STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of January 10, 2023
TO: Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Edwin Gato, Director of Finance
SUBJECT: ALLOCATION OF LOCAL ASSISTANCE FUNDS FROM SENATE BILL 154 (SKINNER) BUDGET ACT OF 2022 RECOMMENDED ACTION:
Staff recommends that the Council discuss the following strategies for the use of the $8 million budget allocation from the State of California and direct staff to proceed with the following recommendations:
Allocate $2.5 million for principal debt service payment to the California Housing Finance Authority (CalHFA) loans and explore re-negotiating the existing repayment timeline.
Allocate $5.5 million to Capital Reserve future infrastructure improvements, including the Hercules Hub project.
FISCAL IMPACT OF RECOMMENDATION
The State legislature ultimately approved a one-time budget allocation of $8,000,000 by enacting Senate Bill 154 (Skinner) Budget Act of 2022. The City requested and received these funds in the winter of 2022. Upon approval of the recommended fund allocation, staff will include the assignment of funds into next year's budget.
BACKGROUND AND DISCUSSION:
On October 7, 2022, the City of Hercules ("City") received $8,000,000 from the California Department of Finance as a disbursement from the 2022-23 State Budget, General Government Section, Code 9210 Local Government Financing, 7540 Aid to Local Government. The State budget allocation was enacted by Senate Bill 154 (Skinner) Budget Act of 2022.
Staff recommends that the Council discuss the following strategies for the allocation of the $8 million of local assistance from the State of California and direct staff to proceed with the following recommendations:
Recommendation #1 - Allocate $2.5 million to partially pay the CalHFA loans and seek to re-negotiate with CalHFA to repay the remaining balance over time.
Summary - The City obtained the CalHFA loans under the Residential Development Loan Program (RDLP) and the Housing Enabled by Local Partnerships (HELP) for the construction of the Sycamore North project. Presumably, income from leasing the residential units would have been sufficient to repay the loans. However, since the cost to complete the project was significantly more than the City and Redevelopment Agency had to pay for the project's construction, the project failed and was marketed to obtain the highest and best offer from a qualified and experienced developer. Thus, the obligation to repay the loans is now the City's obligation. Staff approached CalHFA in 2012 and, after several meetings and counteroffers, negotiated new loan terms that extended the time for payment and lowered the interest rate from 3% to 1.5%. Amendments to loan agreement on CalHFA Loan No. HELP-080604-03 and RDLP-060506-01 were made and entered into on April 11, 2005, and February 15, 2007, and will expire on April 11, 2027, and August 15, 2026, respectively. Payment of the remaining $5.2 million loan balance is due in full no later than the expiration date of the loan.
Recommendation #2 - Allocate $5.5 million to Capital Reserve for future infrastructure improvements, including the Hercules Hub project.
Summary - As one of the City’s top priorities, the Hercules Hub (formally known as the Regional Intermodal Transportation Center (RITC)) is designed to achieve the vision of the Hercules Bayfront as a model transit-oriented community. The project has NEPA and CEQA approvals and the City has completed the first three phases of construction. In 2019, the City and the Gray-Bowen-Scott team succeeded in advancing the Let’s Get I-80 Moving initiative, which resulted in the Capital Corridor Joint Powers Authority’s decision to grant Candidate Station Status to the RITC in Hercules. In 2020, the City completed the interim bus improvements on Bayfront Boulevard to allow buses to serve the area.
The next three phases to be implemented to allow the train to stop are the utility relocations, followed by the track and platform improvements, and lastly the station work. There is currently a unique window of opportunity to pursue grant funding for the completion of the RITC as an unprecedented amount of federal and state grant funding for pandemic relief, economic stimulus, and infrastructure investment is becoming available on a competitive basis. As the City continues to solicit grant funding, a local match will be required to secure the grants.
ATTACHMENT
Resolution