City of Sacramento
City Council - 5PM Report
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File ID: 2024-00713 4/9/2024 Consent Item 11.
Resolution Modifying The Kind Project South Affordable Housing Project - 7141 Woodbine Avenue
File ID: 2004-00713
Location: 7141 Woodbine Avenue, District 5, Represented by Vice Mayor Maple Recommendation: Adopt a Resolution reducing the number of housing units for The Kind Project South Affordable Housing Project - 7141 Woodbine Avenue from 216 low-income units to 108 low- income units for the same previously approved loan amount of $8,426,213 (Resolution No. 2022- 0328) and authorizing the City Manager or the Manger’s designee to execute any and all necessary documents to effectuate the reduction, subject to City Attorney review and approval as to form.
Contact: Leslie Fritzsche, Community Investment Manager, (916) 808-5450, [email protected]; Ya-yin Isle, City Housing Manager, (916) 808-1869, [email protected], City Manager’s Office of Innovation and Economic Development Presenter: None.
Attachments:
1-Description/Analysis
2 - Resolution
Description/Analysis
Issue Detail: Paratransit, Fulcrum Property Corp. and Urban Elements, Inc. (“Venture”) envision the development of the Kind Project South, an affordable housing project that will provide apartment units at affordable rents. Urban Elements and Fulcrum Property will develop the project and, at completion, the Venture will operate the project in collaboration with partner non-profit agencies.
On October 25, 2022, the City Council approved Resolution 2022-0328 committing City funds to the Kind Project South in the amount of $8,426,213, for the development of 216 low-income housing units. The City’s loan was originally structured to be a 55-year residual receipts loan with a 3% interest rate.
With interest rates increasing dramatically in 2022-2023 and changes in the financial markets, the bank loan originally envisioned for the project was rescinded. The developer is now proposing to do
File ID: 2024-00713 4/9/2024 Consent Item 11.
the project in two phases and has secured financing with River City Bank to build 108 of the original 216 units. The developer has indicated that the City’s full original financial contribution of $8,426,213 is necessary to support the development of only the first phase.
The phasing of the project offers the opportunity for Venture to show proof of concept prior to embarking on the development of Phase 2 and will allow Paratransit to contribute a portion of its Phase 1 cash flow as equity into Phase 2. The timing for initiating Phase 2 is uncertain and will depend on the operational and financial success of Phase 1.
With the restructuring of the City’s contribution, the terms have now been modified to a 40-year residual receipts loan term, with the City receiving a fixed amount of the residual receipts and the remaining receipts split with Venture. The anticipated annual debt service payment on the $8,426,213 40-year loan with a 3% interest rate is approximately $360,000 annually. It is anticipated that the completion of Phase 1 will generate enough cash flow to service the City’s loan, and no further subsidy will be needed from the City for the development of Phase 2.
The Kind South project will serve a vulnerable tenant population by stabilizing their housing and ensuring they do not experience or fall back into homelessness. For seniors and persons with disabilities, this project will provide much-needed, fully accessible housing at an attainable rent where tenants may age in place. The project will accept households with tenant-based Housing Choice Vouchers allowing for extremely low and very low-income households to access housing, including those exiting homelessness or those at-risk with housing instability. Arrangements will be made with several non-profit service providers such as Americorps/City Year Youth, Transition-Aged Youth (TAY) Service providers, Resources for Independent Living (RIL) to centralize supportive services and create housing security for vulnerable individuals currently in scattered-site programs and those searching for housing placements.
Policy Considerations: The actions in this report are consistent with the City of Sacramento Housing Element of the General Plan, specifically Policy H-36 that speaks to assistance in the development of affordable housing by providing gap financing.
Economic Impacts: The City investment in this project is estimated to infuse the economy with jobs for the construction of these housing units. The greater economic impact will be providing homes to an estimated 108 households, including those exiting homelessness or at risk of housing instability.
Environmental Considerations: The proposed activity is not a project pursuant to the California Environmental Quality Act (CEQA) Guidelines Section 15378(b). The activity described in this report is the modification of government funding mechanisms or other government fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. As a result, the proposed activity is not subject to CEQA pursuant to CEQA Guidelines Section 15060(c)(3). Appropriate environmental review consistent with
File ID: 2024-00713 4/9/2024 Consent Item 11.
the requirements of CEQA will be completed prior to action on the Planning entitlements required of the project.
Sustainability: The recommendations in this report will result in increased affordable housing opportunities within the city that promote the increased connection of housing, workforce centers, and other amenities and services. Further linkage of these community components will result in reduced impact on the environment.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: The proposed housing project would add 108 low-income housing units serving a vulnerable tenant population by stabilizing their housing and ensuring they do not experience or fall back into homelessness. For seniors and persons with disabilities, this project will provide much-needed, fully accessible housing at an attainable rent where tenants may age in place.
Financial Considerations: On October 25, 2022, City Council adopted Resolution No. 2022-0328 and established the FY 2022/23 Affordable Housing Project (I02189050) and allocated a total of $8,426,213, to the FY 2022/23 Affordable Housing Project loan to the Kind Project South Project (I0218951).The proposed financial contribution to the project from the City is structured as a 40-year residual receipts loan with a 3% interest rate. The annual debt service payment based on the $8,426,213 loan with a 3% interest rate and 40-year amortization schedule is approximately $360,000 annually. It is anticipated that the completion of Phase 1 will generate enough cash flow to service the City’s loan, and no further subsidy is needed from the City for the development of Phase
2. Local Business Enterprise (LBE): The developers of the project, Fulcrum Property and Urban Elements, are locally owned firms.
RESOLUTION NO.
Adopted by the Sacramento City Council
Amendment of Resolution No. 2022-0328 for The Kind Project South – 7141 Woodbine Avenue
BACKGROUND
A. On October 25, 2022, Council adopted Resolution No. 2022-0328, which included the allocation of $8,426,213 in Comprehensive Site Plan and Measure U funds for The Kind Project South – 7141 Woodbine Avenue (“Kind Project”) for the development of 216 low-income affordable housing units for 55 years.
B. Additionally, the City Council established FY 2022/23 Affordable Housing Project (I02189050) and authorized the City Manager or the Manager’s designee to make budgetary adjustments as outlined in Exhibit A of the Resolution. (Resolution No. 2022-0328)
C. Due to significant increases in interest rates in the 2022-2023 financial market, the Kind Project lost its original bank loan as it was rescinded by the bank.
D. Since then, the Kind Project’s development team secured financing with River City Bank to develop the King Project in a phased approach wherein the developer will build 108 low-income housing units with a 40-year affordable housing restriction in phase 1, and after providing proof of completing phase 1, the developer will be able to refinance and use equity from the Project to invest in phase 2 which will build the remaining 108 units. The City’s funding will be attributed to phase 1 of the Project.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. Exhibit B to Resolution No. 2022-0328, is hereby amended to reflect that the Paratransit Kind Project South – 7141 Woodbine will provide funding for 108 low-income units.
Section 2. Except as amended in Sections 1 and 2 above, all other provisions of Resolution No. 2022-0328 and its exhibits shall remain the same, and in full force and effect.