City Council Report
915 I Street, 1st Floor
Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-00743 May 10, 2022 Public Hearing Item 03
Title: (Housing Authority/City Council) The Wong Center: Re-Tax Equity and Fiscal Responsibility Act (TEFRA) and Approval of Final Tax Exempt Bonds Documents (Noticed on 4/26/2022)
Location: 530 7th Street, District 4
Recommendation: Conduct a public hearing and upon conclusion, adopt: 1) a City Council Resolution indicating the City Council has conducted a Re-Tax Equity and Fiscal Responsibility Act (TEFRA) public hearing related to the proposed construction and financing of The Wong Center (Project); 2) a Housing Authority Resolution authorizing the Executive Director or designee to: a) issue, execute, and deliver mortgage revenue bonds of up to $35 million for the financing of the Project; b) execute and deliver necessary documents relating thereto, c) approve all actions taken by officers and agents of the Housing Authority deemed necessary or advisable to issue and deliver the bonds and 3) a Housing Authority Resolution authorizing the Executive Director, or her designee, to enter into the First Amendment to the Loan Commitment.
Contact: Christine Weichert, Director of Housing Finance, 916-440-1353, [email protected]; Sacramento Housing and Redevelopment Agency
Presenter: Christine Weichert, Director of Housing Finance, 916-440-1353, [email protected]; Sacramento Housing and Redevelopment Agency
Attachments:
01-Description/Analysis
02-City Council Resolution – Re-TEFRA
03-Housing Authority Resolution – Bonds
04-Exhibit A: Public Disclosures Relating to Conduit Revenue Obligations 05-Housing Authority Resolution – First Amendment to the Loan Commitment 06-Exhibit A: First Amendment to the Loan Commitment
07-Vicinity Map
08-Project Rendering
09-Residential Project Summary
10-Cashflow Proforma
11-Maximum Income and Rent Limits
Description/Analysis
Issue Detail: On April 20, 2021, the City Council (Council) conducted a Tax Equity and Fiscal Responsibility Act (TEFRA) public hearing and the Housing Authority Board (Board) approved the Housing Authority of the City of Sacramento to provide a bond issuance not to exceed $35 million for the acquisition, construction and permanent financing of The Wong Center (Project).
On May 18, 2021, the Council adopted Resolution 2021-0134 approving a loan commitment and authorizing the Mayor, or his designee, to transmit $3.5 million comprised of $2.8 million in General Funds and $0.7 million in Measure U Funds (City Funds) from the City of Sacramento (City) to the Housing Authority of the City of Sacramento (HACS).
Also on May 18, 2021, the Board adopted Resolution 2021-0012 approving a $3.5 million loan commitment in City Funds (Loan Commitment) and authorizing the Executive Director of HACS, or her designee, to accept $3.5 million in City Funds from the City; negotiate, enter into and execute a $3.5 million funding agreement between the City and HACS; and negotiate, enter into and execute a $3.5 million funding agreement between HACS and Mutual Housing California or related entity (Developer) for the construction and permanent financing of the Project.
On May 25, 2021, HACS and the Developer submitted a joint application for four percent Low Income Housing Tax Credits (LIHTC) from California Tax Credit Allocation Committee (CTCAC) and tax-exempt mortgage revenue bonds (MRB) from California Debt Limit Allocation Committee (CDLAC) for the acquisition, construction and permanent financing of the Project. The Project was not successful.
On September 9, 2021, HACS and the Developer submitted a joint application for four percent LIHTC to CTCAC and MRB to CDLAC for the acquisition, construction and permanent financing of the Project. The Developer targeted lower income and rent limits, from 50% to 40% of Area Median Income (AMI), in order to be more competitive in the application funding round. On December 8, 2021, the Project was successfully awarded. Given the reduced rents at 40% AMI yields a lesser than anticipated net operating income, HACS must amend loan repayment terms from annual payments to residual receipts.
The Loan Commitment expired on January 18, 2022 and the TEFRA expired on April 20, 2022, and the closing of project financing is anticipated in late May 2022. Therefore, staff is recommending adoption of the Re-TEFRA, and approval of the final tax-exempt mortgage revenue bonds documents and the First Amendment to the Loan Commitment for this Project.
Description of Development: The Project is a new construction affordable housing development located on 2.05 vacant acres at 530 7th Street within the Railyards Specific Plan in Downtown Sacramento. A vicinity map and rendering are included as Attachments 7 and 8.
The 150-unit senior development for age 55 and over will have 135 one-bedroom and 15 two- bedroom units, which includes one exempt management unit. The Project will be a single, four- story building that is wood framed construction with stucco exteriors. The exteriors include varying accents with extensive trim and multi-color painting scheme. Each apartment will contain luxury vinyl plank flooring, central heating and air, and energy efficient appliances.
Amenities will include 4,000 square feet of multi-purpose community spaces including a community room with shared kitchen, meeting room, and offices. Three outdoor community spaces will include numerous seating and socializing areas, bocce court, dog park, barbecue, and gardening plots. The remaining open space areas will have lush landscaping to add to and tie into the aesthetic quality and consistency across the community.
Mixed Income Housing Ordinance compliance: The Mixed Income Housing Ordinance, adopted by the Council in 2015, requires large subdivisions such as the Railyards of Sacramento to provide housing for a variety of incomes and family types. The Mixed Income Housing Strategy (Ordinance No. 2016-0044) includes integrating a variety of housing that will benefit sustainability and success of the Railyards over its multi-year build-out, as well as the greater community; specifically, diversity of housing targeted to residents with incomes at or below 80% of Area Median Income for a 30-year term.
To meet a portion of the Railyard Mixed Income Housing Ordinance obligation, the developer will build the 150-unit affordable Project which includes one exempt management unit.
Pursuant to the Ordinance, Sacramento Housing and Redevelopment Agency (SHRA), as the administrator of the affordable housing component of the Ordinance, and the Developer will enter into a Mixed Income Housing regulatory agreement.
Developer: Mutual Housing California (Mutual Housing) is a nonprofit public benefit corporation dedicated to developing affordable housing and has developed 23 affordable properties in California, including 15 properties in Sacramento.
Property Management: The Project will be managed by Mutual Housing Management, a property management company with staff experienced in operating affordable apartment communities. SHRA staff has reviewed and approved the management plan and has ensured that the company meets SHRA’s requirements for property management.
Resident Services: Resident Services will be offered by Mutual Housing, who will provide a minimum of 20 hours of on-site resident services per week. These services will consist of six hours where a resident services coordinator is on-site, six hours of health and wellness programming, and eight hours of additional services tailored to seniors. SHRA staff has reviewed and approved the resident services plan and has ensured that the company meets SHRA’s requirements for resident services.
Project Financing: In addition to the HACS loan, financing includes four percent LIHTC, tax- exempt bonds, a conventional loan, a Wong Center Inc. loan, Downtown Railyard Ventures (DRV), LLC loan, fee waivers, land donation from the Master Developer, deferred developer fee and general partnership contribution. The Project Summary and Cashflow Proforma are in Attachments 9 and 10.
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. Income restrictions from LIHTC financing require that 20 percent of the units have rents that are affordable to households with income up to 50 percent of Area Median Income (AMI). Maximum rent and income limits are in Attachment 11. Project affordability restrictions will be specified in regulatory agreements with the Developer. The anticipated sources and their affordability requirements are summarized in the following table:
The Wong Center
Affordability Restrictions (55 years) Units % of Units
Very-Low Income (40% AMI) 30 20%
Very-Low Income (50% AMI) 89 59%
Low Income (60% AMI) 30 20%
Management Unit (Exempt) 1 1%
Total 150 100%
Policy Considerations: The recommended actions are consistent with a) SHRA’s approved Multifamily Lending and Mortgage Revenue Bond Policies; b) the 2021-2029 Housing Element, Policies H-2.3, assist in the development of affordable housing, H-2.4, provide deferrals and zero-dollar impact fees for affordable housing, H-2.5 create additional local funding for affordable housing, H-4.3, promote mixed income neighborhoods, and H-8.1 universal design in new residential housing units to provide housing for people with disabilities and allow older adults to age in place; c) the Sacramento Promise Zone Plans and Goals, Sustainably Built Community sub-goal is to increase housing types and transit growth to promote livability and connectivity within the Promise Zone (Resolution No. 2015-263); d) the Downtown Housing Initiative and Initiation of the Downtown Specific Plan, to bring 10,000 places to live to Downtown Sacramento by year 2025 (Resolution No. 2015-282) and e) located in an Opportunity Zone that provides a federal tax incentive for investors, who invest in real estate projects and operating businesses located in designated low-income communities through deferral and partial tax reductions of reinvested capital gains and forgiveness of tax on new capital gains (enacted into federal law through the Tax Cuts and Jobs Act of 2017).
Additionally, on May 30, 2017, the City of Sacramento approved the Railyards Mixed Income Housing Strategy as part of the Development Agreement. Regulatory restrictions on the property will be specified in regulatory agreements between the Developer and the Housing Authority for a period of 55 years for the mortgage revenue bond assisted units. Compliance with the regulatory agreements will be monitored by SHRA on an annual basis. All units will be regulated for a period of 55 years as a Low Income Housing Tax Credit funding requirement.
Economic Impacts: This multifamily residential project is expected to create an estimated 437.86 total jobs (245.81 direct jobs and 192.05 jobs through indirect and induced activities) and create an estimated $38,408,380 in total economic output ($23,604,178 of direct output and another $14,804,202 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 project has been reviewed pursuant to CEQA, and it has been determined that the Project is consistent with the Railyards Specific Plan and the project is therefore exempt from CEQA pursuant to Guidelines section 15182.
Sustainability: The proposed project has been reviewed for consistency with the goals, policies and targets of the Sustainability Master Plan and the 2030 General Plan. If approved, these projects will advance the following goal, policy and target of goal number one – Energy Independence, specifically by reducing the use of fossil fuels and providing long-term affordable and reliable energy.
Rationale for Recommendation: The actions recommended in this report enable SHRA to continue to fulfill its mission to provide a range of affordable housing opportunities in the City and are consistent with the SHRA’s approved Multifamily Lending and Mortgage Revenue Bond Policies, the City of Sacramento’s 2021-2029 Housing Element, Promise Zone, Downtown Housing Initiative and Initiation of the Downtown Specific Plan, and the Railyards Mixed Income Housing Strategy as part of the Development Agreement.
Financial Considerations: SHRA will receive a one-time issuance fee of 0.25 percent of the bond amount, which is payable at bond closing; and annual payment for monitoring the regulatory restrictions and administration of the bonds of 0.125 percent of the bond amount.
SHRA will also receive a $100 annual administrative fee for each assisted unit under the City Funds. The total administrative fee will not exceed $25,000 annually for the affordable units during the regulatory agreement term. The HACS loan will be repaid based on residual receipts terms where the Developer will be required to repay a portion of the loan and interest if rents are sufficient to pay all priority costs (e.g., operating expenses, debt service on the first mortgage, monitoring fee, asset management fees and deferred developer fee), and subject to annual third party audited financial statements.
The Developer will be responsible for payment of all costs, fees, and deposits relating to the bond application. Mortgage Revenue Bonds do not represent a financial obligation of SHRA, Housing Authority, or City of Sacramento. The law firm Orrick, Herrington and Sutcliffe, LLP, is acting as bond counsel for the Housing Authority.
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. The Developer and general contractor will work with SHRA’s Section 3 Administrator, the Sacramento Employment and Training Agency, the Greater Sacramento Urban League or similar entities, to promote employment opportunities.
RESOLUTION NO. 2022-____
Adopted by the Sacramento City Council
On date of
THE WONG CENTER: APPROVAL OF THE ISSUANCE OF
OBLIGATIONS BY THE HOUSING AUTHORITY OF THE CITY OF
SACRAMENTO ON BEHALF OF WONG CENTER AT THE RAILYARD,
L.P.
BACKGROUND
A. The Housing Authority of the City of Sacramento, a housing authority organized and existing under the laws of the State of California (the "Authority”), proposes a plan of financing providing for the issuance of exempt facility bonds for a qualified residential rental project pursuant to Section 142(a)(7) of the Internal Revenue Code of 1986 (the “Code”) in one or more series issued from time to time, including bonds issued to refund such exempt facility bonds in one or more series from time to time, and at no time to exceed $3 5,000,000 (the “Obligations”) and to lend the proceeds thereof to Wong Center at the Railyard, L.P. or a partnership of which Mutual Housing California (the “Developer”) or a related person to the Developer is the general partner , to be used to provide funds to finance or refinance the acquisition, construction and development of a multifamily housing residential facility located at 590 7th Street, in the City of Sacramento, California.
B. Section 147(f) of the Code requires the execution and delivery of the Obligations to be approved by the City Council of the City (the "City Council"), as the elected representative of the City of Sacramento and the host jurisdictio n of the subject multifamily housing residential facility, after a public hearing has been held following reasonable and proper notice.
C. A public hearing was held by the City Council on May 10, 2022 , following duly published notice thereof, and all persons desiring to be heard have been heard.
D. It is in the public interest and for the public benefit that the City Council, as the elected representative of the City of Sacramento and the host jurisdiction of the subject multifamily housing residential facility, approve the execution and delivery by the Authority of the Obligations.
E. The project has been reviewed pursuant to California Environmental Quality Act (CEQA), and it has been determined that the Project is consistent with the Railyards Specific Plan and the project is therefore exempt from CEQA pursuant to Guidelines section 15182
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The City Council of the City of Sacramento hereby finds, determines a nd declares that issuance by the Authority of the Obligations in the maximum principal amount of $3 5,000,000 for the purposes described above is hereby approved.
Section 2. This resolution shall take effect immediately upon its adoption.
RESOLUTION NO. 2022 –
Adopted by the Housing Authority of the City of Sacramento
on date of
WONG CENTER: A RESOLUTION OF THE HOUSING AUTHORITY OF THE CITY OF
SACRAMENTO AUTHORIZING THE EXECUTION AND DELIVERY OF
MULTIFAMILY HOUSING REVENUE NOTES IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $35,000,000 FOR THE FINANCING OF A MULTIFAMILY
RENTAL HOUSING PROJECT TO BE GENERALLY KNOWN AS THE WONG CENTER; AUTHORIZING THE EXECUTION AND DELIVERY OF A FUNDING LOAN
AGREEMENT, A BORROWER LOAN AGREEMENT, A REGULATORY
AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS AND OTHER DOCUMENTS RELATING THERETO; AND APPROVING OTHER ACTIONS AND
MATTERS RELATING THERETO
BACKGROUND
A. The Housing Authority of the City of Sacramento (the “Authority”) is authorized by Chapter 1 of Part 2 of Division 24 of the California Health and Safety Code (commencing with Section 34200) (the “Act”) to issue and sell revenue obligations for the purpose of making loans or otherwise providing funds to finance the acquisition, construction, rehabilitation and development of multifamily residential rental housing projects, including units for households meeting the income limits set forth in the Act.
B. The governing board of the Authority (the “Board”) hereby finds and declares that it is necessary, essential and a public purpose for the Authority to finance multifamily housing projects pursuant to the Act, in order to increase and maintain the supply of multifamily housing in the City of Sacramento (the “City”) available to persons and families within the income limitations established by the Act.
C. The proceeds of such obligations issued by a housing authority may be loaned to a nongovernmental owner of multifamily housing, who shall be responsible for the payment of such obligations, to allow such nongovernmental owner to reduce the cost of operating such housing and to assist in providing housing for low and very low income persons.
D. Wong Center at the Railyard, L.P. , a California limited partnership , and entities related thereto (collectively, the “Borrower”), has requested the Authority execute and deliver its Housing Authority of the City of Sacramento Multifamily Housing Revenue Construction/Permanent Note (The Wong Center ) 2022 Issue C-1 (the “Issue C-1 Note”) and its Housing Authority of the City of Sacramento Multifamily
Housing Revenue Construction Note (The Wong Center) 2022 Issue C -2 (the “Issue C-2 Note” and together with the Issue C -1 Note, the “Notes”) and loan the proceeds thereof to the Borrower to finance the acquisition and construction of a 150-unit multifamily rental housing d evelopment for seniors (including one (1) manager’s unit), to be located in the City, and to be commonly known as The Wong Center (the “Project”).
E. On December 8, 2021 , the Authority received an allocation in the amount of $26,638,727 (the “Allocation Amount”) from the California Debt Limit Allocation Committee in connection with the Project.
F. The City Council of the City has by resolution approved the issuance of the Notes by the Authority, following notice and a public hearing as required by Section 147(f) of the Internal Revenue Code of 1986, as amended.
G. The Authority is willing to execute and deliver the Notes in an aggregate principal amount not to exceed $35,000,000, provided that the portion of such Notes executed and de livered as federally tax -exempt obligations shall not exceed the Allocation Amount, and to loan the proceeds thereof to the Borrower to assist in providing financing for the Project, which will allow the Borrower to reduce the cost of the Project and to as sist in providing housing for persons of low and very low income.
H. The Notes will be privately placed with Bank of the West (the “Funding Lender”), as the initial holder of the Notes, in accordance with the Authority’s policies.
I. There have been prepared and made available to the Board the following documents required for the execution and delivery of the Notes, and such documents are now in substantial form and appropriate instruments to be executed and delivered for the purposes intended:
(1) Funding Loan Agreement (the “Funding Loan Agreement,” ) to be entered into between the Funding Lender and the Authority; (2) Borrower Loan Agreement (the “ Borrower Loan Agreement,”) to be entered into between the Authority and Borrower;
(3) Regulatory Agreement and Declaration of Restrictive Covenants (the “Regulatory Agreement”) to be entered into between the Authority and the Borrower, with respect to the Project;
(4) Contingency Draw-Down Agreement (the “Contingency Draw-Down Agreement”) to be entered into by the Funding Lender and the Borrower.
J. The Authority hereby finds and declares that this resolution is being adopted pursuant to the powers granted by the Act.
K. All conditions, items and acts required to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of the Notes as contemplated by this resolution and the documents referred to herein will exist, have happened and have been performed in due time, form and manner as required by the laws of the State of California, including the Act.
L. Pursuant to Section 5852.1 o f the California Government Code, the Authority, as a conduit financing provider, has received certain representations and good faith estimates from the Borrower and has disclosed such good faith estimates as set forth on Exhibit A attached hereto.
M. The project has been reviewed pursuant to the California Environmental Quality Act (CEQA), and it has been determined that the Project is consistent with the Railyards Specific Plan and the project is therefore exempt from CEQA pursuant to Guidelines section 15182
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE HOUSING AUTHORITY OF THE CITY OF SACRAMENTO RESOLVES AS FOLLOWS:
Section 1. The Authority hereby finds and declares that the above recitals are true and correct.
Section 2. Pursuant to the Act and the Funding Loan Agreement, the execution and delivery of the Notes designated as “ Housing Authority of the City of Sacramento Multifamily Housing Revenue Construction /Permanent Note (The Wong Center) 2022 Issue C -1” and “Housing Au thority of the City of Sacramento Multifamily Housing Revenue Construction Note (The Wong Center) 2022 Issue C -2” are hereby authorized, including, if and to the extent necessary, one or more sub -series, with appropriate modifications and series and sub -series designations as necessary, in an aggregate principal amount not to exceed $ 35,000,000; provided that the aggregate principal amount of any tax -exempt Notes issued shall not exceed the Allocation Amount.
Section 3. The Notes shall be executed and delivered in the form set forth in and otherwise in accordance with the Funding Loan Agreement, and shall be executed on behalf of the Authority by the manual signature of the Executive Director of the Authority, or a designee thereof, acting alone (each an “Authorized Officer”), with such changes, deletions and insertions as may be approved by such Authorized Officers and legal counsel to the Authority, such approvals being conclusively evidenced by the execution and delivery thereof. The Notes shall be secured in accordance with the terms of the Funding Loan Agreement presented to this meeting, as hereinafter approved.
Section 4. Payment of the principal and purchase price of, and prepayment premium, if any, and interest on, the Notes shall be made solely from amounts pledged thereto under the Funding Loan Agreement, and the Notes shall not be deemed to constitute a debt or liability of the Authority, the City of Sacramento, the Sacramento Housing and Redevelopment Agency or any commissioners of the Board.
Section 5. The Funding Loan Agreement in the form on file with the Clerk, is hereby approved. The Authorized Officers, each acting alone, are hereby authorized for and on behalf of the Authority to execute by manual signature and deliver the Funding Loan Agreement with such changes, additions or deletions as may be approved by such Authorized Officer and legal counsel to the Authority, such approvals to be conclusively evidenced by the execution and delivery thereof. The date, maturity date or dates (which shall not be more than 45 years from the date of execution and delivery thereof), interest rate or rates (which shall not exceed 12%), interest payment dates, denominations, form, registration privileges, manner of execution, place of payment, terms of prepayment and other terms of the Notes shall be as provided in the Funding Loan Agreement as finally executed.
Section 6. The Borrower Loan Agreement in the form on file with the Clerk, is hereby approved. The Authorized Offi cers, each acting alone, are hereby authorized for and on behalf of the Authority to execute by manual signature and deliver the Borrower Loan Agreement with such changes, additions and deletions as may be approved by such Authorized Officer and legal counsel to the Authority, such approvals to be conclusively evidenced by the execution and delivery thereof.
Section 7. The Regulatory Agreement in the form on file with the Clerk, is hereby approved. The Authorized Officers, each acting alone, are hereby authorized for and on behalf of the Authority to execute by manual signature and deliver the Regulatory Agreement with such changes, additions or deletions as may be approved by such Authorized Officer and legal counsel to the Authority, such approvals to be conclusively evidenced by the execution and delivery thereof.
Section 8. The Contingency Draw-Down Agreement in the form on file with the Clerk, is hereby approved.
Section 9. The Authority is hereby authorized to execute and deliver the Notes to the Funding Lender pursuant to the terms and conditions of the Funding Loan Agreement.
Section 10. All actions heretofore taken by the officers and agents of the Authority with respect to the financing of the Project and the execution and delivery of the
Notes are hereby approved, confirmed and ratified, and the proper officers of the Authority, including the Authorized Officers, are hereby authorized and directed, for and in the name and on behalf of the Authority, to do any and all things and take any an d all actions and execute any and all certificates, agreements and other documents, which they, or any of them, may deem necessary or advisable in order to consummate the lawful execution and delivery of the Notes in accordance with this Resolution, including but not limited to those certificates, agreements and other documents described in the Funding Loan Agreement, the Borrower Loan Agreement and the Regulatory Agreement and other documents herein approved.
Section 11. All consents, approvals, notices, orders, requests and other actions permitted or required by any of the documents authorized by this Resolution, whether before or after the execution and delivery of the Notes, including without limitation any of the foreg oing that may be necessary or desirable in connection with any default under or amendment of such documents, any transfer or other disposition of the Project, any addition or substitution of security for the Notes or any prepayment of the Notes, may be given or taken by any Authorized Officer, as appropriate, without further authorization by the Board, and each such officer is hereby authorized and directed to give any such consent, approval, notice, order or request and to take any such action that such officer may deem necessary or desirable to further the purposes of this Resolution and the financing of the Project; provided such action shall not create any obligation or liability of the Authority other than as provided in the Funding Loan Agreement and other documents approved herein.
Section 12. This Resolution shall take effect immediately upon its adoption.
Table of Contents:
Exhibit A: Public Disclosures Relating to Conduit Revenue Obligations
EXHIBIT A
PUBLIC DISCLOSURES RELATING TO CONDUIT REVENUE OBLIGATIONS
Pursuant to California Government Code Section 5852.1, the borrower (the “Borrower”) identified below has provided the following required information to the Housing Authority of the City of Sacramento (the “Housing Authority”) prior to the Housing Authority’s regular meeting (the “Meeting”) of its Housing Authority Board (the “Board”) at which Meeting the Board will consider the authorization of conduit revenue obligations (the “Bonds”) as identified below.
1. Name of Borrower: Wong Center at the Railyard, L.P., a California limited partnership
2. Authority Meeting Date: May 10, 2022
3. Name of Bond Issue / Conduit Revenue Obligations: Not to exceed $31,000,000 Housing Authority of the City of Sacramento Multifamily Housing Revenue Bonds (Pass-Through – The Wong Center).
4. X Private Placement Lender or Bond Purchaser, __ Underwriter or ___ Financial Advisor (mark one) engaged by the Borrower from which the Borrower obtained the following required good faith estimates relating to the Bonds:
(A) The true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the new issue of Bonds (to the nearest ten- thousandth of one percent): 4.5000%
(B) The finance charge of the Bonds, which means the sum of all fees and charges paid to third parties: $567,000
(C) The amount of proceeds received by the public body for sale of the Bonds less the finance charge of the bonds described in subparagraph (B) and any reserves or capitalized interest paid or funded with proceeds of the Bonds:
$26,071,727
(D) The total payment amount, which means the sum total of all payments the borrower will make to pay debt service on the Bonds plus the finance charge of the Bonds described in subparagraph (B) not paid with the proceeds of the Bonds (which total payment amount shall be calculated to the final maturity of the Bonds): $34,834,260
This document has been made available to the public at the Meeting of the Housing Authority.
RESOLUTION NO. 2022 -
Adopted by the Housing Authority of the City of Sacramento
on date of
WONG CENTER (PROJECT): AUTHORITY TO AMEND THE $3.5 MILLION LOAN
COMMITMENT BETWEEN THE HOUSING AUTHORITY OF THE CITY OF
SACRAMENTO (HACS) AND MUTUAL HOUSING CALIFORNIA OR RELATED
ENTITY (DEVELOPER), AND RELATED FINDINGS
BACKGROUND
A. On May 18, 2021, the Housing Authority Board (Board) adopted Resolution No. 2021-0012 authorizing the Housing Authority of the City of Sacramento (HACS) to enter into a $3.5 million Loan Commitment comprised of General Funds and Measure U Funds (City Funds) with Mutual Housing California or related entity (Developer) for the construction and permanent financing of The Wong Center (Project) (Loan Commitment) . The Board also approved HACS to apply for tax exempt bonds, and negotiate, enter into and execute a $ 3.5 million funding agreement comprised of City Funds. The Loan Commitment required annual payment terms after the loan was deferred for 15 years.
B. On May 25, 2021, HACS and the Developer submitted a joint application for four percent Low Income Housing Ta x Credits (LIHTC) from California Tax Credit Allocation Committee (CTCAC) and tax -exempt mortgage revenue bonds (MRB) from California Debt Limit Allocation Committee (CDLAC) for the acquisition, construction and permanent financing of the Project. The application was not successful.
C. On September 9, 2021, HACS and the Developer submitted a joint application for four percent LIHTC to CTCAC and MRB to CDLAC for the acquisition, construction and permanent financing of the Project. The Developer targeted lower income and rent limits, from 50% to 40% of Area Median Income (AMI), in order to be more competitive in the application funding round. On December 8, 2021, the Project was successfully awarded. Given the reduced rents at 40% AMI yields a lesser than anticipated net operating income, HACS must amend loan repayment terms from annual payments to payments based on residual receipts. Additionally, the Loan Commitment expired on January 18, 2022 and must be extended for the closing of the Project’s financing anticipated in late May 2022.
D. The project has been reviewed pursuant to California Environmental Quality Act (CEQA), and it has been determined that the Project is consistent with the Railyards Specific Plan and the project is therefore exempt from CEQA pursuant to Guidelines section 15182.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE HOUSING AUTHORITY OF THE CITY OF SACRAMENTO RESOLVES AS FOLLOWS:
Section 1. All evidence presented having been duly considered, the findings, including environmental findings regarding this action, as stated above, are found to be true and accurate and are hereby approved adopted.
Section 2. The Executive Director, or her designee, is authorized to enter into the First Amendment to the Loan Commitment incorporated and attached hereto as Exhibit A to this resolution.
Section 3. This resolution shall take effect immediately upon its adoption.
Table of Contents
Exhibit A: First Amendment to the Loan Commitment
1. 202.
CHANGING LIVES
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The Wong Center
The Wong Center
Senior Housing Community
Map
Location
Senior Housing Community 0
I
Feet
150
I
300
I
Attachment 7
SHRAGIS
February 23, 2021
Attachment 8
T
he Wong Center
Project Rendering
Attachment 9
Address
Number of Units
Year Built
Acreage
Unit Mix and Rents VLI 40% AMI VLI 50% AMI LI 60% AMI Total 1 Bedroom/1 Bath 27 81 27 135
2 Bedroom/1 Bath 38 3 1 4
Management Unit (2 Bedroom exempt) 00 0 1
Total Units 30 89 30 150
Square Footage Unit Size (sq.ft.) Total
1 Bedroom/1 Bath 571 77,085 sq.ft.
2 Bedroom/1 Bath 755 11,325 sq.ft.
Community Area 4,000 sq.ft.
Total Gross 92,410
Resident Facilities
Permanent Sources Total Per Unit
Permanent Loan 5,431,000$ 36,206.67$ 58.77$ Tax Credit Equity 24,721,621$ 164,811$ 267.52$ HA Loan 3,500,000$ 23,333$ 37.87$ Wong Center Foundation Loan 12,800,000$ 85,333$ 138.51$ DRV LLC Loan 2,228,000$ 14,853$ 24.11$ Fee Waiver 1,990,218$ 13,268$ 21.54$ Land Donation 1$ 0$ 0.00$ Deferred Developer Fee 1,104,328$ 7,362$ 11.95$ GP Contribution 3,318,372$ 22,122$ 35.91$ TOTAL SOURCES 55,093,540$ 367,290 $ 596.19 $ Permanent Uses
Acquisition 1$ 0 $ 0.00 $ Construction Costs 38,408,380$ 256,056 $ 415.63 $ Architecture & Engineering 1,489,500$ 9,930 $ 16.12 $ Permits 2,763,656$ 18,424 $ 29.91 $ Hard Cost Contingency 1,914,739$ 12,765 $ 20.72 $ Soft Cost Contingency 241,753$ 1,612 $ 2.62 $ Financing Cost 565,866$ 3,772 $ 6.12 $ Operating Reserves 662,875$ 4,419 $ 7.17 $ Legal Fees 80,000$ 533 $ 0.87 $ Developer Fee 6,703,872$ 44,692 $ 72.54 $ Third Party Fees, Marketing, Other 2,262,898$ 15,086 $ 24.49 $ TOTAL USES 55,093,540$ 367,290 $ 596.19 $ Management / Operations
Proposed Developer
Property Management Company
Operating Expenses (Stabilization - Year 2) 725,669$ 4,838 $ Property Management 106,191$ 708 $
Resident Services 40,430$ 270 $
Security Services 15,680$ 105 $
Replacement Reserves 60,000$ 400 $
Taxes and Insurance 55,080$ 367 $
Mutual Housing Management
Mutual Housing California
2.05 acres (123,898 sf)
The Wong Center
Residential Project Summary
530 7th St, Sacramento CA 95814
150
New Construction
Community room, shared laundry rooms, outdoor courtyards, community garden, bocce ball court, small dog park, outdoor bbq Per Square Foot
The Wong Center Square Total Max Gross Utilit y 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 (40% AMI) 27 571 15,417 $680 $64 $616 $1 $16,632 $199,584 1 Bedroom/1 Bath (50% AMI) 81 571 46,251 $850 $64 $786 $1 $63,666 $763,992 1 Bedroom/1 Bath (60% AMI) 27 571 15,417 $1,020 $64 $956 $2 $25,812 $309,744 2 Bedroom/1 Bath (40% AMI) 3 755 2,265 $816 $80 $736 $1 $2,208 $26,496 2 Bedroom/1 Bath (50% AMI) 8 755 6,040 $1,020 $80 $940 $1 $7,520 $90,240 2 Bedroom/1 Bath (60% AMI) 3 755 2,265 $1,224 $80 $1,144 $2 $3,432 $41,184 2 Bedroom/1 Bath (Exempt Management Unit) 1 755 755 $0 $0 $0 $0 $0 $0 Totals 150 88,410 $119,270 $1,431,240
Annual 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2038 Income increase per unit Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 15 Potential Gross Income 2.50% 776,845 1,446,777 1,482,946 1,520,020 1, 558,021 1,596,971 1,636,895 1,677,818 1,719,763 1,762,757 1,994,398 Other Income 2.50% 7,056 7,232 7,413 7,599 7,789 7,983 8,183 8,387 8,597 8,812 9,970 Less Vacancy 5.00% 38,842 72,339 74,147 76,001 77,901 79,849 81,845 83,8 91 85,988 88,138 99,720 Effective Gross Income $745,059 $1,381,671 $1,416,212 $1,451,618 $1,487,908 $1,525,106 $1,56 3,233 $1,602,314 $1,642,372 $1,683,431 $1,904,648 Operating Expenses
Operating Expenses 3.50% 4,838 293,194 725,669 751,067 777,354 804,562 832,721 861,867 892,032 923,253 955,567 1,134,914 Property Management 3.50% 708 102,600 106,191 109,908 113,754 117,736 1 21,857 126,122 130,536 135,105 139,833 166,078 Residential Services 3.50% 270 39,063 40,430 41,845 43,310 44,826 46,39 5 48,018 49,699 51,439 53,239 63,231 Security Services 3.50% 105 15,150 15,680 16,229 16,797 17,385 17,993 18 ,623 19,275 19,950 20,648 24,523 Replacement Reserves 400 60,000 60,000 60,000 60,000 60,000 60,000 60,0 00 60,000 60,000 60,000 60,000 Taxes and Insurance 2.00% 367 54,000 55,080 56,182 57,305 58,451 59,620 60,813 62,029 63,270 64,535 71,252 Total Expenses 6,687 $564,007 $1,003,050 $1,035,231 $1,068,521 $1,102 ,960 $1,138,586 $1,175,443 $1,213,571 $1,253,015 $1,293,822 $1,519,99 8 Net Operating Income $181,052 $378,621 $380,982 $383,097 $384,949 $386,519 $387,791 $388,74 3 $389,357 $389,609 $384,650 Debt Service amount rate amor t
Senior Loan $5,431,000 4.50% 35 156,052 308,431 308,431 308,431 308,431 308,431 308,431 308,431 308,431 308,431 308,431 Housing Authority Monitoring Fee $35,000,000 0.125% 25,000 25,000 2 5,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 Debt Service Subtotal $181,052 $333,431 $333,431 $333,431 $333,431 $333,431 $333,431 $333,43 1 $333,431 $333,431 $333,431 Priority Distributions
Partnership Management Fee (LP) $5,000 3.00% 0 5,000 5,150 5,305 5,464 5,628 5,796 5,970 6,149 6,334 7,343 Asset Management Fee (GP) $20,000 3.00% 0 20,000 20,600 21,218 21,855 2 2,510 23,185 23,881 24,597 25,335 29,371 Priority Distributions Subtotal $0 $25,000 $25,750 $26,523 $27,318 $28,138 $28,982 $29,851 $30,747 $31,6 69 $36,713 Net Cash after Priority Distributions $0 $20,190 $21,801 $23,143 $24 ,199 $24,951 $25,378 $25,461 $25,179 $24,509 $14,506 Deferred Developer Fee
Principal Balance $300,000 0.00% 300,000 300,000 279,810 258,009 234,8 66 210,667 185,716 160,338 134,877 109,698 2,424 Payment 0 20,190 21,801 23,143 24,199 24,951 25,378 25,461 25,179 24,509 2,424 Balance $300,000 $279,810 $258,009 $234,866 $210,667 $185,716 $160,338 $134,87 7 $109,698 $85,188 $0 Net Cash after Developer Fee $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $12,082 Housing Authority Loan
Principal Balance $3,500,000 3.00% 3,500,000 3,500,000 3,500,000 3,50 0,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 3,50 0,000 Accumulated Interest 105,000 210,000 315,000 420,000 525,000 630,000 735,000 840,000 945,000 1,050,000 1,575,000 Payment 00 0 00 0000 0 2,192
Balance $3,605,000 $3,710,000 $3,815,000 $3,920,000 $4,025,000 $4,130,000 $4, 235,000 $4,340,000 $4,445,000 $4,550,000 $5,072,808 Wong Development Loan
Principal Balance $12,800,000 3.00% 12,800,000 12,800,000 12,800,000 12,800,000 12,800,000 12,800,000 12,800,000 12,800,000 12,800,000 12, 800,000 12,800,000 Accumulated Interest 384,000 768,000 1,152,000 1,536,000 1,920,000 2,304,000 2,688,000 3,07 2,000 3,456,000 3,840,000 5,760,000 Payment 00 0 00 0000 0 5,466
Balance $13,184,000 $13,568,000 $13,952,000 $14,336,000 $14,720,000 $15,104, 000 $15,488,000 $15,872,000 $16,256,000 $16,640,000 $18,554,534 DRV LLC Loan
Principal Balance $2,228,000 3.00% 2,228,000 2,294,840 2,430,525 2,63 9,126 2,926,901 3,302,483 3,777,139 4,365,109 5,084,033 5,955,478 12,8 00,000 Accumulated Interest 66,840 135,685 208,601 287,775 375,582 474,656 587,970 718,924 871,445 1 ,050,109 2,532,744 Payment 00 0 00 0000 0 4 2 6
Balance $2,294,840 $2,430,525 $2,639,126 $2,926,901 $3,302,483 $3,777,139 $4, 365,109 $5,084,033 $5,955,478 $7,005,587 $15,332,318 Net Cash to Borrower for Project $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,998 Attachment 10The Wong Center
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