CITY COUNCIL STAFF REPORT
DATE: JANUARY 14, 2026 BUSINESS & LEGISLATIVE
SUBJECT: APPROVE THE REQUEST FOR FINANCIAL ASSISTANCE AND LOAN
COMMITMENT FOR DEVELOPMENT AND CONSTRUCTION OF A
PROJECT LOCATED AT McCARTHY ROAD AND SAN RAFAEL, A 110-
UNIT AFFORDABLE HOUSING PROJECT
FROM: Scott C. Stiles, City Manager
BY: Housing & Community Development
SUMMARY:
Pacific West Communities, Inc. (“PWC”) has submitted a proposal to develop a 100 percent affordable multifamily housing community on approximately five acres located at the northwest corner of McCarthy Road and San Rafael Drive (APNs 669-420-011, -012, and -014), immediately adjacent to the Palm Springs Navigation Center. The property is currently vacant and identified in the City’s Housing Element as a suitable site for affordable and supportive housing development.
The project, tentatively titled San Rafael Apartments, envisions the construction of approximately 115 affordable rental units serving low- and very low-income households.
The development will include a mix of one-, two-, and three-bedroom units, a leasing office, community clubhouse, fitness room, laundry facilities, pool, tot lot, dog park, and associated open-space amenities.
The proposed site is located adjacent to the City’s Navigation Center, creating opportunities for coordination related to housing placement, resident referrals, and service access. While the Project is not a service facility, proximity to the Navigation Center allows for collaboration with the City and service providers to support residents transitioning from homelessness into stable, permanent housing. The site design and management plan will emphasize clear boundaries, secure access, and ongoing communication to ensure compatibility with surrounding uses and to be a good neighbor within the area.
The Developer has requested financial assistance from the City to support land acquisition costs and applicable impact and developer fees to ensure project feasibility.
The Developer anticipates applying for 4 percent tax-exempt bond financing and Low-
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January 14, 2026 -- Page 2
San Rafael Apartments Funding Commitment
Income Housing Tax Credits (LIHTC) and will leverage the City’s funding commitment to strengthen its competitiveness for these state and federal resources.
RECOMMENDATION:
1. Approve a funding commitment in the amount of Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) to Pacific West Communities, Inc. (“Developer”) to assist with acquisition of approximately five acres located at the northwest corner of McCarthy Road and San Rafael Drive for the development of a 100 percent affordable housing community.
2. Authorize the City Manager to structure applicable Development Impact Fees and Developer Fees as a City loan, not to exceed $2,500,000, subject to repayment from residual receipts and documented through separate loan and regulatory agreements, consistent with the Affordable and Multi-Family Housing Incentive Program.
3. Authorize the City Manager to execute all necessary loan documents and related agreements, subject to approval by the City Attorney, consistent with the terms described herein.
STAFF ANALYSIS:
The Developer requests a $2,250,000 loan from the City to assist with the purchase of land. The loan will accrue simple interest at 3 percent per annum, carry a 55-year affordability term, and be repaid from annual residual receipts, secured by a deed of trust on the property. The City anticipates making loan funds available for disbursement in the fourth quarter of calendar year 2026, contingent upon completion of project entitlements, execution of loan documents, and confirmation of all other project financing sources.
Disbursement would occur no earlier than October–December 2026, contingent upon verification of all financing sources and execution of loan agreements.
The proposed affordability program includes a total of 115 units, which will be affordable across multiple AMI levels, including units restricted at 30%, 50%, 60%, and 80% AMI.
The project meaningfully advances the City’s Housing Element goals by delivering affordability across multiple income levels, including a substantial number of very-low- income units in proximity to the Navigation Center.
The Developer submitted a preliminary development budget totaling $52,921,660, including approximately $31.6 million in direct construction costs, $14.0 million in soft costs, and $3.95 million in financing costs. Land acquisition totals $2,250,000, which is the amount requested for City participation. These estimates are consistent with comparable 100% affordable multifamily projects of similar scale in California.
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San Rafael Apartments Funding Commitment
Project Schedule
Phase Milestone / Description Estimated Timing
Entitlement
Preparation
Developer submits formal entitlement
package (first full submittal)
Within 30 days of request
letter (June 2025)
Planning Review Staff review and Planning Commission
hearing
Mid-2026
Financing
Applications
4% Tax-Exempt Bonds + LIHTC
application cycle
Late 2026 – 2027
City Loan &
Agreement
Execution
Draft and execute Loan Agreement;
finalize Regulatory Agreement
Q4 2026 – 2027
(dependent on financing
awards)
Construction Start Groundbreaking after bond/TAX
CREDIT awards + building permit
issuance
Late 2027
Construction
Duration
Typical Pacific West multifamily timeline
(per comparable TPC projects)
18–22 months
Project Completion Certificate of Occupancy; lease-up
begins
2029
Full Stabilization Stabilized occupancy achieved 6–9 months after completion
The Developer has initiated a community engagement process, including two scheduled community meetings on December 16, 2025 and January 7, 2026, designed to introduce the project, gather neighborhood feedback, and review conceptual designs. Staff will continue to coordinate with the Developer to ensure the outreach process remains inclusive, transparent, and accessible to nearby residents and community stakeholders.
Pursuant to Resolution No. 24654, the project qualifies for the Affordable and Multi-Family Housing Incentive Program. The Developer has requested and staff recommends that applicable Development Impact Fees and Developer Fees be provided to the project in the form of a City loan, rather than waived outright. The fee loan would be repaid from residual receipts and documented through the loan agreement and regulatory agreement to protect the City’s financial interests.
Staff further recommends that City impact fees be lent to the project under the same residual-receipts repayment structure, consistent with past practice for affordable housing projects. Applicable Development Impact Fees and Developer Fees will be structured as a City fee loan, accruing simple interest at three percent (3%) per annum and repaid from available residual receipts over a term consistent with the Project’s long-term affordability restrictions. The fee loan will be secured by a deed of trust and regulatory agreement, and no General Fund impact is anticipated.
The City’s land acquisition loan shall be senior in priority to the City’s fee loan. The City’s loan for Development Impact Fees and Developer Fees shall be subordinate to the acquisition loan and shall be evidenced by separate loan documents. The relative priority City Council Staff Report
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San Rafael Apartments Funding Commitment
and subordination of the City loans shall be further documented in the respective loan agreements and recorded instruments, in a form acceptable to the City Manager and City Attorney.
ENVIRONMENTAL ASSESSMENT:
The proposed City action is exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Sections 15192–15194, which provide a statutory exemption for affordable housing projects meeting specified criteria. The Project qualifies for this exemption because it is a 100 percent affordable housing development located on an infill site and complies with applicable density, location, and affordability requirements. As a statutory exemption, the Project is not subject to further CEQA review or environmental analysis.
ALIGNMENT WITH STRATEGIC PLANNING:
This action would further City Council’s Strategic Plan Broad Goal of Housing, specifically the Enhanced Area of Focus of Affordable Housing.
FISCAL IMPACT:
Approval of this item will commit $2,250,000 in City affordable housing funds for land acquisition. Applicable Development Impact Fees and Developer Fees eligible under Resolution No. 24654 will be provided to the project in the form of a City fee loan.
Repayment will be subject to available residual receipts, and no General Fund impact is anticipated.
REVIEWED BY:
Department Director: Jay Virata
Director of Finance & Treasury: Kristopher J. Mooney
Assistant City Manager: Flinn Fagg
City Manager: Scott Stiles
ATTACHMENTS:
A. Project Conceptual Design Submittal (Edited)
B. Developer Request Letter (June 24, 2025)
C. Funding Commitment Letter (January 2026)
D. Resolution Number 24654 – Affordable and Multi-Family Housing Incentive Program