City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: JANUARY 23, 2024
FROM: DEPARTMENT OF HOUSING AND WARD: 2
HUMAN SERVICES
SUBJECT: AMERICAN RESCUE PLAN ACT (ARPA) SUBRECIPIENT AGREEMENT WITH WAKELAND ENTRADA LP FOR A $1,000,000 RESIDUAL LOAN TO ASSIST IN THE DEVELOPMENT OF THE ENTRADA AFFORDABLE HOUSING PROJECT LOCATED AT 1701-1757 SEVENTH STREET IN THE EASTSIDE NEIGHBORHOOD – SUPPLEMENTAL APPROPRIATION ISSUE:
Approval of an American Rescue Plan Act Subrecipient Agreement with Wakeland Entrada LP for a $1,000,000 residual loan to assist in the development of the Entrada affordable housing development located at 1701-1757 Seventh Street in the Eastside Neighborhood.
RECOMMENDATIONS:
That the City Council:
Approve an American Rescue Plan Act Subrecipient Agreement with Wakeland Entrada LP for $1,000,000 to assist with development costs related to the Entrada affordable housing project; and Authorize the City Manager, or designee, to sign and execute the attached American Rescue Plan Act Subrecipient Agreement with Wakeland Housing and Development Corporation, including making minor and non-substantive changes.
LEGISLATIVE HISTORY:
The American Rescue Plan Act (ARPA), Public Law No. 117-2, was signed into Law by President Biden on March 11, 2021, and established the Coronavirus State Fiscal Recovery Fund and Coronavirus Local Fiscal Recovery Fund, which together make up the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program. This program was intended to provide support to State, territorial, local, and Tribal governments in responding to the economic and public health impacts of COVID-19 and in their efforts to contain impacts on their communities, residents, and businesses.
On July 27, 2022, the U.S. Treasury Department released updated guidance that allows governments to use State and Local Fiscal Recovery Funds (SLFRF) from the ARPA to fully finance long-term affordable housing loans, including the principal of any such loans, subject to certain conditions and other changes that will facilitate significant additional financing for affordable housing projects, including those using the Low-Income Housing Tax Credit (LIHTC).
BACKGROUND:
The ARPA established the SLFRF to provide resources to support communities that are struggling with the impacts resulting from the COVID-19 pandemic. The US Department of the Treasury (Treasury) first released the Interim Final Rule providing eligibility guidance as well as regularly updated Frequently Asked Questions (FAQ). The Interim Final Rule provided initial guidance and served to help communities develop proposals for funding.
On August 31, 2021, the City submitted the required one-time Interim Report and the first annual Recovery Plan Performance Report. The one-time Interim Report identified expenditures by Expenditure Category from the date of the award to July 31, 2021.
On November 9, 2021, the City Council approved the ARPA funding Expenditure Category Plan for the first allocation in the amount of $36,767,594 following the Interim Final Rule guidelines. Additionally, City Council directed staff to return with an itemized list for Parks infrastructure needs during the second allocation of funding for consideration. The Final Rule was issued on January 6, 2022 and became effective on April 1, 2022.
On November 15, 2022, a preliminary draft of the second round of ARPA funding was presented to City Council. The Mayor and City Council received and provided input to staff on the potential to reallocate additional funding to Parks and the Affordable Housing Fund.
On February 7, 2023, the City Council approved the proposed ARPA Expenditure Plan for the second allocation of grant funds in the amount of $36,767,594 per Treasury’s guidance to be applied to the following expenditure categories: Public Health, Negative Economic Impacts, Revenue Replacement, Citywide Revenue Loss, and Administration. The approved Road to Recovery, the Envision Riverside 2025 Strategic Plan, and guidelines from the Final Rule guided the approved expenditures, which were to address needs that persist in the community as well as revenue loss to ensure continued government services. This approval included a reallocated amount to the Affordable Housing Fund totaling $1,388,789.
DISCUSSION:
Wakeland Housing and Development Corporation has submitted a request to the Department of Housing and Human Services on behalf of Wakeland Entrada L.P. for additional funding to help alleviate a $1,000,000 project budget shortfall.
The Entrada Project is a 65-unit affordable housing project located at 1701-1757 Seventh Street in the Eastside neighborhood that is expected to be completed and occupied by March 2024. The project will be available to individuals and families who earn less than 60% of the Area Median Income with a set-aside of eight reserved units for Permanent Supportive Housing recipients at 30% or less. Previously awarded Affordable Housing and Sustainable Communities (AHSC) program funds are also providing for street improvement projects as well as transportation amenities and urban greening components to the project area and surrounding community as part of this project.
Wakeland’s project budget shortfall is a result of the economic impacts of the COVID-19 pandemic such as supply chain shortages, volatile commodity markets, and construction workforce issues that significantly increased construction costs. Direct project impacts were associated with various construction line items and trades such as lumber, masonry, concrete, and gypsum board. The project also encountered delays due to permitting and inspections and increases in development impact fees. Below is a list of specific line items that were previously removed from the project’s budget to address the shortfall, but that Wakeland re-inserted into the project as they believed the items provided a materially better project that would offer substantial benefits to future residents and the surrounding community:
Delays (22 days @ $2,518): $55,396
Site Work changes: $45,000
Flooring upgrades (from carpet to LVP): $20,000
Countertop upgrades (from P-LAM to solid surface): $100,000 Enhanced security system (to Galaxy): $180,000
Landscape: $100,000
Decorative balcony railing: $30,000
Perimeter wall changes: $35,000
Fee changes: $217,299.52 (school) + $251,757.02 (city) = $469,056.54 General Contractor Costs: $36,835.46
Total: $1,071,228
Below is an updated breakdown of Entrada’s project activity costs and sources of funds:
Activity
Cost
Land Acquisition
$3,017,997
Construction
$31,633,148
Soft Costs
$6,496,746
Financing Costs
$2,947,866
Total Development Costs
$44,095,757
Sources of Funds
Funding Amount
Tax Credit Equity
$23,997,600
Permanent Loan
$3,816,353
AHSC Loan & Grant
$11,117,754
City Loan
$4,000,000
ARPA (SLFRF)
$1,000,000
Accrued Interest
$164,050
Total Sources of Funds
$44,095,757
Residual receipt payments from the loan will be placed back in the Affordable Housing Loan pool to fund additional affordable housing projects.
STRATEGIC PLAN ALIGNMENT:
The project contributes to Strategic Priority 2 - Community Well Being and Goal, specifically Goal 2.1 to facilitate the development of a quality and diverse housing supply that is available and affordable to a wide range of income levels.
The Project aligns with each of the five Cross-Cutting Threads as follows:
Community Trust – Community was informed of the project through social media, community meetings, and the Housing Authority website. The project was discussed and approved in a public forum at prior City Council meetings.
Equity – Activities funded under the ARPA (SLFRF) grant are accessible and made available to all Eastside residents.
Fiscal Responsibility – Riverside is a prudent steward of public funds and ensures responsible management of the City’s financial resources while providing quality public services to all.
Innovation – Riverside is inventive and timely in meeting the community’s changing needs and prepares for the future through collaborative partnerships and adaptive processes.
Sustainability & Resiliency – Riverside is committed to meeting the needs of the present without compromising the needs of the future and ensuring the City’s capacity to persevere, adapt and grow during good and difficult times alike.
FISCAL IMPACT:
The total fiscal impact of the action is $1,000,000. The funds are budgeted and available in the Grants & Restricted Programs Fund, Federal Operating Grants, Affordable Housing Projects Account 8821200-440110.
Prepared by: Michelle Davis, Housing and Human Services Director Certified as to
availability of funds: Kristie Thomas, Finance Director/Assistant Chief Financial Officer Approved by: Mike Futrell, City Manager
Approved as to form: Phaedra Norton, City Attorney
Attachment: American Rescue Plan Act Subrecipient Agreement ARPA Agreement with Entrada LP ● Page 2