City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-01892 12/13/2022 Discussion Item 4.
(City Council) Approval of Middle-Income Housing Bond Policy File ID: 2022-01892
Location: Citywide
Recommendation: Adopt a City Council Resolution: 1) approving a City of Sacramento Middle- income Housing Bond Policy (Policy), 2) delegating authority to the Sacramento Housing and Redevelopment Agency (SHRA) to administer the Policy on behalf of the City, 3) authorizing SHRA to make technical changes to the Policy, and 4) making related findings.
Contact: La Shelle Dozier, Executive Director, (916) 440-1319, [email protected]; Christine Weichert, Director of Housing Finance, (916)-440-1353, [email protected]; Sacramento Housing and Redevelopment Agency
Presenter: La Shelle Dozier, Executive Director, (916) 440-1319, [email protected]; Christine Weichert, Director of Housing Finance, (916)-440-1353, [email protected]; Sacramento Housing and Redevelopment Agency
Attachments:
1-Description/Analysis
2-Resolution
3-Middle-income Bond Policy
Additional Description/Analysis
Issue Detail: Middle-income households in Sacramento have experienced increasing rents and fewer homeownership opportunities which require new policy tools to avoid the affordability crisis faced by lower-income residents. One option to deal with this issue is the adoption of a Middle- Income Housing Bond Policy (Policy). This Policy allows public entities such as the City of Sacramento to become a member of a Joint Powers Agency (JPA) which can then issue tax-exempt public purpose bonds to finance 100 percent of the cost to develop multifamily housing units affordable to middle-income households (generally households earning 80-120percent of the Area Median Income or AMI). For each project funded under this Policy, the City is required to enter into a JPA agreement and a public benefit agreement. The current rent levels and income limits for a four- person household are outlined in the chart below.
Affordability Levels - Four-Person Household Monthly Rent Annual Income
Low Income (80 percent AMI) $2108 $81,040
Median Income (100 percent AMI) $2634 $101,300
Moderate Income (120 percent AMI) $3162 $121,560
File ID: 2022-01892 12/13/2022 Discussion Item 4.
Affordability Levels - Four-Person Household Monthly Rent Annual Income
Low Income (80 percent AMI) $2108 $81,040
Median Income (100 percent AMI) $2634 $101,300
Moderate Income (120 percent AMI) $3162 $121,560
In 2022, the Sacramento Housing and Redevelopment Agency (SHRA) was asked to develop a Middle-income Housing Bond Policy for the City of Sacramento. A draft Policy was brought to the City Council for review and comment on October 11, 2022. At the October meeting, the City Council expressed general support for the Policy and directed SHRA staff to bring back a final policy for review and approval. Although this financing approach has been deployed across the State of California since 2019, there are currently limited regulations related to the public benefit offered in return for the fiscal impact. Adoption of this Policy will help ensure the public benefit of individual bond offerings, help with the assessment of future requests, ensure a more inclusive approach, and support the increased provision of middle-income housing.
Since October 11
th, SHRA staff has met with the California Municipal Finance Agency, Orrick (Bond Counsel), and Goldman Sachs (Bond Purchaser) regarding the Policy. All three entities indicated that projects are required to have a regulatory agreement to regulate rents recorded on title, but not monitored by a third party, and a public benefit agreement regarding compliance with the adopted City Policy. They indicated that SHRA would have the ability to request and negotiate an additional regulatory agreement related to SHRA’s monitoring of rents, income qualifications, and property conditions. However, all three entities cautioned that investors may hesitate to be involved with projects if the additional monitoring regulatory agreement is a requirement, so these agreements would need to be negotiated on a project-by-project basis. Staff would endeavor to negotiate a regulatory agreement whenever possible as the public benefit agreement does not grant the same level of enforcement and oversight as a regulatory agreement.
Implementation
SHRA will administer the Policy, review and approve applications, and present future projects, JPA agreements, Regulatory agreements, and Public Benefit agreements to City Council for review and approval. Though administration of the Policy would be delegated to SHRA, the City Manager or designee would be required to execute the JPA Agreement for each project. SHRA staff will monitor projects as outlined in the public benefit agreement and monitoring regulatory agreement, as applicable. The Policy requires that the following annual reports be submitted to SHRA by the developer if a project is approved: Property Financial Report, Assessment Report, and Tenant Summary. These will enable SHRA to determine over the long term if the project continues to meet all requirements.
An additional provision of the Middle-income Housing Bond Policy is that no earlier than 15 years after acquisition, the City can choose to pay off outstanding debt and take ownership of the property. At that point, the City can restructure the property financing, assign the property to a third party to maintain long-term affordability, or sell the property on the real estate market (the regulatory agreement limiting rents will remain in place for the term of the bonds). When appropriate and financially feasible, SHRA staff will present this option to the Council for consideration. If the City chooses not to pay off the outstanding debt, the JPA will sell the property at the end of the term of the bonds, repay any outstanding debt, and revert any additional net sale proceeds to the City.
Overview of Policy
The Middle-income Housing Policy is broken into several sections which include: Policy Goals, Application Process, and Underwriting Criteria. A brief summary of each section is outlined below.
Policy Goals
1) Housing Production and Conversion : Produce deed-restricted middle-income units and maximize Regional
File ID: 2022-01892 12/13/2022 Discussion Item 4.
1) Housing Production and Conversion : Produce deed-restricted middle-income units and maximize Regional Housing Needs Assessment (RHNA) credit for the City.
2) Housing Affordability: Target as follows: one-third at 80 percent Area Median Income (AMI), one-third at 100 percent AMI, and one-third at 120 percent AMI. The affordability term is 30 years for new construction projects and 55 years for acquisition projects in compliance with Regional Housing Needs Assessment (RHNA). 3) Other Public Benefits: Additional benefits to the public will be encouraged such as those that provide rapid conversion of units to Middle-Income Housing, projects that stimulate the receipt of other tax revenues (e.g. ground floor commercial uses), projects that include other local economic benefits (e.g., jobs), projects that successfully include the adaption from one use to another and projects that help revitalize a blighted area.
Application Process
SHRA staff will prepare a recommendation to City Council for a proposed Middle-Income Housing bond financing request per the Policy. Review of the application will include the following steps: 1) Initial Consultation Meeting, 2) Submittal of Application, 3) Application Completeness Review and Analysis, and 4) Consideration by City Council. It is estimated that the review process will take approximately 90-120 days which will allow staff time to review the application and ensure that the requirements in the Policy are met.
Underwriting Standards
The following information will be reviewed by SHRA staff as part of the application review process:
1. Joint Powers Authority and Sponsor Team Member Qualifications
2. Transaction & Annual Fees
3. Tenant Protections & Occupancy Process
4. Property Condition Requirements
5. Basic Underwriting standards
Policy Considerations: The proposed Policy meets multiple housing objectives outlined in the City’s Housing Element including:1) increasing housing supply for middle-income households, 2) providing this additional housing stock with limited direct financial support from the City’s housing resources, 3) ensuring that the project model is economically feasible and continues to support affordability over the specified term, and 4) ensuring maintenance and housing quality of the property over the same term.
Economic Impacts: Not applicable.
Environmental Considerations: California Environmental Quality Act (CEQA): The proposed actions are administrative n nature and as such are exempt under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15378(b).
Sustainability: Not applicable.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: Middle-income households in Sacramento have experienced increasing rents and fewer homeownership opportunities indicating a growing issue that requires new policy tools to avoid the affordability crisis faced by lower-income groups. Adoption of the Middle- income Housing Bond Policy will ensure the public benefit of individual bond offerings, help with the assessment of future requests, ensure a more inclusive approach, and support the increased
File ID: 2022-01892 12/13/2022 Discussion Item 4.
provision of middle-income housing.
Financial Considerations: Not applicable.
Local Business Enterprise (LBE): Not applicable.
RESOLUTION NO. 2022 -
Adopted by the Sacramento City Council
on date of
APPROVING THE CITY OF SACRAMENTO MIDDLE INCOME HOUSING BOND POLICY: DELEGATING AUTHORITY TO THE SACRAMENTO HOUSING AND
REDEVELOPMENT AGENCY (SHRA) TO ADMINISTER THE POLICY ON BEHALF
OF THE CITY
BACKGROUND
A. Middle-income households in Sacramento have experienced increasing rents and fewer homeownership opportunities. This indicates a growing issue that requires new policy tools to avoid the affordability crisis faced by lower income groups. An option to deal with this issue is a Middle Income Hou sing Bond Policy (Policy) which allows public entities, such as the City of Sacramento, to become a member of a Joint Powers Agency (JPA). The public entities can then issue tax -exempt Public Purpose Bonds to finance 100% of the cost to develop multifamily housing units affordable to middle income households (generally households earning 80 - 120% of the Area Median Income or AMI).
B. In 2022, the Sacramento Housing and Redevelopment Agency (SHRA) was asked to develop a policy for a Middle-Income Housing Bond Policy in Sacramento. A draft policy was brought to the Council for review and comment on October 11, 2022. At the October meeting, Council expressed general support for the policy and directed SHRA staff to bring back a final policy for review and approval .
Adoption of this policy will provide more clarity, ensure the public benefit of individual bond offerings, help with the assessment of future requests, ensure a more inclusive approach, and support the increased provision of middle -income housing.
C. The recommended actions have been reviewed pursuant to the California Environmental Quality Act (CEQA) requirements under Title 14 of the California Code of Regulations (CCR) and the actions have been determined not to be a project under CEQA pursuant to CEQA Guidelines §15378. No federal funds are involved; therefore, the National Environmental Policy Act does not apply.
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 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 Middle -Income Housing Bond Policy for the City of Sacramento is approved and the Sacramento Housing and Redevelopment Agency (SHRA) is delegated authority to administer the Policy on behalf of the City.
Section 3. The City Manager or designee and SHRA staff are authorized to exec ute any and all agreements for this Policy as approved by the City Attorney and/or SHRA General Counsel including but not limited to JPA Agreements, Public Benefit Agreements, and Regulatory Agreements.
Section 4. The Middle Income Housing Policy included as Exhibit A is approved.
Section 5. SHRA is authorized to make technical changes to the Policy as necessary to comply with federal, state and local laws, regulations, ordinances or resolutions as they may be adopted or amended from time to time. The authority to make any material changes to this Policy, however, shall remain with the City Council, at its sole discretion.
Table of Contents:
Exhibit A – Middle Income Housing Bond Policy
City of Sacramento
Middle Income Housing
Bond Policy
Adopted on: December 13, 2022
Policy Administered by:
Sacramento Housing and Redevelopment Agency
Development Finance Department
801 12th Street
Sacramento CA 95814
916-440-1393
1. Introduction
Middle-income households in Sacramento have experienced increasing rents and fewer homeownership opportunities indicating a growing issue that requires new policy tools to avoid the affordability crisis faced by lower income groups. Adoption and implementation of a Middle Income Housing Bond Policy allows public entities such as the City of Sacramento to enter into a joint exercise of powers agreement with a Statewide Joint Powers Agency (JPA) to form joint powers agencies that can offer 100 percent of project financing through the issuance of tax-exempt public purpose bonds for the development of multifamily properties affordable to low- and moderate-income households (generally households earning 80-120% of the Area Median Income). For each project funded, the City will enter into an agreement to become a member of a JPA, a regulatory agreement to fix rents, and will also enter into a public benefit agreement with the developer. A second regulatory agreement to monitor maintenance and upkeep of the units is also desired and will be negotiated on a case-by-case basis as deemed necessary. In the City of Sacramento, the Sacramento Housing and Redevelopment Agency has been delegated authority to administer this Policy on behalf of the City, unless otherwise directed by the City Council.
The goals of the Policy are to:
Increase Housing Production and Conversion : Policy will produce additional deed-restricted middle -income units and maximize Regional Housing Needs Assessment (RHNA) credit in the City of Sacramento.
Increase Housing Affordability : Projects are encouraged to provide affordability at both low- and moderate-income levels. Unit affordability is recommended to be targeted as follows: one-third at 80 percent Area Median Income (AMI), one -third at 100 percent AMI, and one -third at 120 percent AMI. Affordability term is 30 years for new construction projects and 55 years for acquisition projects in compliance with RHNA.
Provide additional benefits to the public: Projects that provide additional benefits to the public are encouraged. These include rapid conversion of units to Middle-Income Housing, stimulation of other tax revenues (e.g., ground floor commercial uses), the inclusion of other local economic benefits (e.g., jobs), the successful adaption from one use to anothe r, and the elimination of blighting influences in an area.
SHRA and City staff roles under Middle Income Housing Bond JPA and Public Benefit agreement
SHRA staff will administer the Policy, review, and approve applications, and present future projects, JPA agreements, Regulatory Agreements, and Public Benefit agreements to Council for review and approval. The City Manager or designee will be required to execute the JPA agreements. SHRA staff will monitor projects as outlined in the public benefit agreement or regulatory agreement if one is negotiated. The policy requires that the following annual reports be submitted to SHRA by the developer if a project is approved:
Property Financial Report, Assessment Report and Tenant Summary. These will enable SHRA to ensure over the long-term that the project continues to meet all requirements.
An additional provision of the Middle-Income Bond Policy is that no earlier than 15 years after acquisition, the City can choose to pay off outstanding debt and take ownership of the property. At that point, the city can restructure the property, assign the property to a third party to maintain long-term affordability or sell the property on the real estate market (typically the regulatory agreement limiting rents remains in place for the term of the bonds). When appropriate, SHRA staff will present this option to the Council for consideration. If the City chooses not to pay off the outstanding debt, the JPA sells the property on its own initiative at the end of the term of the bonds, repays any outstanding debt, and reverts any additional net sale proceeds to the City.
2. Application Process and Timeline
SHRA staff will prepare a recommendation for City Council for a proposed Middle-Income Housing bond financing request using the guidelines outlined in this policy. Review of the application contents, agreements, and City Council action will include the following steps all of which may require 90-120 days depending on project specifics:
1. Initial Consultation Meeting . A Mi ddle-Income Housing Application Sponsor (Sponsor) requests a meeting with SHRA staff to introduce and discuss the proposed transaction and obtain an understanding of the application and review process.
2. Submittal of Application. The Sponsor provides all the information listed in the Middle-Income Housing Application Information Checklist.
3. Application Completeness Review . SHRA staff reviews the application and required information and make a “completeness” dete rmination within 30 days. Sponsors will be noti fied if their application is complete, or if deemed incomplete, what additional information is required to deem the application complete.
4. Application Analysis Review . SHRA staff will conduct analysis of the proposed transaction, including its degree of adh erence to the required terms and conditions and seek to clarify any questions or need for additional information from the Sponsor to complete their analysis.
SHRA staff will also draft and submit the JPA agree ment, Regulatory Agreement, and Public Benefit Agreement to the Sponsor for review.
This process may take 30-60 days, depending on project specifics.
5. Application Consideration by the City Council . When SHRA staff determines that the agreements are finalize d and all necessary information has been gather ed, the matter will be scheduled for a City Council hearing in not less than 45 days, to allow for preparation and distribution of a staff report and publication of a public notice about the hearing. Final app roval to enter into the transaction an d approve required documents will be by majority vote of the City Council.
3. Underwriting Standards
To achieve Policy goals and objectives, future Middle Income Housing transactions will be reviewed against the following underwriting standards.
SHRA will consider preliminary applications on a rolling basis to accommodate market transactions.
Joint Powers Authority and Sponsor Team Member Qualifications:
The following professional experience parameters for members of the Statewide JPA and/or Sponsor’s project team members is required:
1. Joint Powers Authority or Other Sponsor : The Statewide JPA or other Sponsor shall demonstrate reasonable satisfaction that it operates with responsible leadership and financing pract ices, as evidenced by information on current pe rformance on other Middle -Income Housing and/or Affordable Housing transactions. The Statewide JPA or other Sponsor shall provide evidence of at least three successfully closed deals.
2. Project Administrators o r Asset Managers : Asset management companies will evidence no less than 40 years of combined experience of key principal staff in the following areas: identifying real estate properties for acquisition, negotiating terms, conducting due diligence, documenting, and closing acquisitions; borrowing or und erwriting debt and/or equity investments in multifamily transactions; developing properties from the ground up; overseeing substantial rehabilitation of multifamily projects of 100 units and up subject to a recorded regulatory agreement; experience managin g development and ownership of multifamily rental affordable housing projects, including having received affordable housing finance resources of tax -exempt mortgage revenue bonds and low-income housing tax cre dits; and performing high -quality full asset management of properties under control, including hiring and
overseeing reputable property management companies experienced with affordable housing compliance and operations, as well as financial workouts and re structuring. Property specific requirements on past projects may include confirmation of positive cash flows and that required reserves were funded throughout ownership period.
3. Property Managers : The Property Manager shall have successful experience manag ing at least five large -scale affordable housin g apartment developments in the Sacramento Metropolitan Area over 40 units in size as well as extensive experience managing apartment buildings with deed -restricted affordable units and associated compliance a dministration. Property Management companies sh ould have experience working diligently and cooperatively with local governments to resolve apartment building condition and safety problems. Property Managers shall submit their portfolio of currently managed properties as well as other managed properties within the last five years, a list of projects with regulatory agreements restricting rents, and the designation of subsidies for those projects.
Transaction & Annual Fees
The Sponsor’s annual fees must comply with the following terms:
1. Asset Management Reserves: For existing buildings, reserves for asset management fees, which contribute to a property's overall debt load, shall be initially funded at a minimum of three years’ worth of payments.
2. Closing Fees: Initial closing fees shall be evaluated to e nsure that they do not exceed market standards and are fully accounted for in the information provided by the Sponsor. Closing fees will include bond origination costs, if applicable, or financing fees, projec t administrator and ownership fees. Total fees should not exceed two percent of either the total development cost for new construction or the acquisition price for an existing building.
Basis Underwriting Standards
All applications will be reviewed against the following basic underwriting standards.
1. Additional Debt : For bond financed projects, after the initial bond issuance, SHRA shall have the right to approve the amount and terms of any additional subordinate debt exceeding $50,000.
2. Accrual: Interest payments on bond series related to sponsor ret urns shall be applied to principal first, then accrued interest. No capitalization of accrued interest is allowed.
3. Annual Administration Fee: All projects will be required to pay the SHRA’s annual monitoring fee. SHRA will also receive a Fee equal to $50 per each regulated, non-bond unit per year. For mixed-income projects,
the Annual Administration Fee amount shall be determined based on the number of affordable units.
4. Annual Rent Growth : Rents charged on all units shall not increase more than three percent per year.
5. Asset Management Fees : Asset Management fees not to exceed two percent of the subordinate bond amount and may increase up to three percent annually and may accrue interest.
6. Capital Expenditure Reserves: A minimum of $300 per unit per year escalating at no less than 3 percent per year. The required level of annual reserves may increase based on the type and age of property. A Sponsor-provided, third -party physical needs assessment over the entire b ond term or affordability restriction summarize d as a capital repairs list will be evaluated in determining these requirements.
Furthermore, replacement reserves shall be part of Net Operating Income calculations and used in sizing the Bond.
7. Construction Cost: If applicable, the hard costs for new con struction projects must be verified by SHRA’s construction cost estimating team and methodology for determining must be provided. The construction costs should include a contingency of at least 10 percent.
8. Cumulative Rent Discounts : Over the bond term, the value of cumulative rent discount shall be approximately equal or greater than the value of cumulative foregone property tax revenue to all taxing entities.
9. Debt Service Coverage Ratio Minimum : The financing package, including all series of bonds where relevant, must have a minimum debt service coverage ratio of 1.00 in each year the bonds for the project are outstanding.
10.Deed Restriction : For consistency with AB 787, the affordability restrictions will inclu de a 30 -year deed restriction for new construct ion projects, 55-year deed restriction for acquisition projects, and otherwise be subject to review and approval by SHRA.
11.Forced Sale: With necessary action by the City C ouncil, ability to force sale shall occur at any point after year 15 of the Bond term.
12.Maximum Rents : Affordable rents shall not exceed 30 percent of household income, net of utility allowances published by SHRA. The maximum affordable rents shall be least below market rents for a given type and size of unit or comparable within the submark et. Fair market rents are determined by the United States Department of Housing and Urban Development.
13.Ongoing Fees : The total ongoing fees to all entities potentially including the owner, property administra tor, property manager shall b e evaluated to ensure they do not exceed market standards.
14.Operating Expense Growth: Expenses should be projected to grow at a minimum of three percent per year. Accumulated capital reserves should be used to conduct major ren ovation as laid out in the capital repairs Policy, as well as address unplanned emergencies.
15.Operating Expenses: Total operating expenses shall be no less than the minimum amounts allowed by California Tax Credit Allocation Committee.
16.Unit Mix: The specific project unit mix by number of bedrooms, location within the project and allocation by middle -income household income category will be subject to review and consideration of all project benefits.
17.Vacancy: Vacancy should be assumed at no less than five percent.
18.Debt Obligations: There shall be no ad ditional debt obligations issued on the property without consent of SHRA.
Tenant Protections & Occupancy Process
For acquisition of existing projects, the Sponsor is required to take the following measures to avoid involuntary displacement of existing tenants within the 12 months following a property’s acquisition:
1. Noticing: Each tenant shall be provided with a written notice advising them of their rights under the terms of the approved transaction and deed restrictions and ongoing compliance procedures to maintain their eligibility to reside in any market -rate or income and rent restricted units by category, as applicable. The notice shall include procedures for the conversion of tenants of any market -rate units to deed -restricted units in a way that do es not cause involuntary displacement of existing tenants.
2. Maximum Household Income : Following conversion to deed - restricted rents of all occupied market -rate units at the commencement of lease -up, no units s hall be rented to tenants with incomes that exceed 120 percent of AMI.
3. Existing Tenants : Existing tenants who meet household income requirements should be transitioned first into more deeply affordable units at their option, prioritizing those with the hig hest proportion of income spent on rent payments.
4. Section 8: In accordance with SB 329, the Property Manager shall not discriminate in renting units to Housing Choice or VASH (for veterans) voucher holders including those receiving rental assistance from any local, federal, state, or non-profit agency.
5. Smoke-Free: 100% of buildings and units must be smoke free (including all forms of smoking that create secondhand smoke that impacts health of nonsmokers). In addition, all indoor common areas must be smoke-free. Clearly marked designated smoking areas must be provided. Exceptions may be given to supportive services developments and existing tenants may be grandfathered in for rehabilitation developments.
6. Renters Insurance: Owners may not make payment of ren tal insurance premiums a condition of occupancy.
Reporting Requirements
The following annual reporting is required:
1. Application Fee. At the time that the full application is submitted, the Sponsor must pay a fee of $12,500 to cover SHRA staff costs and expenses in determining feasibility of the proj ect and processing the application.
2. Property Condition : The Property Management Company shall continually maintain the affordable units in a condition which, at a minimum, satisfies the Uniform Physical Condi tions Standards promulgated by the Department of Housing and Urban Development (24 CFR §5.705). Property shall also be subject to the City’s rotation of property inspections set forth by the City’s Code Compliance Division of the Community Development Department if SHRA regulatory agreement is not in place on the property.
3. Property Financial Report : The Sponsors will provide an annual financial report that details operating revenues and expenses and debt metrics associated with the property.
4. Annual Assess ment Report: The Sponsors will provide an annua l assessment report indicating the property conditions.
5. Tenant Summary: The property manager will provide an annual rent roll summary of tenant attributes including household size, income and rent information on a form acceptable to the SHRA.
6. Requests for Other Information : The Sponsor project team shall respond within 10 calendar days in writing to any reasonable written request from SHRA for other information about the project’s property maintenance conditions or leasing practices.
Middle-Income Housing Bond Application Information Checklist The following information must be submitted to the satisfaction of SHRA staff to deem a Middle-Income Housing (MIH) transaction application complete for review and consideration by the City Council:
Requested
Item
Description
Completed
SHRA
Application
Requirements
In addition to components summarized below, applicants
should ensure inclusion of components in the Full
Application Requirements outline as well as all reports and studies required in the Middle-Income Housing (MIH) Terms and Conditions.
Sponsor Team
Narrative & Org
Chart
Include a narrative description of the experience and roles of each of member of the Sponsor project team including Principal(s), Executive Director, or President of the firm with the project manager specified. Include information on current Middle-Income Housing bonds as well as real estate portfolio performance.
Documents to include description of ownership entity, org chart and ownership interests, declaration of non-profit status if applicable, tax returns for the last three years for all ownership interests, financial statements, legal status, and information on other consultants including but not limited to general contractor, attorney, architect, underwriter, and property manager. Applicant should refer to Management Agent Approval Required
Documentation for required background on Management Company and Management plan. Applicant should reference the scope narrative templates for Rehab and New Construction Projects.
Sponsor team narrative should include contact list of the firm, address, phone number, fax and e-mail for the applicant and associated consultants.
Development
Team
Credentials
A resume from each member of the development team should be provided which demonstrates their qualifications to develop, own, and/or operate the proposed project, and should include specifically the qualifications listed in the Full Application Requirements.
Full Project
Financial Pro
Forma
A “live” or dynamic Excel version of the financial pro forma with formulas for the proposed transaction, reflecting current and projected income and expenses, reserves, bond payments, debt coverage ratio, proposed basis for annual rent increases and a schedule of all transaction fees for the Project, and estimated sale disposition and net proceeds scenarios at year 15 and termination of the bond term, along with notes on all key assumptions. To Submission to include a narrative description of financing arrangements, including commitment status or evidence of commitment of proposed financing. Proforma to include the final maturity date under the bond documents.
Additional Cashflow Considerations to account for in underwriting proforma include:
- Cash flow from pro ject operations subsequent to loan approval and prior to conversion of construction to
permanent financing must be shown as a source of income in the proforma.
- Cash flow from commercial income will not be included in calculating the debt service for affordable housing units. - Income from laundry, vending, storage units and/or resident parking fees, if any, will be included in project income for purposes of underwriting. Though resident parking fees may be included in project income, parking fees must be
voluntary and cannot be required of tenants in af fordable units.
Project
Narrative
Summary
Project narrative will be a summary of the overall project, construction type, number of units and size (bedrooms, bathrooms, and square footage), affordability levels for units, amenities, and any exceptional circumstances for the project.
Project
Financing
Summary
Include a narrative description of financing arrangements, including commitment status or evidence of commitment of proposed financing. Financing summary to include sources and uses of funds, including construction, and permanent financing, evidence of commitment, or commitment status of proposed financing.
Evidence of project-based assistance, such as rent or operating subsidies, if applicable. If proposing to request project-based assistance, be sure to include that information and timeline.
Itemized and detailed total development budget, for which the applicant can refer to the SHRA Budget Template, as well as operating expenses.
Development or
Redevelopment
Narrative
Applicant to provide a description of current buildings and a matrix of existing unit types. If major renovation or redevelopment is proposed, then the applicant should include relocation and tenant protection plans for existing tenants.
New construction projects must include a description of the proposed construction and design, component budgets, description of work scope for each budget line item, design drawings including architectural plans (to include unit floor plans with gross and net square footage for each unit type) and site plans (to include parking, square footage, and amenities highlighted), building renderings, landscape plans, design and architectural features of the building, and sustainability compliance evidence. All projects shall adhere to the applicable section of the SHRA Rental Property Minimum Construction Standards.
Property
Information
SHRA Site data form completed, detailed information about the location, age, size and current uses of the property, evidence of site control, preliminary title report not more than 90 days old, flood plain status, including back-up documentation, evidence of land use entitlements or status of City application.
Property Tax
History
Copies of property tax bills for all project parcels over the last five years, if available
Existing Rent
Roll
Trailing 12-month rent roll at the property, if applicable.
Historic
Revenue and
Expenses
Full accounting of revenue and expenses over the past five years, if applicable.
Payroll and
Staffing Plan
Detailed payroll and staffing plan for the proposed project.
Capital
Expenditure
Plan
Detailed capital expenditure plan with estimated financing levels over the entire bond term.
Purchase and
Sale Agreement
A copy of the executed purchase and sale agreement.
Public Benefit
Agreement
A copy of the draft Public Benefit Agreement between the JPA and the City of Sacramento
Partnership and
Management
Agreement
A copy of the draft agreement between JPA and project
administrator if relevant.
Public Offering
Statement
A copy of the draft documents for the proposed transaction or a comparable recently closed transaction by the same Sponsor team.
Offering
Memorandum
Broker offering memorandum from marketed deals or similar marketing materials.
Property
Conditions
Assessment
Property Condition Assessment report for the Project if available.
Application
Eligibility
Timeframe
An application is to be eligible within 18 months of submission, after which time the applicant is required to provide updated application information.
Property
Plans
Proposed
Management
Plan
A Management Plan drafted by a property management company meeting the minimum Policy requirements that outlines how the property will be managed, staffed, and maintained. This shall include
a. Affordable Unit Schedule
b. Tenant Selection Criteria and eligibility forms
c. Tenant Application and Waiting List procedure
d. Rent Collection, Inspection Schedule, and Work Order Procedures
e. Tenant Lease and all lease addenda
f. House Rules and Crime Free Policy
g. Visitation and Guest Policy
h. Smoke Free Policy
i. Procedures for Appeal and Grievance
Security
Questionnaire
A filled-out version of the SHRA Security Questionnaire of Multifamily Projects to be completed for the subject property.
Third Party
Reports and
Plans
Third Party
Appraisal
The acquisition price of existing properties and/or land for a new construction project must be verified by a third-party appraisal from a licensed appraiser with the cost covered by the Sponsor or lender. Appraisal must be an MAI appraisal that takes restricted rents and the value of below-market financing and tax credits into consideration.
Market Rent
Study
SHRA requires a Rent Comparability Study at time of full applications. Market studies consistent with California Tax Credit Allocation Committee requirements.
Rehabilitation
assessment
A Physical Needs Assessment (PNA) of the property must be submitted that details the conditions and remaining useful life of the building’s major components, including but not limited to electrical, plumbing, HVAC, foundation, and roofing. The scope of rehabilitation work identified in the application should match the findings of the Physical Needs Assessment and comply with SHRAs Minimum Construction Standards for rehabilitation buildings. (if applicable). 1. PNA must be prepared by the project architect or a qualified independent third-party, neither of whom has a conflict of interest with any member of the development team or sponsor.
The PNA must be performed no earlier than 120 days prior to application. 2. The PNA shall include a reserve study for the length of the bond term, which indicates the expected dates and costs of future replacements of all major building components that are not being replaced immediately. The PNA shall also include a schedule of reserve contributions needed to fund those replacements.
Phase I or
Phase II
environmental
Assessments
Applications must include a Phase I Environmental Assessment following the standards outlined in the American Standards of Testing and Materials (ASTM) to discover the potential presence of on-site and neighboring property contamination. The assessment must have been completed within six months of the project’s application. If the Phase I assessment indicates the need for further study, a Phase II report must be submitted. The cost of any remediation must be included and discussed in the project’s budget. Additional environmental reports may be required pursuant to SHRA’s review, including, but not limited to, soils, arborist reports, cultural resources reports, wetland delineation report, etc.
Utility
Allowance
Analysis
Housing Authority utility allowance based on project and utility type.