CITY OF POMONA
COUNCIL REPORT
March 6, 2023
To: Honorable Mayor and Members of the City Council
From: James Makshanoff, City Manager
Submitted By: Kirk Pelser, Deputy City Manager
SUBJECT: AUTHORIZATION TO APPLY FOR AND RECEIVE AN AWARD OF HOUSING ACCELERATOR FUNDS FROM THE CALIFORNIA DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT FOR THE EAST END VILLAGE AFFORDABLE HOUSING PROJECT RECOMMENDATION:
It is recommended that the City Council take the following actions:
Adopt the following Resolution No. 2023-33 (Attachment No. 1):
RESOLUTION NO. 2023-33 – A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF POMONA, CALIFORNIA, AUTHORIZING THE CITY TO BE A CO-APPLICANT AND CO-RECIPIENT OF CALIFORNIA HOUSING ACCELERATOR FUNDS THROUGH THE DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT FOR THE EAST END VILLAGE AFFORDABLE HOUSING PROJECT IN THE CITY OF POMONA Approve a Standard Agreement (STD213) in an amount not to exceed $46,386,823, to secure the California Housing Accelerator Loan from the California State Department of Housing and Community Development (“HCD”) and to participate in the California Housing Accelerator program; and Authorize the City Manager to execute the agreement and any extensions, subsequent non- substantive changes or corrections that may be required by HCD or amendments thereto, on behalf of the City, subject to review and approval as to form by the City Attorney.
EXECUTIVE SUMMARY:
Approval of this report will increase the funding provided by HCD from the previously approved amount of $45,000,000 to $46,386,823. HCD is requiring that the City adopt a new resolution to reflect these minor adjustments in the 100% affordable housing development at 1321 E. Holt Avenue. The Cesar Chavez Foundation (Developer) has also needed to make some changes to the project scope in order to assure the project’s financial viability. As a result, the project is now proposed to have 90 units, a reduction of 35 units from the previously planned 125. The scope of development includes a 6,700 square foot clinic on the ground floor to offer medical and dental services to the residents and the community at large.
FISCAL IMPACT:
There is no fiscal impact to the City of Pomona. The Accelerator Award is an allocation of funds in the form of a forgivable loan made to advance the housing, and it is secured by the real estate until such time that it is forgiven and becomes a grant.
PREVIOUS RELATED ACTION:
On October 17, 2022, the City Council approved the Authorization to Apply for and receive the Housing Accelerator funds from the California Department of Housing and Community Development in the amount of $45,000,000.
DISCUSSION:
The Developer acquired the 2.3-acre Proposed Project subject site from the Pomona Unified School District in 2019 and has obtained all City of Pomona entitlements to proceed with the project, which was intended to provide 125 residential units in a five-story configuration (Attachment No. 2). The Developer is now proposing to remove the fifth floor in order to achieve two goals: the first is to reduce the unit count to 90 and at the second is to remove the requirement to pay commercial prevailing wages and instead pay residential prevailing wages, thereby substantially reducing the cost of building the Project. The project will have approximately 6,700 square feet of the ground floor space occupied by a community health clinic operated by East Valley Community Health. As with nearly all affordable housing projects, many distinct layers of financing are needed in order for a project to be financially feasible, and this typically includes some form of substantial tax credits and grant allocations from the State of California.
The Developer has been seeking ways to finance this very expensive project since the land was purchased in September 2019 from the Pomona Unified School District. The Project has received several awards of gap financing, including a previous award of Affordable Housing and Sustainable Communities (AHSC) funds from HCD, a No Place Like Home (NPLH) award also from HCD for some supportive housing units, and several smaller awards from the San Gabriel Valley Regional Housing Trust and the City of Pomona. However, the Project was still not competitive enough to receive the major piece of funding needed to close the financing, an award of tax-exempt bonds and 4% low income housing tax credits (LIHTC), the most critical piece of the financing. The Project was determined to be not competitive enough mostly because it did not have enough (up to 50%) supportive housing units.
When HCD launched the Accelerator Program in the first quarter of 2022, the intent of the program was for the State to provide funds to affordable projects like East End that had received previous HCD awards (The Project had 2), but had not been able to receive award bonds and/or credits. The Accelerator awards would be in the form of forgivable loans (grants) and would replace the bonds and credits that were not received by the projects that applied.
The Developer of East End immediately applied for those funds and was initially rejected because the application did not include the City of Pomona, who was a co-applicant on the AHSC application that won $18.4 million for the affordable housing and $9.1 million for transportation and infrastructure. The Developer appealed the decision on the grounds that the AHSC application was for two distinct pools of money, one for infrastructure and one for housing, and that the City was not a co-developer of the housing Project. Accelerator funds were intended for housing only. The Developer also requested that HCD allow the project size to be reduced to 90 units so that the funds that were awarded (including the Accelerator funds) would be sufficient to close the financing and begin building the project. Project costs had been escalating every month as inflation, lack of materials/supply side issues, and labor costs have driven many projects into financial infeasibility. HCD has now relented and made a commitment of the Accelerator funds to the East End project, while the technicalities of the amount of the award versus project size and organizational structure are resolved.
In the meantime, HCD has requested that the City be treated as a co-applicant and co-recipient of the Accelerator Award for consistency with the AHSC award.
COUNCIL PRIORITIES & GOALS:
City Council Priority 2: Economic Development – Goal J: Encourage the development and maintenance of quality housing opportunities for all.
Prepared by:
_____________________________
Kirk Pelser
Deputy City Manager
ATTACHMENT(S):
Attachment No. 1 - Draft Resolution No. 2023-33
Attachment No. 2 - Award letter for Accelerator Program HCD Funding – East End Village Affordable Housing Project