fiscal charges 92,758 83,212
Total Expenditures 1,027,941 764,259
Excess (Deficit) of Revenues Over Expenditures 2,126,970 1,524,124 Other Financing Sources (Uses)
Loan proceeds 380,000 -
Total Other Financing Sources (Uses) 380,000 - Net Change in Fund Balance 2,506,970 1,524,124
Fund Balance - Beginning 20,454,868 18,930,744
Fund Balance - Ending 22,961,838$ 20,454,868$
Reconciliation of the Statements of Revenues, Expenditures, and Changes in Fund Balance of Governmental Fund to the Statements of Activities (page 14)
Net change in fund balance - governmental fund 2,506,970$ 1,524,124$ Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 354,027 192,758 Loan proceeds provided current financial resources to governmental funds, but increased long-term liabilities in the government-wide statemem of net position. (380,000) -
Change in net positions of governmental activities 2,480,997$ 1,716,882$ The notes to the financial statements are an integral part of this statement. 18 Notes to the Basic Financial Statements
19 This page intentionally left blank
20 HOUSING ENDOWMENT AND REGIONAL TRUST OF SAN MATEO COUNTY

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(b) Reporting Entity
On February 26, 2002, the County of San Mateo (County) approved establishment of a housing trust fund for the County and set aside $3 Million from reserves to be used as the initial capitalization for the fund.

A Joint Powers Agreement (Agreement) between the County and certain cities and towns within the County (Member Agencies) established the Housing Endowment and Regional Trust (HEART) in 2003 under the Joint Exercise of Powers Act per California Government Code Sections 6500 et seq. T he Agreement was in effect at least until March 30, 2013 and can be terminated thereafter according to the terms specified in the Agreement. HEART’s general purpose is to support and generate funding that will result in permanent additions to workforce housing needs in San Mateo County. HEART obtained a determination from the Internal Revenue Service of its tax-exempt status and classification as a public charity under Section 501(c)(3) of the Internal Revenue Code (Code), effective January 8, 2008.

Contributions to HEART are tax deductible under Section 170 of the Code.

HEART is an entity separate from each participating entity and is under the direction of a Board of Directors (Board). The Board is comprised of 11 elected officials from the County and Member Agencies and 10 at-large members who are not publicly elected officials. The Board appoints a managing agent who is responsible for the day-to-day administration of HEART under its direction.

The County also made an initial allocation of $75,000 for administrative costs in addition to the $3 Million initial capitalization. HEART received $2.075 Million in fiscal year 2004 and the remaining $1 Millionwas paid in equal installments from fiscal years 2005 through 2009. The Member Agencies support HEART by contributing annual dues. The dues were assessed annually through fiscal year 2009 based upon Member Agency’s population information used by City/County Association of Governments of San Mateo County (C/CAG). The dues remained fixed from fiscal years 2009 through 2011. The dues were reduced by 10% annually in FY 2012, and remained fixed in FY 2014 through FY 2024 at the lower rate.

Monies allocated and disbursed to HEART can be expended only for purposes authorized under the Agreement.
(c) Measurement Focus, Basis of accounting, and Financial Statement Presentation Under the new financial reporting model, governments are required to present government-wide and fund financial statements along with reconciliation from the fund financial statements to the government- wide statements. The government-wide financial statements are reported on a basis of accounting similar to a commercial enterprise, which is different from the traditional basis of accounting used for the fund financial statements.

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred regardless of when the related cash flows take place. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 21 HOUSING ENDOWMENT AND REGIONAL TRUST OF SAN MATEO COUNTY

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Measurement Focus, Basis of accounting, and Financial Statement Presentation (continued) Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized as soon as they are both measurable and available. Revenues are considered available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. R evenues from reimbursement type programs are considered to be available when they are collectible within two months of the end of the current fiscal period in order to properly match revenues with related expenditures. Expenditures are recognized in the accounting period in which the liability is incurred.

Cash and Cash Equivalents: Cash and cash equivalents include all monies held in banks, highly liquid investments with maturities of less than three months and cash held in the San Mateo County Investment Pool (County Pool). A portion of the cash balance is pooled with other funds of the County to earn a higher rate of return than could be earned by investing the funds individually. HEART considers its equity in the County’s investment pool to be cash equivalents.

Receivables: All receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion that is expected to be uncollectible.

Restricted Assets: Amounts maintained in separate bank accounts are classified as restricted assets on the balance sheet because uses of the funds are externally restricted by the lending agencies to maintain a minimum balance in the Pledge Account for financing eligible housing developers and homeowners.

Long-term Obligations: Long-term debts are reported as liabilities in the government-wide financial statements. In the fund financial statements, governmental fund types report the face amount of the debt issued as other financing sources and interest and principal payments made in the current period are reported as debt service expenditures.
(d) Use of Estimates
The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results based on subsequent events could differ from those estimates.
(e) Budgetary Information
HEART adopts an annual budget that can be amended throughout the year. The basis used to prepare the budget is the same as the basis used to reflect actual revenues and expenditures except that unrealized gains and losses are not included in the budget. See Note 1 of the notes to the required supplementary information for detail.
22 HOUSING ENDOWMENT AND REGIONAL TRUST OF SAN MATEO COUNTY

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f) New Pronouncements
In fiscal year 2022-23, HEART adopted new accounting standards in order to conform to the following Governmental Accounting Standards Board Statements:
 GASB Statement No. 100, Accounting Changes and Error Corrections – an Amendment of GASB Statement No. 62 – The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability.

2. CASH AND INVESTMENTS
(a) Cash and Investments
As of June 30, 2024 and 2023, HEART’s cash and investments consisted of:

Cash Deposits
The carrying amount of HEART’s cash deposits were a total of $3,752,129. Bank balances before reconciling items were a positive amount of $3,752,129 as of June 30, 2024. The carrying amount of HEART’s cash deposits were a total of $3,752,129. Bank balances before reconciling items were a positive amount of $3,752,129 as of June 30, 2023.

The California Government Code requires California banks and savings and loan associations to secure HEART’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in HEART’s name. The fair value of pledged securities must equal at least 110% of HEART’s cash deposits. California law also allows institutions to secure deposits by pledging first trust deed mortgage notes having a value of 150% of the total cash deposits. HEART’s cash deposit was fully insured up to $250,000 by the Federal Deposit Insurance Corporation. The remaining amount was not collateralized FY 23-24 FY 22-23
Cash and investments:

Cash on hand -$ -$
Wells Fargo Checking and Savings Accounts 3,501,846 1,833,816 Meriwest Committed Account 250,283 88,145 San Mateo County Investment Pool 5,928,017 8,208,505 Total unrestricted cash and investments 9,680,146 10,130,466 Meriwest Restricted Account 421,359 414,960 Total cash and investments 10,101,505$ 10,545,426$ 23 HOUSING ENDOWMENT AND REGIONAL TRUST OF SAN MATEO COUNTY

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023

2. CASH AND INVESTMENTS (CONTINUED)
(a) Cash and Investments, Continued
San Mateo County Investment Pool
Investment in the County Pool is reported at fair value. The change in fair value for the year is recorded as unrealized gain or loss and reported as part of investment earnings. Fair value is based on information provided by the County Treasurer. T he fair value in HEART's investment in the County Pool as of June 30, 2024 and 2023 was $5,928,017 and $8,208,505 respectively. The fair value factor of 0.9913 and

0.9715 was used to calculate the fair value of the investments in the County Pool for fiscal year 2024 and fiscal year June 30, 2023.

HEART does not have a formally adopted investment policy. (b) Risk Disclosures
Interest Risk: Interest rate risk is the market value fluctuation due to overall changes in the interest rates.

It is mitigated by limiting the average maturity of HEART’s portfolio. Investments held in HEART grouped by maturity date as of June 30, 2024 and 2023 are shown below:

Credit Risk: Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of an issuer to repay its debt. As of June 30, 2024, HEART’s deposits and investments were rated as follow:

Custodial Credit Risk: Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside.

FY2024
Investment Type Total 1 year or Less 1 - 2 years 2- 3 years San Mateo County Investment Pool 5,928,017$ 5,928,017$ $ - $ - Total Investments 5,928,017$ 5,928,017$ $ - $ - FY2023
Investment Type Total 1 year or Less 1 - 2 years 2- 3 years San Mateo County Investment Pool 8,208,505$ 8,208,505$ $ - $ - Total Investments 8,208,505$ 8,208,505$ $ - $ - Investment Maturities (in years)
Investment Maturities (in years)
Moody's S&P % of Portfolio Moody's S&P % of Portfolio
San Mateo County Investment Pool Not Rated Not Rated 100% Not Rated Not Rated 100% Total 100% 100%
FY2024C redit Q uality Ratings FY2023 C redit Q uality Ratings 24 HOUSING ENDOWMENT AND REGIONAL TRUST OF SAN MATEO COUNTY

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023

3. RECEIVABLES
(a) Interest Receivable
The interest receivable balance reported at June 30, 2024and 2023 of $1,665,692 and $1,311,665 respectively represent uncollected interest on loans receivable and fourth quarter interest due from the County Treasurer on investments made by HEART in the County Pool. (b) Loans Receivable
Loans receivable as of June 30, 2024and 2023 consist of the following:
2024 2023
In September 2006, HEART loaned $1,730,000 of program funds to The Crossings Phase II, L.P. for the development of the 113-unit The Village at the Crossing project in San Bruno, CA, which will provide housing for very-low and extremely-low income households. The loan has a term of 55 years from the issuance of the Certificate of Occupancy and bears interest at a rate of 3% per annum. The Certificate of Occupancy was issued on January 10, 2008. 1,709,866$ 1,709,866$ In June 2006, HEART signed a loan ag reement with Hillcrest Senior Housing Corporation (HSHC) for $510,000 to assist with construction financing of the 39-unit Hillcrest Gardens project in Daly City, CA, which will provide housing for very-low and extremely-low income seniors. The loan has a term of 55 years from the issuance of the Certificate of Occupancy and/or Notice of Completion for the development, whichever is earlier, and bears interest at a rate of 3% per annum. The Notice of Completion was issued on December 11, 2008.
510,000 510,000
In February 2015, HEART signed a loan agreement with Habitat for Humanity for $500, 000 to assist in the acquisition of the land and improvements located at 612 Jefferson Avenue, Redwood City (“Property”) to build a multifamily development. The loan is secured by a Deed of Trust recorded against the property. The loan has a term of 5 years with an option to extending for a term of one year and bears interest at a rate 0% for the first five years and at a rate of 3% if the borrower fails to achieve the project completion milestone at maturity. 462,500 487,500 In December 2007, HEART signed a loan agreement with Trestle Glen Associates for $1,760,000 to assist with the development of a 119-unit rental housing project in Colma, CA, which will provide housing for very-low and extremely-low income households. The loan has a term of 55 years from the issuance of the Certificate of Occupancy and/or Notice of Completion for the development, whichever is later, and bears interest at a rate of 3% per annum. The Certificate of Occupancy was issued on December 30, 2009. 1,760,000 1,760,000 Sub-total carried forward 4,442,366$ 4,467,366$
25 HOUSING ENDOWMENT AND REGIONAL TRUST OF SAN MATEO COUNTY

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023

3. RECEIVABLES (CONTINUED)
(b) Loans Receivable
2024 2023
Sub-total carried forward 4,442,366$ 4,467,366$
In October 2015, Bridge Housing Ventures assumed National Church Residences loan including accrued interest for the amount of $542, 123, to assist with the one hundred units of rental housing affordable to low-income households, commonly known as Ocean View Senior Apartments, located at 555 Crespi Drive in Pacifica, California. The loan has a term of 57 years from the date of the modification agreement, which bears interest at a rate of 3% per annum commencing on October 16, 2016. 542,123 542,123 In March 2011, HEART signed aloan agreement with Mid-Peninsula South City, L.P. for $600, 000, which was funded by the Genetech Foundation South Francisco Fund to assist with the development of 62-units of a 109-unit rental housing project in South San Francisco, CA, which will provide housing for low and very-low income households. The loan has a term of 55 years from the issuance of the Certificate of Occupancy, which evidences project completion and bears interest at a rate of 3% per annum commencing upon project completion. The Certificate of Occupancy was issued on October 19, 2012. 600,000 600,000 In March 2011, HEART signed aloan agreement with Mid-Peninsula South City II, L.P. for $400, 000, which was funded by the Genetech Foundation South Francisco Fund to assist with the development of 47-units of a 109-unit rental housing project in South San Francisco, CA, which will provide housing for low and very-low income households. The loan has a term of 55 years from the issuance of the Certificate of Occupancy, which evidences project completion and bears interest at a rate of 3% per annum commencing upon project completion. The Certificate of Occupancy was issued on October 19, 2012. 400,000 400,000 In December 2021, HEART signed a Deveopment Loan Agreement with MP Downtown San Mateo Associates, L.P. to provide $3,800,000 for the development of 225 rental homes for extremely low- very low- and low-income individuals and families. The project is located in the City of San Mateo. The loan has a term of 55 years from and bears an interest rate of 3% commencing in March 2022. 3,800,000 3,800,000 In February 2024, HEART signed a Deveopment Loan Agreement with CRP Affordable Housing and Community Development CA LLC. to provide $3,000,000 for the development of 65 rental homes for low-income persons and households. The project is located in the City of San Mateo. The loan has a term of 55 years from and bears an interest rate of 5%. 3,000,000 -
In July 2024, HEART signed a Deveopment Loan Agreement with HEART-SV, a California Joint Powers Authority. to provide $450, 000 for the development of 8 rental homes for low-income persons and households. The project is located in the City of San Mateo. The loan has a term of 55 years from and bears an interest rate of 3%. 50,000 - Total Loans Receivable 12,834,489$ 9,809,489$
26 HOUSING ENDOWMENT AND REGIONAL TRUST OF SAN MATEO COUNTY

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023

4. ACCOUNTS PAYABLE
Accounts payable comprises of the following:

5. NON-CURRENT LIABILITIES
The following is summary of non-current liability activity of HEART:

San Mateo County: Measure-K loan
On August 1, 2017 HEART entered into a loan agreement with the County of San Mateo for an amount of $5,000,000 with a maturity date of July 31, 2024. Interest rate will be paid annually based on the amount of interest that the loan would have earned had it been invested in the San Mateo County Pooled Investment rate starting twelve months from the date of the initial disbursement. The proceeds of the loan will to be used to make predevelopment, acquisition, construction and bridge loans that are consistent with the terms of HEART’s Quick Start Loan Program. As of June 30, 2024 HEART drawn an amount of $5,000,000 from the total loan agreement of $5,000,000. 2024 2023
Payable for contractor service 12,986$ 4,598$ Accrued payroll 65,924 57,792
Total Accounts payable 78,910$ 62,390$
Balance at Balance at
July 1, 2023 Additions Deletions June 30, 2024
San Mateo County:Measure-K 4,620,000$ 380,000$ -$ 5,000,000$ Total 4,620,000$ 380,000$ -$ 5,000,000$ Balance at Balance at
July 1, 2022 Additions Deletions June 30, 2023
San Mateo County:Measure-K 4,620,000$ -$ -$ 4,620,000$ Total 4,620,000$ -$ -$ 4,620,000$ 27 HOUSING ENDOWMENT AND REGIONAL TRUST OF SAN MATEO COUNTY

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023

6. REVENUES
(a) Operating Grants and Contributions
Operating grants and contributions consist of the following:

Member Agencies Dues
Member Agencies are billed annually for dues to cover administrative expenses.

Donors
Other operating grants and contributions include contributions from private donors. (b) Charges for Services
Charges for services are loan processing fees collected from home buyers upon close of escrow on each home loan.
(c) Investment Earnings
Investment earnings reported in the government fund statements of revenues, expenditures, and changes in fund balance comprise of quarterly interest received from the County Treasurer on investments made by HEART in the County Pool and interest collected from developers on cumulative interest receivable accrued. Interest is recorded in the year it is earned and is available to pay current liabilities.

Investment earnings reported in the government-wide statements of activities includes earnings from the County investments noted above plus interest earned in the current year on loans made to developers.

7. FUND BALANCES / NET POSITION
As prescribed by GASB Statement No. 54, governmental funds report fund balance in classifications based primarily on the extent to which HEART is bound to honor constraints on the specific purpose for which amount in the fund can be spent. As of June 30, 2024 and 2023, fund balance for the governmental fund consists of the following classifications respectively:
(a) Nonspendable Fund Balance – includes amounts that cannot be spent because they are not in spendable form, such as prepaid items and loans receivable. (b) Restricted Fund Balance – includes amounts that can be spent only for specific purposes stipulated by external resources providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers. (c) Unassigned Fund Balance – is the residual classification for the government’s general fund and includes all spendable amounts not contained in the other classifications.

In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is depleted in the order of restricted and then unassigned. 28 HOUSING ENDOWMENT AND REGIONAL TRUST OF SAN MATEO COUNTY

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2024 AND 2023

7. FUND BALANCES / NET POSITION (CONTINUED)
At fiscal year-end, fund balance reported on the balance sheets on page 17 includes:

The amount shown as restricted above is also reported as restricted net position on the statement of net positions on page 13.

8. RISK MANAGEMENT
HEART is exposed to various risks of losses related to assets having a current or future benefit to HEART.

HEART has insurance coverage provided by the Hartford. In addition, HEART has special excess liability insurance coverage provided as part of the County's insurance coverage. The existing insurance policies are current as of the issuance of this report. Under an agreement with the County, the Department of Housing (DOH) of San Mateo County provides fiscal and program services to HEART. Agents of the DOH are covered by the County’s insurance provider. The County Counsel provides legal representation for any claims or litigation of HEART under a contract. For the years ended June 30, 2024 and 2023, the annual amount contracted with County Counsel for legal representation was $1,069 and $9,773 respectively.
2024 2023
Nonspendable 12,834,489$ 9,809,489$
Restricted:

Home Buyer Assistance Loan Program - pledge account
see Note 2(a) 421,359 414,960
Unassigne d 9,705,990 10,230,419
Total Fund Balance 22,961,838$ 20,454,868$
29 This page intentionally left blank
30 REQUIRED SUPPLEMENTARY INFORMATION
31 This page intentionally left blank
32 Actual
Amount Variance with
Budgeted Budgeted Budgetary Final Budget
Amount Amount Basis Positive
Original Final (Note 1) (Negative)
Revenues
Member Agency contributions 236,286$ 236,286$ 236,363$ 77$ Other contributions 355,000 355,000 2,081,483 1,726,483 Investment earnings 157,166 157,166 386,061 228,895 Charges for services and other 587,801 587,801 262,225 (325,576) administrative support 1,336,253 1,336,253 2,966,132 1,629,879 Expenditures
General management and
administrative support 1,274,392 1,274,392 933,913 340,479 Legal services 72,000 72,000 1,069 70,931 Debt services
Interest and fiscal charges 100,000 100,000 92,758 7,242 Contingency - - 201 (201) Total Expenditures 1,446,392 1,446,392 1,027,941 418,451 Net Change in Fund Balance (110,139)$ (110,139)$ 2,318,191 2,428,330 Fund Balance - beginning 20,695,673
Fund Balance - ending 23,013,864$
Housing Endowment and Regional Trust of San Mateo County Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2024
33 HOUSING ENDOWMENT AND REGIONAL TRUST OF SAN MATEO COUNTY

NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2024 and 2023

1. BUDGETS, BUDGETARY PROCESS, AND ENCUMBRANCES
HEART uses two funding sources to manage operations: Administrative Funds and Program Funds. The Board adopts an annual operating budget, which can be amended by the Board throughout the year. Actual revenues and expenditures presented reflect activity in both funds during the year. As discussed in Note 1(d) of the notes to the basic financial statements, the basis used to prepare the budget is the same as the basis used to reflect actual revenues and expenditures, except for unrealized gains and losses under GASB 31. The financial statements record unrealized gains and losses as required by Generally Accepted Accounting Principles (GAAP). Adjustments were made to certain budgeted accounts to reflect changes made in financial statement presentation.

HEART uses an encumbrance system to assist in controlling expenditures. Purchase orders, contracts, and other commitments for the expenditures of monies are recorded under this system in order to reserve applicable appropriations. Any encumbrances outstanding at year-end are recorded as reservations of fund balance as they do not constitute expenditures or liabilities.

The actual net change in fund balance under the budgetary basis on page 33 is reconciled to the change in fund balance under GAAP on page 18 as follows:

Explanation of difference between budgetary basis and GAAP basis:

FY 23-24
Net Change in Fund Balance - budgetary basis 2,318,191$ Cash on hand - Net unrealized loss on cash in County Investment Pool
under GASB 31 188,779
Change in Fund Balance - GAAP basis 2,506,970$
Fund Balance - budgetary basis 23,013,864$
Unrealized loss on cash in County Investment Pool
under GASB 31 as of June 30, 2024 (52,026)
Fund Balance - GAAP basis 22,961,838$
34 SUPPLEMENTARY INFORMATION
35 This page intentionally left blank
36 Program Administrative
Funds Funds Total
Revenues
Member agency contributions -$ 236,363$ 236,363$ Donor contributions 1,938,375 143,108 2,081,483 Investment earnings - 386,061 386,061 Loan origination fees 217,156 45,069 262,225 Total Revenues 2,155,531 810,601 2,966,132 Expenditures
General management and
administrative support 768,541 165,372 933,913 Legal services 553 516 1,069 Debt services
Interest and fiscal charges 92,758 - 92,758 Total Expenditures 861,852 166,089 1,027,941 Excess (Deficiency) of Revenues Over
(Under) Expenditures 1,293,679 644,512 1,938,191 Other Financing Sources (Uses)
Loan proceeds:
- San Mateo County Measure K Loan 380,000 - 380,000 Total Other Financing Sources (Uses) 380,000 - 380,000 Net Change in Fund Balance 1,673,679 644,512 2,318,191 Fund Balance - beginning 19,353,909 1,341,764 20,695,673 Fund Balance - ending 21,027,588$ 1,986,276$ 23,013,864$ required by generally accepted accounting principles.

Housing Endowment and Regional Trust of San Mateo County Status of Funds
For the Year Ended June 30, 2024
Notes:
(1) All income received from investment earnings is categorized to Program Funds (2) The above schedule does not include adjustments made for GASB No. 31 as 37 This page intentionally left blank
38 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND

OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Independent Auditor’s Report
To the Board of Directors
of the Housing Endowment and Regional Trust
of San Mateo County
San Mateo, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and major fund of the Housing Endowment and Regional Trust of San Mateo County (HEART) as of and for the years ended June 30, 2024 and 2023, and the related notes to the financial statements, which collectively comprise HEART’s basic financial statements, and have issued our report thereon dated August 31 , 2025.

Report on
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered HEART’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of HEART’s internal control. Accordingly, we do not express an opinion on the effectiveness of HEART’s internal control.

A
deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements, on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our
consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. 39 To the Board of Directors
of the Housing Endowment and Regional Trust
of San Mateo County
San Mateo, California

Page 2 ends

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether HEART’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Badawi & Associates, CPAs
Emeryville
, California
August 31, 2025
40

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