CITY COUNCIL STAFF REPORT
DATE: JANUARY 14, 2026 BUSINESS AND LEGISLATIVE
SUBJECT: APPROVE THE REQUEST FOR FINANCIAL ASSISTANCE AND LOAN COMMITMENT FOR DEVELOPMENT OF AN 82-UNIT AFFORDABLE
HOUSING PROJECT LOCATED AT 305 WEST SAN RAFAEL
FROM: Scott C. Stiles, City Manager
BY: Housing & Community Development
SUMMARY:
Red Tail Multifamily Land Development, in partnership with Affordable Housing Access (“Developer”), proposes to construct a 100 percent affordable multifamily housing community on approximately 4.05 acres located at 305 West San Rafael Drive, within the Desert Highland Gateway Estates neighborhood. The site is currently vacant and designated in the City’s Housing Element as suitable for new affordable housing development.
The project will provide 82 rental units, including 81 deed-restricted low-income units and one on-site manager’s unit, serving households earning up to 60 percent of the Area Median Income (AMI). The development will feature a mix of one-, two-, and three- bedroom apartments with on-site amenities such as a community building, playground, laundry facilities, outdoor gathering spaces, and landscaped open areas designed for families.
The Developer has requested City assistance to address a financing gap of approximately $8.7 million, seeking a $3.8 million subordinate loan and fee reductions pursuant to the City’s Affordable and Multi-Family Housing Incentive Program under Resolution No. 24654. The City’s investment will be used to leverage additional funding through the California Tax Credit Allocation Committee (CTCAC) and the California Debt Limit Allocation Committee (CDLAC) 4 percent tax-exempt bond program.
The project supports the City’s ongoing commitment to expanding its affordable housing inventory, promoting equitable neighborhood investment, and providing stable, high- quality homes for working families and residents transitioning from housing insecurity.
City Council Staff Report
January 14, 2026 -- Page 2
305 W. San Rafael Funding Commitment
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9 RECOMMENDATION:
1. Approve a funding commitment in the amount of Three Million Eight Hundred Thousand Dollars ($3,800,000) to Red Tail Multifamily Land Development for the construction of an 82-unit affordable rental housing development at 305 W. San Rafael Drive.
2. Authorize the City Manager to execute all loan documents and related agreements, subject to approval by the City Attorney, consistent with the terms described herein.
3. Acknowledge that the project is eligible for fee reductions pursuant to Resolution No. 24654, the Affordable and Multi-Family Housing Incentive Program, which provides a 100 percent reduction of applicable Development Impact Fees and Developer Fees for projects that are 100 percent affordable.
4. Direct staff to schedule, at a future date, a Tax Equity and Financial Responsibility Act (TEFRA) hearing pursuant to Section 147(f) of the Internal Revenue Code, issue public notice, and return to the City Council for consideration of approval of qualified private-activity bonds to be issued by an outside issuer.
BACKGROUND:
A Major Development Permit for the project was approved by the Planning Commission on November 18, 2025. An appeal of the Planning Commission’s decision was filed on December 1, 2025 by adjacent property owners. The appeal is scheduled for City Council consideration on January 14, 2026, at the same meeting at which the Developer has requested action on the City’s financial commitment. The appeal challenges the Project’s height, massing, privacy impacts, siting of service areas, and the adequacy of environmental review, among other items.
Because the Development Permit approval is a prerequisite for the Project to move forward, Council must determine whether it is appropriate to act on the funding request while the land use entitlement is under appeal.
Staff has confirmed with the City Attorney’s Office that the Council may take action on the funding request, provided that any approval is expressly conditioned on the outcome of the appeal and on the Project receiving final, unchallenged entitlements. A conditional funding approval does not predetermine or prejudge the appeal; rather, it preserves the City’s ability to submit timely financing applications should the entitlement be upheld.
To maintain procedural clarity, staff recommends including the following condition in the Council’s funding action:
“This funding commitment shall not become effective unless and until the City Council denies the pending appeal and the Project’s Major City Council Staff Report
January 14, 2026 -- Page 3
305 W. San Rafael Funding Commitment
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9 Development Permit becomes final, or unless the Project otherwise receives all required entitlements in a form acceptable to the City Manager and City Attorney. No City funds will be disbursed, and no loan documents will be executed, until the Project obtains final, non-appealable land use approvals.”
This approach allows the Developer to maintain progress on its financing schedule while ensuring that the City’s action is fully conditioned on the resolution of the appeal and compliance with all required entitlements.
Should the Council uphold the appeal, the funding commitment would automatically terminate, as the Project would no longer have the necessary entitlements to proceed. In that event, no additional Council action would be required to rescind the commitment.
Approval of the funding request does not constitute a finding or determination regarding the merits of the appeal. The funding request is independent and may be conditioned to ensure it becomes effective only if the Project ultimately receives all necessary approvals.
STAFF ANALYSIS:
The Project will include 82 total units, consisting of 81 deed-restricted affordable units and one manager’s unit. The Project therefore contributes a total of 81 RHNA-creditable units, substantially advancing the City’s Housing Element goals and supporting equitable production in the Desert Highland Gateway Estates neighborhood.
The Developer has submitted a preliminary development budget totaling $32,973,609, which is broken down in Table 2 on the following page. The financing package is expected to include tax-exempt bond proceeds, 4% Low-Income Housing Tax Credits, and a City subordinate loan. The Developer is targeting a first-round 2026 4% tax credit application to the California Tax Credit Allocation Committee (CTCAC) / California Debt Limit Allocation Committee (CDLAC) and the application is due February 3, 2026. Staff’s goal is to ensure that City actions, including consideration of the funding request, maintain the Project’s eligibility and competitiveness for this application cycle. Timely Council action is therefore critical to support the Developer’s ability to secure tax-exempt bonds and Low- Income Housing Tax Credits, which are essential components of the Project’s financing plan. If awarded, construction would be required to begin by Q4 2026. Construction duration is estimated at 18-20 months, resulting in a projected completion date in early 2028. Loan disbursement is anticipated in Q1 2028, consistent with the project financing schedule.
Table 1: Sources of Funds
Source Category Amount Notes
Permanent Bond Proceeds $10,723,236 Tax-exempt bonds
City Council Staff Report
January 14, 2026 -- Page 4
305 W. San Rafael Funding Commitment
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9 Table 2: Uses of Funds
Use Category Amount Notes
Land Acquisition $1,435,000 Purchase of 305 W. San
Rafael
Direct Construction
Costs $18,184,741 Residential + onsite + offsite
+ solar
Architectural &
Engineering $1,500,000 A/E design + consultants
Permits, Fees &
Studies $2,550,000 Building permits, impact fees,
studies
Developer Fee $3,824,778 Portion deferred
Contingency $1,439,237 Construction contingency
Financing Costs $3,095,181 Loan fees, bond issuance,
interest
Insurance, Legal,
Admin
$750,000
(approx.)
Builders risk, legal,
accounting
Reserves & Misc. Soft
Costs $194,672 Reserves, furnishings,
marketing
TOTAL USES $32,973,609 Matches pro forma total
The Project is located within the Desert Highland Gateway Estates neighborhood. The Developer has initiated outreach to schedule introductory meetings with neighborhood stakeholders and has committed to ongoing communication throughout the entitlement and development process.
The City will provide a loan of $3,800,000 for permanent financing. The loan will bear Source Category Amount Notes
Tax Credit Equity (4% LIHTC) $12,197,268 Based on 4% federal credits City Loan $3,800,000 Updated amount requested
Deferred Developer Fee $1,353,104 Soft-source contribution Additional Gap Financing $4,900,001 Increased to fill total stack TOTAL SOURCES $32,973,609 Equals total uses
City Council Staff Report
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305 W. San Rafael Funding Commitment
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9 simple interest at 3 percent per annum, carry a 55-year affordability term, and be secured City Council Staff Report
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305 W. San Rafael Funding Commitment
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9 by a deed of trust against the land and improvements. Repayment will be based on annual residual receipts over a 57-year loan term. The City anticipates disbursing the loan funds in the first quarter of 2028, contingent upon satisfaction of all pre-closing conditions, execution of loan documents, and confirmation of all project financing commitments.
Pursuant to Resolution No. 24654, the City will extend the Affordable and Multi-Family Housing Incentive Program to the project. That resolution provides a “reduction of 100 percent of applicable Development Impact Fees and Developer Fees for projects that are 100 percent affordable.” Developer Fees are defined as “development processing and administrative fees such as application, processing, plan check, and inspection fees required by the City’s codes, ordinances, or resolutions.” To comply with federal requirements for private-activity bond financing, staff will schedule, pursuant to Section 147(f) of the Internal Revenue Code, a Tax Equity and Financial Responsibility Act (TEFRA) hearing at a future date. Public notice will be issued in advance of the hearing, and Council approval of qualified private-activity bonds (to be issued by an outside issuer) will follow.
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, provides more than the minimum required number of affordable units, and complies with all applicable density and location standards. As a statutory exemption, the project is not subject to further CEQA review or environmental analysis.
ALIGNMENT WITH STRATEGIC PLANNING:
This action advances the City’s Strategic Plan priorities related to Housing and Neighborhood Investment, including increasing the supply of high-quality affordable housing, promoting equitable access to housing opportunities, and supporting long-term neighborhood stability. The Project also aligns with the City’s broader goals of enhancing Quality of Life, expanding housing options for working families, and fostering resilient, inclusive communities.
FISCAL IMPACT:
Approval of this item commits $3,800,000 in City affordable housing funds to the Red Tail project, to be disbursed in FY 2028. Applicable fees eligible under Resolution No. 24654 will be waived for this 100 percent affordable development.
City Council Staff Report
January 14, 2026 -- Page 5
305 W. San Rafael Funding Commitment
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9 City Council Staff Report
January 14, 2026 -- Page 6
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9 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 (September 30, 2025)
C. Funding Commitment Letter (January 2026)
D. Resolution Number 24654 – Affordable and Multi-Family Housing Incentive Program