Agenda Item
City Council
Item #: 3.5. 10/11/2022 File #: 22-0482
TO: Honorable Mayor and Members of the City Council
THRU: Rob Houston, City Manager
FROM: Jeff Adams, Interim Community Development Director
1. SUBJECT
Affordable Housing Agreement between the City of Orange and Mercy Housing California 107, L.P. (Relates to Agenda Item 8.3)
2. SUMMARY
Agreement with Mercy Housing California 107, L.P. to provide financing for a 50-unit senior affordable housing development at 480 S Batavia Street.
3. RECOMMENDED ACTION
1. Approve the Affordable Housing Agreement between the City of Orange and Mercy Housing California 107, L.P. and authorize the Mayor and City Clerk to execute on behalf of the City.
2. Authorize the appropriation of $576,000 from the Low and Moderate Income Housing Asset (921) unreserved fund balance to expenditure account number 921.9810.56571.30210 - Rehab/Dev Loans - Villa St. Joseph.
3. Authorize the appropriation of $372,756 from Affordable Housing (916) unreserved fund balance to expenditure account number 916.9810.56571.30210 - Rehab/Dev Loans - Villa St.
Joseph.
4. Authorize the City Manager to make minor language changes to agreement, related attachments, and documents if needed and execute on behalf of the City.
4. FISCAL IMPACT
The total expenditure for this agreement is $1,600,000.00 and will be funded in Rehab/Dev Loans - Villa St. Joseph (30210) through the following sources:
HOME Fund (317) $651,244
Low and Moderate Income Housing Asset Fund (921) 576,000 Affordable Housing Fund (916) 372,756
Total: $1,600,000
5. STRATEGIC PLAN GOALS
Goal 3: Enhance and promote quality of life in the community c: Support and enhance attractive, diverse living environments.
6. DISCUSSION AND BACKGROUND
Mercy Housing California 107, L.P. (Mercy Housing) approached the City with a proposal to convert the existing vacant Sisters of St. Joseph Motherhouse at 480 S. Batavia Street into a senior affordable housing project. The request from Mercy Housing is for the City to provide financial City of Orange Printed on 10/6/2022Page 1 of 4
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Item #: 3.5. 10/11/2022 File #: 22-0482
affordable housing project. The request from Mercy Housing is for the City to provide financial assistance to fund $1.6 million of a $3.2 million financial gap. The three funding sources to be considered include:
· $651,244 in HOME Investment Partnerships (HOME) funds · $576,000 in Redevelopment set-aside funds
· $372,756 in development in-lieu fees funds
This report is one of two on the October 11, 2022 agenda that addresses the financing for the proposed project. The other associated report fulfills the additional requirement of the U.S.
Department of Urban Development’s(HUD) to amend and submit the Fiscal Year 2022-2023 Annual Action Plan to HUD for the allocation of HOME funds to the project and hold a public hearing.
Project Description
The proposed development by Mercy Housing will convert the existing vacant Sisters of St. Joseph Motherhouse into 50-dwelling units; 49 affordable senior units for those 62 and over, and one managerial unit for staff.
Summary of Unit Mix (50 Total)
Type 20% AMI 30% AMI 40% AMI 50% AMI Staff Unit
Studio 0 2 2 2 0
1 Bedroom 18 4 11 10 0
2 Bedroom 0 0 0 0 1
Total 18 6 13 12 1
*AMI: Average Median Income
Costs and Financing
The proposed development budget includes:
Item Cost
Building/Legal Acquisition $5,830,000
Design 10,199,587
Construction (including Owner’s
Contingency)
20,404,693
Financing Fees 369,222
Total Development Cost $36,803,502
The proposed financing for the project includes the following:
SourceAmount
Seller Carryback Loan (SJCO) $5,705,000
Accrued Deferred Interest - Seller
Carryback
433,092
California Finance Agency (Cal HFA)
Special Needs Housing Program (SNHP)
3,696,893
Accrued Deferred Interest - Cal HFA
SNHP
157,352
County of Orange HOME Loan 1,020,600
California Department of Housing &
Community Development (HCD) - No
Place Like Home (NPLH) Non-Competitive
2,000,000
HCD - NPLH Competitive 3,641,722
Orange HOME Investment Partnerships
Program (HOME) Loan
651,244
Orange Low Moderate Income Housing
Asset (LMIHA) Loan
576,000
Orange In-Lieu Fees Loan 372,756
County of Orange (Mental Health Services
Act) MHSA Loan
1,400,000
Deferred Developer Fee 710,208
Limited Partners (Enterprise) 16,438,635
Total $36,803,502
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Item #: 3.5. 10/11/2022 File #: 22-0482
SourceAmount
Seller Carryback Loan (SJCO) $5,705,000
Accrued Deferred Interest - Seller
Carryback
433,092
California Finance Agency (Cal HFA)
Special Needs Housing Program (SNHP)
3,696,893
Accrued Deferred Interest - Cal HFA
SNHP
157,352
County of Orange HOME Loan 1,020,600
California Department of Housing &
Community Development (HCD) - No
Place Like Home (NPLH) Non-Competitive
2,000,000
HCD - NPLH Competitive 3,641,722
Orange HOME Investment Partnerships
Program (HOME) Loan
651,244
Orange Low Moderate Income Housing
Asset (LMIHA) Loan
576,000
Orange In-Lieu Fees Loan 372,756
County of Orange (Mental Health Services
Act) MHSA Loan
1,400,000
Deferred Developer Fee 710,208
Limited Partners (Enterprise) 16,438,635
Total $36,803,502
Affordable Housing Agreement
The Agreement with Mercy Housing includes the following provisions:
· The City agrees to provide $576,000 from the Low and Moderate Income Housing Asset (LMIHA) fund. The LMIHA is former redevelopment funds that were set aside to develop affordable housing. The current fund balance is $1,328,641. · The City agrees to provide $372,756 from the Affordable Housing - New Construction fund.
The Affordable Housing Fund consists of one-time in-lieu fees collected from developers to contribute towards other affordable housing projects in the City as an alternative to building required affordable units. The current fund balance is $372,756. · The City agrees to provide $651,244 in HOME funding solely for the purpose of paying a portion of the construction and rehabilitation costs of the Low Income and Very Low Income HOME units. The HOME funding will include $127,487 in Program Income, funded by principal and interest payments from outstanding HOME loans, and $523,757 in HOME entitlement funds, including unused entitlement funds from past years and the current FY2022-2023 funds. At this time, there is $127,487 in Program Income available, which the City is obligated to use first, and $848,574 in HOME entitlement funds.
· The City Loans are intended to be “gap”financing not to exceed the amounts set forth in the final Project Budget.
· All loans are residual receipts loans with a 55-year term and a 3% simple interest rate. The City may not start receiving loan payments until sometime beyond the completion of the project, however, interest costs will be accrued.
Recommendation
Staff recommends the City Council approve the Affordable Housing Agreement with Mercy Housing to provide financial assistance to the project.
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Item #: 3.5. 10/11/2022 File #: 22-0482
7. ATTACHMENTS
· Affordable Housing Agreement
· Pro Forma
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