City Council Report
915 I Street, 1st Floor
Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-00123 May 10, 2022 Public Hearing Item 02
Title: 4995 Stockton Boulevard Affordable Housing Community Tax Equity and Fiscal Responsibility Act Hearing (Noticed on 04/26/2022)
Location: 4995 Stockton Boulevard, District 6
Recommendation: Conduct a public hearing and upon conclusion, adopt: 1) a City Council Resolution indicating the City Council of the City of Sacramento has conducted a Tax Equity and Fiscal Responsibility Act (TEFRA) public hearing related to the proposed construction and financing of 4995 Stockton Boulevard.
Contact: La Shelle Dozier, Executive Director, (916) 440-1319, [email protected] ; Christine
Weichert, Director, (916) 440-1353, [email protected], Sacramento Housing and Redevelopment Agency
Presenter: Whitney Bonner, Management Analyst, 916-440-1319, [email protected] ,
Sacramento Housing and Redevelopment Agency
1-Description/Analysis
2-Resolution – TEFRA Hearing
3-Vicinity Map
4-Site Plan
5-Project Rendering
6-Residential Project Summary
7-Cash Flow Proforma
8-Maximum Income and Rent Limits
Description/Analysis
Issue Detail: In December of 2020, Mercy Housing California 105, L.P. (Developer) requested that the California Municipal Finance Authority (CMFA) become the issuer of one or more series of revenue bonds due to the timing of the 2020 Expiring Difficulty Development Area (DDA). Sacramento Housing and Redevelopment Agency (SHRA) approved this request.
On May 11, 2021, the City Council (Council) adopted Resolution No. 2021–0114 and approved a $15 million Loan Commitment comprised of $5 million from the City General Fund and $5 million in Measure U Funds, collectively, City funds (Revolving Loan Fund 2029), $4 million in Housing Trust Funds (HTF) and $1 million in Mixed Income Housing Funds (MIHF) from SHRA to the Developer for the purpose of financing the acquisition, construction and permanent financing of the 4995 Stockton Boulevard affordable housing development (Project) (Loan Commitment).
On August 17, 2021, the City Council (Council) adopted Resolution No. 2021-0254 and approved $5 million of the $15 million in committed loan funds towards early acquisition, closings costs, demolition of existing structures on the Property and permanent financing.
Development: The Developer is proposing to construct 198 affordable units for families and two exempt management units on a 7.76-acre site on Stockton Boulevard, north of Fruitridge Road. The construction costs reflect the varied architectural and engineering design features and styles of the four-story elevator building with offices and community space on the ground floor and apartments on the upper three floors; nine three-story walk-up buildings; and 13 two- story townhomes. The proposed development includes 47 one-bedroom, 95 two-bedroom, and 58 three-bedroom units. Each unit will have a full kitchen with a dishwasher, stove, and refrigerator; be prewired for high-speed internet/TV; and contain high quality finishes and low/no volatile organic compound materials.
Community amenities will include a 1,600 sq. ft. community room, with a kitchen, a computer area and conference rooms. There will be two community restrooms available. The property will have barbeque and seating areas and play equipment appropriate for ages two to five and ages six to twelve. The Vicinity Map, Site Plan and Project Rendering are included as Attachments 3, 4, and 5.
Developer: Mercy Housing California, or related entity, will serve as the Developer. The Developer is a non-profit public benefit corporation dedicated to providing quality affordable housing with supportive programs to low-income individuals in California. Mercy Housing has developed more than 11,000 affordable homes, including over 8,000 rental units and 3,000 homeownership units. Their portfolio includes 20 properties with over 1,400 units in Sacramento County. The Developer is qualified to undertake this new construction project given their long and successful history of affordable housing development.
Property Management: The Project will be managed by Mercy Housing Management Group, an affiliate of the Developer. The Property Management Agent manages more than 220 properties nationally comprised of over 11,000 affordable housing units, including over 100 properties in California. The management plan has been reviewed and approved by SHRA staff. The Developer will participate in the Stockton Boulevard Partnership Property Business Improvement District, which will provide the majority of its security services. In the event that additional security is needed, it will be provided by Mercy Housing.
Resident Services: Resident services will be provided by Mercy Housing California. The resident services staff will include one full-time and one part-time Resident Services Coordinator, exceeding SHRA’s minimum requirements for a project of this size. Resident services will include programming to support housing stability, financial literacy, life skills, and after school programs. SHRA staff has reviewed Mercy Housing’s qualifications and the resident services plan, and has found that the proposed resident services provider and resident services plan meet SHRA requirements.
Project Financing: In addition to the SHRA and City-funded loan, the Project will be financed with four percent Low Income Housing Tax Credits (LIHTC), State Tax Credits, tax-exempt bond financing, tax- exempt permanent loan, deferred developer fee, general partnership contribution and fee waivers.
Low-Income Set-Aside Requirements: As a condition of receiving LIHTC and the benefits of tax-exempt bond financing, federal law requires that units be set aside for targeted income groups. The Developer intends to elect the Average Income LIHTC set-aside and the income restrictions for the tax-exempt bond financing that requires 40 percent of the units have rents affordable to households with income up to 60 percent of Area Median Income (AMI). SHRA further requires at least 15 percent of the units have rents that are affordable to households with income up to 50 percent AMI and at least 5 percent of the units have rents that are affordable to households with income up to 30 percent AMI, based on financial feasibility.
Project affordability restrictions will be specified in regulatory agreements with the Developer.
The Project Summary and Proforma are included as Attachments 6 and 7, and a schedule of Maximum Income and Rent Limits is included as Attachment 8. These anticipated sources and their affordability requirements are summarized in the following table:
4995 Stockton Boulevard Affordable Housing Development
Affordability Restrictions (55 years) Units % of Units
Extremely Low Income (30% AMI) 27 13%
Very-Low Income (50% AMI) 71 35%
Low Income (60% AMI) 51 26%
Moderate Income (70% AMI) 49 25%
Management Unit (Exempt) 2 1%
Total 200 100%
Policy Considerations: The recommended actions are consistent with: 1) SHRA’s Multifamily Lending and Mortgage Revenue Bond Policies, priority level 2(iii) - New Construction and Conversion of Non-Residential to Residential Use for Workforce Housing (Resolution No. 2019-0425 and Housing Authority Resolution No. 2019-022); and 2) the 2013-2021 Housing Element, which encourages the provision of a variety of quality housing types to encourage neighborhood stability, including options for extremely low-income households (Resolution No. 2013-415).
Economic Impacts: This multifamily residential project is expected to create 755.86 total jobs (424.34 direct jobs and 331.52 jobs through indirect and induced activities) and create $66,303,386 in total economic output ($40,747,278 of direct output and another $25,556,108 of output through indirect and induced activities). The indicated economic impacts are estimates calculated using a calculation tool developed by the Center for Strategic Economic Research (CSER). CSER utilized the IMPLAN input-output model (2009 coefficients) to quantify the economic impacts of a hypothetical $1 million of spending in various construction categories within the City of Sacramento in an average one-year period. Actual impacts could differ significantly from the estimates and neither the City of Sacramento nor CSER shall be held responsible for consequences resulting from such differences.
Environmental Considerations: California Environmental Quality Act (CEQA): The City, as Lead Agency, has determined that the Project qualifies for Ministerial Approval of Infill Housing Development Projects pursuant to City Code Section 17.860.030 and no CEQA review is required.
Sustainability: Not applicable.
Financial Considerations: The $15 million loan from SHRA to the Developer is comprised of $4 million in HTF, $1 million in MIHF and $10 million in City funds. The loan to the Developer will have a term of 57 years and three percent interest rate. SHRA will receive an annual payment for monitoring the regulatory restrictions and administration of the loan programs in the amount of 0.125 percent of the loan amount. SHRA will also receive a $100 annual administrative fee for each assisted unit under the Funding Program. The total administrative fee will not exceed $15,000 annually for the affordable units during the regulatory agreement term.
Local Business Enterprise (LBE)/Minority and Women’s Business Enterprise (MBE/WBE): Local Business Enterprise requirements do not apply to this report. Minority and Women’s Business Enterprise requirements and Section 3 will be applied to all activities to the greatest extent feasible and as required by federal funding and in accordance with SHRA’s Section 3 Economic Opportunity Plan.
Updated 10-15-19
RESOLUTION NO. 2022 -
Adopted by the Sacramento City Council
on date of
4995 STOCKTON BLVD PROJECT - RESOLUTION OF THE
SACRAMENTO CITY COUNCIL APPROVING THE ISSUANCE OF
REVENUE BONDS BY THE CALIFORNIA MUNICIPAL FINANCE
AUTHORITY IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO
EXCEED $60 MILLION TO FINANCE A MULTIFAMILY RENTAL
HOUSING FACILITY FOR THE BENEFIT OF MERCY HOUSING
CALIFORNIA OR AN AFFILIATE THEREOF, AND CERTAIN OTHER
MATTERS RELATING THERETO
BACKGROUND
A. The City of Sacramento (the “City”) is a member of the California Municipal Finance Authority (the “Authority”), a joint exercise of powers authority authorized and empowered by Title 1, Division 7, Chapter 5 of the California Government Code (the “JPA Act”) and Chapter 7 of Part 5 of Divisi on 31 of the California Health and Safety Code (the “Housing Act”) to issue revenue bonds for the purpose of financing the acquisition, construction, rehabilitation, improvement and equipping of multifamily rental housing projects within the jurisdictions of its members; and
B. Mercy Housing California 105, L.P., a California limited partnership (the “Borrower”), has requested the Authority to issue one or more series of revenue bonds in an aggregate principal amount not to exceed $60 million (the “Bonds”) as part of a plan to (1) finance the acquisition, construction, development and equipping of a multifamily rental housing facility for low-income tenants (the “Project”) to be owned and operated by the Borrower and located within the City at 4995 Stockton Boulevard, Sacramento, California, and (2) pay certain expenses in connection with the issuance of the Bonds; and C. An “applicable elected representative” of a jurisdiction in which the Project is to be located is required to approve the issuance of the Bon ds under Section 147(f) of the Code; and
D. The City Council of the City (the “City Council”) is the elected legislative body of the City and is an “applicable elected representative” for purposes of Section 147(f) of the Code; and
E. The Authority has request ed that the City Council approve the issuance of the Bonds by the Authority in order to satisfy the public approval requirement of Section 147(f) of the Code and the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the Califo rnia Municipal Finance Updated 10-15-19
Authority, dated as of January 1, 2004 (the “Agreement”), among certain local agencies, including the City; and
F. Pursuant to Section 147(f) of the Code, the City Council has, following notice duly given, held a public hearing regarding the issuance of the Bonds, and now desires to approve the issuance of the Bonds by the Authority;
G. The City, as Lead Agency, has determined tha t the Project qualifies for Ministerial Approval of Infill Housing Development Projects pursuant to City Code Section 17.860.030 and no California Environmental Quality Act (CEQA) review is required.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. All evidence presented having been duly considered, the fin dings, including environmental findings regarding this action, as stated above, are found to be true and accurate and are hereby approved adopted.
Section 2 The foregoing recitals are true and correct.
Section 3 The City Council hereby approves the issuance of the Bonds by the Authority, including but not limited to Bonds issued as part of a plan to finance the facilities described herein. It is the purpose and intent of the City Council that this resolution constitutes approval of the issuance of the Bonds by the Authority for the Project, for the purposes of (a) Section 147(f) of the Code by the applicable elected representative of a governmental unit having jurisdiction over the area in which the Project is to be located, in accordance with said Section 147(f) and (b) Section 4 of the Agreement.
Section 4 The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing transaction approved hereby.
Section 5 The City Clerk shall forward a certified copy of this Resolutio n to the Authority:
California Municipal Finance Authority
2111 Palomar Airport Road
Suite 320
Carlsbad, CA 92111
Section 6 This resolution shall take effect immediately upon its adoption.
Updated 10-15-19
Attachment 3
4995 Stockton Blvd. CHANGING LIVES
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4995 Stockton Blvd.
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200 400 SHRAGIS
April 13, 2021
Attachment 4
4995 Stockton Boulevard
Site Plan
Attachment 5
4995 Stockton Boulevard
Project Rendering
Attachment 6
Address
Number of Units
Construction Type
Acreage
Unit Mix
ELI 30% AMI VLI 50% AMI LI 60% AMI LI 70% AMI
Exempt
Management Units Total
1 Bedroom/1 Bath 9 1 01 51 3 0 4 7
2 Bedroom/1 Bath 9 4 42 21 8 2 9 5
3 Bedroom/1.5 Bath 9 1 71 41 8 0 5 8
TOTAL 27 71 51 49 2 200
Square Footage Per Unit Total Sq Ft
1 Bedroom/1 Bath 700 32,900
2 Bedroom/1 Bath 950 90,250
3 Bedroom/1.5 Bath 1,300 75,400
Common Areas 43,660
TOTAL 242,210
Resident Facilities
Permanent Sources
Current Total Per Unit Per Sq Ft
Federal Tax Credit Equity 42,657,167$ 213,286 $ 176.12 $ State Tax Credit Equity 23,338,635$ 116,693$ 96.36$ Tax Exempt Loan 9,580,207$ 47,901$ 39.55$ SHRA Loan 15,000,000$ 75,000$ 61.93$ Deferred Developer Fee 3,300,000$ 16,500$ 13.62$ GP Contribution 6,453,774$ 32,269$ 26.65$ Fee Waiver 128,400$ 642$ 0.53$
TOTAL SOURCES 100,458,183$ 502,291 $ 414.76 $ Permanent Uses
Acquisition 4,500,000$ 22,500$ 18.58$ Construction 64,371,953$ 321,860$ 265.77$ Environmental Cleanup 1,811,433$ 9,057$ 7.48$ Demolition 120,000$ 600$ 0.50$
Permits and Fees 4,115,598$ 20,578$ 16.99$ Architecture and Engineering 2,489,964$ 12,450$ 10.28$ Hard Cost Contingency 3,309,169$ 16,546$ 13.66$ Soft Cost Contingency 590,000$ 2,950$ 2.44$ Financing Costs 4,823,179$ 24,116$ 19.91$ Operating Reserves 530,039$ 2,650$ 2.19$
Legal Fees 305,000$ 1,525$ 1.26$
Developer Fee 11,939,114$ 59,696$ 49.29$ Insurance, Third Party, Marketing, Other 1,552,734$ 7,764$ 6.41$ TOTAL USES 100,458,183$ 502,291 $ 414.76 $ Leverage SHRA $ per Unit Per Unit Cost
75,000$ 502,291$ $1.00 : $6.70
Management/Operations
Proposed Developer
Property Management Company
Operations Budget 1,033,000$ 5,165 $
Property Management 144,000$ 720$
Resident Services 88,000$ 440$
Replacement Reserves 50,000$ 250$
Taxes and Insurance 130,000$ 650$
7.76 (338,025.6 Sq Ft)
Mercy Housing Management Group
Management offices, resident community space with kitchen, laundry facilities, computer room, elevator in community building, landscape courtyards with seating areas, two playgrounds for ages 2-5 and 5-12, barbecue areas, picnic tables, 296 vehicle and 124 bicycle parking spaces.
Mercy Housing California
Leverage
4995 Stockton Boulevard
Residential Project Summary
4995 Stockton Blvd, Sacramento 95820
200
New Construction
4995 Stockton Boulevard Square Total Max Gross Utility Max Net Rent per Total Mo. Current Unit Type Number Feet Sq Feet Rent Allowance Rent Sq Foot Rent Annual Rent 1 Bedroom/1 Bath (30% AMI) 9 700 6, 300 510$ 69$ 441$ 0. 07$ 3, 969$ 47, 628$ 1 Bedroom/1 Bath (50% AMI) 10 700 7, 000 850$ 69$ 781$ 0. 11$ 7, 810$ 93, 720$ 1 Bedroom/1 Bath (60% AMI) 15 700 10, 500 1,020$ 69$ 951$ 0. 09$ 14, 265$ 171, 180$ 1 Bedroom/1 Bath (70% AMI) 13 700 9, 100 1,072$ 69$ 1, 003$ 0. 11$ 13, 039$ 156, 468$ 2 Bedroom/1 Bath (30% AMI) 9 950 8, 550 612$ 86$ 526$ 0. 06$ 4, 734$ 56, 808$ 2 Bedroom/1 Bath (50% AMI) 44 950 41, 800 1,020$ 86$ 934$ 0. 02$ 41, 096$ 493, 152$ 2 Bedroom/1 Bath (60% AMI) 22 950 20, 900 1,224$ 86$ 1, 138$ 0. 05$ 25, 036$ 300, 432$ 2 Bedroom/1 Bath (70% AMI) 18 950 17, 100 1,349$ 86$ 1, 263$ 0. 07$ 22, 734$ 272, 808$ 3 Bedroom/1.5 Bath (30% AMI) 9 1,300 11, 700 706$ 105$ 601$ 0. 05$ 5, 409$ 64, 908$ 3 Bedroom/1.5 Bath (50% AMI) 17 1,300 22, 100 1,178$ 105$ 1, 073$ 0. 05$ 18, 241$ 218, 892$ 3 Bedroom/1.5 Bath (60% AMI) 14 1,300 18, 200 1,413$ 105$ 1, 308$ 0. 07$ 18, 312$ 219, 744$ 3 Bedroom/1.5 Bath (70% AMI) 18 1,300 23, 400 1,649$ 105$ 1, 544$ 0. 07$ 27, 792$ 333, 504$ 2 Bedroom/1 Bath (Exempt Management) 2 950 1, 900
Totals 200 198,550 202,437$ 2,429,244$
Annual 2024 2025 2026 2027 2028 2033 2038 2043 2048 2053 Income increase per unit Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Potential Gross Income 2.50% 2,552,224 2,616,030 2,681,431 2,748,467 2,817,178 3,187,379 3,606,226 4,080,114 4,616,275 5,222,891 Other Income 2.50% 6,934 7,107 7,285 7,467 7,654 8,660 9,798 11,085 12,542 14,190 Less Vacancy 5.00% 127,958 131, 157 134, 436 137, 797 141, 242 159, 802 180, 801 204, 560 231, 441 261, 854 Effective Gross Income $2,431,201 $2,491,981 $2,554,280 $2,618,137 $2,683,591 $3,036,236 $3,435,223 $3,886,639 $4,397,376 $4,975,227 Operating Expenses 3.50% $5,165 1,033,000 1,069,155 1,106,575 1,145,306 1,185,391 1,407,873 1,672,111 1,985,944 2,358,678 2,801,370 Property Management 3.50% $720 144,000 149,040 154,256 159,655 165,243 196,257 233,092 276,840 328,799 390,510 Residential Services 3.50% $440 88,000 91,080 94,268 97,567 100,982 119,935 142,445 169,180 200,933 238,645 Replacement Reserves 0.00% $250 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Taxes and Insurance 2.00% $650 130,000 132,600 135,252 137,957 140,716 155,362 171,532 189,385 209,097 230,860 Total Expenses $7,225 $1,445,000 $1,491,875 $1,540,352 $1,590,485 $1,642,333 $1,929,427 $2,269,181 $2,671,350 $3,147,507 $3,711,385 Net Operating Income $986,201 $1,000,106 $1,013,929 $1,027,652 $1,041,258 $1,106,809 $1,166,042 $1,215,290 $1,249,868 $1,263,842 Debt Service amount rate amort
Tax Exempt Permanent Loan $9,580,207 5.03% 35 388,269 582,403 582,403 582,403 582,403 582,403 582,403 582,403 582,403 582,403 SHRA Monitoring Fee $15,000,000 0.125% 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 Debt Service Subtotal $403,269 $597,403 $597,403 $597,403 $597,403 $597,403 $597,403 $597,403 $597,403 $597,403 Priority Distributions
Limited Partner Management Fee (LP) $7,500 1.00% 7,500 7,575 7,651 7,727 7,805 8,203 8,621 9,061 9,523 10,009 General Partner Asset Management Fee (GP) $17,500 1.00% 17,500 17,675 17,852 18,030 18,211 19,139 20,116 21,142 22,220 23,354 Priority Distributions Subtotal $25,000 $25,250 $25,503 $25,758 $26,015 $27,342 $28,737 $30,203 $31,743 $33,363 Net Cash after Priority Distributions $557,932 $377,453 $391,023 $404,492 $417,840 $482,064 $539,902 $587,684 $620,722 $633,076 Deferred Developer Fee
Principal Balance $3,300,000 3.00% 3,300,000 2,841,068 2,548,847 2,234,289 1,896,827 0 0 0 0 0 Accumulated Interest 99,000 85,232 76,465 67,029 56,905 0 0 0 0 0 Payment 557,932 377,453 391,023 404,492 417,840 0 0 0 0 0 Balance $2,841,068 $2,548,847 $2,234,289 $1,896,827 $1,535,892 $0 $0 $0 $0 $0 Net Cash after Deferred Developer Fee $0 $0 $0 $0 $0 $482,064 $539,902 $587,684 $620,722 $633,076 SHRA Loan
Principal Balance $15,000,000 3.00% 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 15,000,000 Accumulated Interest 450,000 900,000 1,350,000 1,800,000 2,250,000 4,346,196 6,596,196 7,262,881 7,372,763 7,370,694 Payment 0 0 0 0 0 0 0 415,339 444,154 455,798
Balance $15,450,000 $15,900,000 $16,350,000 $16,800,000 $17,250,000 $19,346,196 $21,596,196 $21,847,543 $21,928,609 $21,914,896 4995 Stockton Boulevard
Cash Flow Proforma
Attachment 7
Attachment 8
Family Size 30% AMI 50% AMI 60% AMI 70% AMI
1 person 19,050$ 31,750$ 38,100$ 44,450$ 2 person 21,750$ 36,250$ 43,500$ 50,750$ 3 person 24,480$ 40,800$ 48,960$ 57,120$ 4 person 27,180$ 45,300$ 54,360$ 63,420$ 5 person 29,370$ 48,950$ 58,740$ 68,530$ 6 person 31,530$ 52,550$ 63,060$ 73,570$ 7 person 33,720$ 56,200$ 67,440$ 78,680$ Unit Size 30% AMI 50% AMI 60% AMI 70% AMI
1 Bedroom 510$ 850$ 1,020$ 1,190$
2 Bedroom 612$ 1,020$ 1,224$ 1,428$ 3 Bedroom 706$ 1,178$ 1,413$ 1,649$ Maximum Gross Rent Limits
4995 Stockton Boulevard
MAXIMUM INCOME AND RENT LIMITS 2022
Rents at 30%, 50%, 60% and 70% of Area Median Income (AMI) Low Income Housing Tax Credits, State Tax Credits, Mortgage Revenue Bonds, Mixed Income Housing Funds, Housing Trust Funds,
City General Fund and City Measure U Funds
Maximum Gross Income Limits