Attachment B
Staff Report, dated December 10, 2024 (no attachments)
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NEWPORT BEACH
City Council Staff Report
COUNCIL STAFF REPORT
CITY OF
December 10, 2024
Agenda Item No. 10
ABSTRACT:
In July 2023, the Newport Beach City Council approved a loan commitment of $3,000,000 to American Family Housing to help fund a new permanent supportive housing project located at 1400 Bristol Street, Costa Mesa. The project will convert the existing, 120-room Travelodge North Motel property into a 78 -unit permanent supportive housing project.
Following the City of Newport Beach’s commitment, the developer secured commitments for the balance of the funds for the project and is finalizing negotiations of the various loan and funding agreements and approvals. For the City Council’s consideration is an Affordable Housing Loan Agreement (Agreement) (Attachment A) with American Family Housing and a funding request to loan $3,000,000 toward the conversion of the Travelodge North Homekey Project.
RECOMMENDATIONS:
a) Find this project is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15 301 (Existing facilities) and Section 15302 (Replacement or Reconstruction) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because this project has no potential to have a significant effect on the environment;
b) Approve Budget Amendment No. 25 -047, appropriating $3,000,000 for increased expenditures in the Permanent Supportive Housing Account No. 01201925 -980000- 22M15; and
c) Authorize the City Manager to finalize negotiations and authorize the City Manager and City Clerk to ex ecute the Affordable Housing Loan Agreement between the City of Newport Beach and American Family Housing, LLC, to loan $3,000,000 to convert the property at 1400 Bristol Street, Costa Mesa, into permanent supportive housing , provided the terms of the Agre ement are substantially similar with the Agreement attached hereto, which terms shall be reviewed and approved by the City Attorney’s Office, and to take any other action necessary to implement the Agreement, including, but not limited to, approving and executing additional documents related thereto.
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Seimone Jurjis, Assistant City Manager/Community Development Director - 949-644-3232, [email protected]
PREPARED BY: Lauren Wooding Whitlinger, Real Property Administrator - 949-644- 3236, [email protected]
TITLE: Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homeke y Project at 1400 Bristol Street, Costa Mesa
Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa December 10, 2024
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DISCUSSION:
Following the State of California Department of Housing and Community Development’s (HCD) announcement of additional funding for affordable and supportive housing in early 2023, the County of Orange (County) sought development partners and identified American Family Housing’s (AFH) proposed project for the acquisition, conversion and operation of the Travelodge North Motel property located at 1400 Bristol Street, Costa Mesa (Property) as permanent supportive housing for those experiencing or at risk of homelessness. AFH’s proposed project would convert the existing 120 -unit motel property into 78 total units of housing - 76 units of permanent supportive housing and two manager’s units (Project).
Consistent with the County’s funding requirements, AFH also secured financial support from the governing jurisdiction, the City of Costa Mesa. The City of Costa Mesa works closely with Newport Beach to address homelessness issues and made City staff aware of the Project. The Project was submitted to the City Council on July 11, 2023 (Attachment C), and the City committed to participate in the Project (Attachment D).
The City’s commitment includes a $3,000,000 loan with a 55-year term, at a 3.00% simple interest rate, repaid out of a portion of the project’s residual receipts. In return, there would be “local preference” for 12 studio units at the Project, based, in part, on the eligible tenant’s connection to Newport Beach . Similarly, with C osta Mesa’s contribution of $4,000,000 towards the Project, 16 studio units would have a similar “local preference” for tenants with a connection to the City of Costa Mesa.
In addition to the funding from the City and Costa Mesa, the Project was granted Round 3 Homekey funds of almost $29 million from the State through HCD. The County will administer the State Homekey funding as well as provide an additional $6.8 million towards the Project. AFH will round out the Project funding with a private mortgage lo an of approximately $3 million.
A summary of the funding sources for the Project:
Funding Source Amount
Homekey Program Award $27,700,000
Homekey – Relocation $750,000
County of Orange HOME $2,400,000
County of Orange MHSA $4,421,520
City of Costa Mesa $4,000,000
City of Newport Beach $3,000,000
Private Loan $3,115,000
Total $45,386,520
Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa December 10, 2024
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Project Scope and Timing
Figure 1
The Property (Figure 1) will be purchased by the County using a portion of the Homekey funds and leased to AFH to redevelop and operate as permanent supportive housing.
Existing commercial space on the Property will be included in the purchase, and lease revenues will help support the ongoing operating budget for the Project.
The Project includes exterior renovations such as façade and landscaping improvements, demolition of an existing pool to create a community courtyard, and path of travel upgrades to comply with American s with Disabilities Act requirements. Interior renovations include extensive upgrade s to all living quarters, the installation of kitchenettes, and the reconfiguration of office space to accommodate on-site services.
Due to the small size - approximately 250 square feet - of the existing motel rooms, AFH will absorb 42 of the current 120 rooms to create 76 studio and one -bedroom apartments. The space reconfiguration will bring the units into compliance with minimum floor area requirements and provide enough space to accommodate the kitchenettes.
Four of the units will be updated to full m obility units, and four units will be updated to visual/hearing impaired units, in compliance with the Americans with Disabilities Act All of the units will be furnished upon initial occupancy with a bed frame, mattress, nightstand, kitchen table and chai rs, at no cost to the tenants. Common area amenities including a large community room, community kitchen, outdoor gathering spaces, and two laundry rooms will also be provided at the Project.
Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa December 10, 2024
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Supportive services will be tailored to each particular househ old’s needs to improve housing stability and retention and overall wellbeing. Services will be provided on and off-site from third party providers and coordinated by AFH. Leasing and p roperty management for the Project will also be provided by AFH, including on-site management staff, maintenance and janitorial services, and oversight of the building and vendors.
Tenant Eligibility Standards
The following eligibility standards will apply to all of the 76 units at the Project:
A. Housing status will be considered, with no less than 38 of the units being dedicated to households experiencing chronic homelessness of one year or longer, 10 units dedicated to households experiencing homelessness of up to one year, and 28 units dedicated to households at-risk of experiencing homelessness.
B. All of the units will be restricted to households with incomes equal to or less than 30% of the Area Median Income (AMI) for the county.
Twenty four of the 1-bedroom units are restricted to households that qualify through the Orange County Health Care Agency under the Mental Health Services Act.
Additionally, 48 units will be covered by a Housing Assistance Payments (HAP) contract with the County, including 38 Housing Choice and 10 Ve terans Affairs project -based vouchers.
The remaining 28 units not subject to the HAP contract will have a local preference for the City and the City of Costa Mesa. Twelve units will have a household connection to the City of Newport Beach, meaning 36 months’ tenancy in the city, current and active employment in the city with documented income, or having a child enrolled in a school within the Newport-Mesa Unified School District, or a child who attended such a school in the last two years. Costa Mesa will have 16 units with a household connection to the City of Costa Mesa, with similar criteria to establish the connection.
Summary of Terms
The proposed terms of the Agreement are summarized below:
1. The term of the Agreement will run for 55 years, commencing upon completion of the Project.
2. The loan of $3,000,000 will be disbursed through escrow during construction of the Project to cover construction costs and leasing expenses for the Property.
3. The loan will accrue simple interest of 3% per annum from the date of disbursement of the loan proceeds. Full repayment of the principal amount of the loan and any outstanding interest will be due on the maturity date 55 years from completion of construction of the Project and release of construction covenants.
Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa December 10, 2024
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4. Commencing the first calendar year after disbursement of the loan, AFH will make annual payments to the City. The payment will first be applied to accrued interest, and then to the principal amount of the loan. The annual repayment amount will be based on 50% of the residual receipts from the Property revenues less allowed expenses, and the City’s proportionate share of the financing.
5. The Property will be subject to a regulatory agreement , which shall be recorded against title. The regulatory agreement will restrict the use of the Property to supportive affordable housing, limit rents that may be charged to lease the units and will restrict tenants’ income to no more than 30% AMI, for 55 years.
6. Twelve studio size units at the Property will be leased to tenants, identified through the County’s coordinated entry system as being homeless or at a minimum at-risk of becoming homeless, with ties to Newport Beach.
7. The developer must establish an operating reserve fund and a capital replacement reserve fund to ensure the long-term maintenance and operation of the units and the Property.
8. Annual reports must be submitted to the City providing a detailed description of the financials and perf ormance of the Property, including verification of tenant incomes.
9. The developer shall provide certificates of insurance to the satisfaction of the City’s Risk Manager, naming the City as additional insured.
The Agreement has been reviewed by the City Attorney’s Office. AFH, the City of Costa Mesa, and the County are reviewing the Agreement and may have additional comments; substantive revisions to the Agreement will be returned to City Council for its consideration at a future meeting.
FISCAL IMPACT:
On July 11, 2023, the City Council committed $3,000,000 to this project, which was appropriated to an account in the General Fund. On October 22, 2024, these funds were included in the year-end surplus and transferred to the Facilities Financing Planning Fund (Fund 513). The proposed budget amendment (Attachment B) appropriates $3,000,000 to the Permanent Supportive Housing Account No. 01201925-980000-22M15, funded by a transfer from the Facilities Financing Planning Fund. The $3,000,000 contribution is the total commitment for the City; all ongoing costs to provide the support services will be managed by AFH.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this project exempt from the Califor nia Environmental Quality Act ( CEQA) pursuant to Section 15301 (Existing facilities) and Section 15302 (Replacement or Reconstruction) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential to have a significant effect on the environment.
Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project at 1400 Bristol Street, Costa Mesa December 10, 2024
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NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A – Affordable Housing Agreement
Attachment B – Budget Amendment
Attachment C – Staff Report, dated July 11, 2023
Attachment D – City of Newport Beach Commitment Letter for the Proposed Travelodge North Homekey Project, dated July 13, 2023