City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2024-00715 5/7/2024 Consent Item 1.
(Housing Authority) Approval of the Amended and Restated Development Services Agreement with the Sacramento Housing Authority Repositioning Program, Inc. (SHARP) File ID: 2024-00715
Location: Applicable to all City Public Housing properties located within District 2, Represented by Councilmember Thao; District 3, Represented by Mayor Pro Tem Talamantes; District 4, Represented by Councilmember Valenzuela; District 5, Represented by Vice Mayor Maple; District 6, Represented by Councilmember Guerra; District 7, Represented by Councilmember Jennings; and District 8, Represented by Councilmember Vang
Recommendation: Adopt a Housing Authority Resolution authorizing the Executive Director of HACS, or her designee, to review, negotiate, and execute the Amended and Restated Development Services Agreement.
Contact: Mark Hamilton, Director of the Rental Assistance Demonstration (RAD) Program, (916) 449 -6248, [email protected], Sacramento Housing and Redevelopment Agency Presenter: None.
Attachments:
1-Description/Analysis
2-Original Development Services Agreement
3-Housing Authority Resolution
4-Exhibit A - Amended and Restated Development Services Agreement Description/Analysis
Issue Detail: On October 30, 2018, the Housing Authority Board (Board) adopted Resolution No. 2018-0019, which approved updates to the Housing Authority Asset Repositioning Plan, allowing for the conversion of the public housing portfolio under the Rental Assistance Demonstration (RAD) and Section 18 Demolition and Disposition (Section 18) Programs. Additionally, the Board authorized the Housing Authority to submit applications to the United States Department of Housing and Urban Development (HUD) to reposition and convert City Public Housing Properties under the RAD Programs.
As part of the updated Asset Repositioning Plan, Guiding principles were adopted as the policy
File ID: 2024-00715 5/7/2024 Consent Item 1.
direction for each repositioning activity. The general parameters of those principles were to prevent the loss of units for extremely low-income households, facilitate a decrease in reliance on federal funds, incorporate smart growth principles into development opportunities, reinvest any sale proceeds into Housing Authority replacement units, foster partnerships with entities to position development efforts for success, and to pursue actions that would generate fees and other revenue for the Housing Authority.
Conversion to RAD is a critical component of the Asset Repositioning plan. RAD allows public housing agencies (PHAs) to convert public housing units to long-term, Project-Based Voucher rental assistance developments. Converting the properties under RAD facilitates access to private debt and equity to address immediate and long-term capital needs.
HACS entered into a Development Services Agreement (Attachment 2) with SHARP after receiving consent from the Sacramento Housing and Redevelopment Commission on October 2, 2019, and the Housing Authority Board on October 22, 2019.
This agreement allowed for Housing Authority of the City of Sacramento staff to perform, on behalf of SHARP, pre-development and development activities, including, but not limited to:
(a) Oversight of architectural design.
(b) Solicitation and contracting of general contractor and all necessary consultants for preconstruction and construction activities.
(c) Directing and monitoring the general contractor and all consultants with respect to the predevelopment and development of the Properties. (d) Interacting with state and federal government authorities to complete applications for improving and converting of the Properties to RAD. (e) Facilitating compliance with zoning, building codes, occupancy permits, and all other local government requirements concerning the construction of the Properties. (f) Preparing requisite environmental assessments, neighborhood impact assessments, engineering surveys, hazardous substance reports, and preliminary plans and specifications for the Properties.
(g) Developing a scope of work and schedule of values for the rehabilitation involved in the Properties.
(h) Creating and implementing a HUD-approved financing plan for the Project. The Housing Authorities are working to secure financing through bond applications.
File ID: 2024-00715 5/7/2024 Consent Item 1.
(i) Procuring all contractors necessary for the conversion of the Properties, including any vendor needed for third-party reports required to submit financial applications successfully.
(j) Create, on SHARP’s behalf, any necessary Request for Qualifications or Request for Proposals needed to secure predevelopment contracts to be paid for with public housing funds and such other contracts as the parties may agree. These vendors may include, but are not limited to:
i) Environmental Consultants
ii) Pest Control Company (Wood Destroying and General)
iii) Hazardous Material Inspectors
iv) General Contractor
v) Architects/Engineers
vi) Appraisers
vii)Market Study Evaluators
(k) Oversight of completing of all punch-list items and construction activities consistent with standards required of lenders and investor partners. The Authority will seek to ensure that rehabilitation and/or construction work is completed with no liens, claims, or encumbrances on the properties.
(l) Complete all predevelopment, development, and monitoring work, including but not limited to feasibility assessments, financial and evidentiary document negotiation, and construction monitoring activities required to complete the Project.
Policy Considerations: The recommendations in this report are consistent with the Public Housing Authority Plan to transition and convert public housing properties under the RAD program. The efforts are also consistent with the Housing Authority’s mission to promote self-sustaining housing opportunities for extremely low-income residents in Sacramento.
Economic Impacts: None.
Environmental Considerations: The Amended and Restated Development Services Agreement is administrative and does not constitute a project subject to environmental review under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15378 (b) and is exempt under the National Environmental Policy Act pursuant to 24 CFR 58.34(a)(3). Environmental Review for specific activities, such as disposition and/or rehabilitation, under RAD will be completed prior to any discretionary action(s) being carried out with regard to such projects.
File ID: 2024-00715 5/7/2024 Consent Item 1.
Sustainability: Not Applicable.
Commission Action: At its meeting of May 1, 2024, it is anticipated that the Sacramento Housing and Redevelopment Commission will recommend approval of the attached resolution. In the event it fails to do so, Staff will advise the Board at the meeting.
Rationale for Recommendation: Each deal requires SHARP to provide liquidity and net worth guarantees as the developer and the general partner of each project. Housing Authorities are not allowed to leverage federal sources for financial guarantees on these projects.
1. Predevelopment costs have risen, and capital funds, the primary source utilized for predevelopment activities, have not increased to keep up. These capital fund sources are intended for capital improvements at the Public Housing sites in the City and County of Sacramento. While these funds are used to facilitate capital improvements through rehabilitation activities, properties that are not going through RAD do not have an adequate source to address capital needs for the properties.
2. The Amended and Restated Agreement (Agreement) would expand to all future RAD and Section 18 projects.
Financial Considerations: The needs of the Housing Authorities and SHARP may vary from project to project, and the Agreement allows for both parties to negotiate terms. The Amended and Restated DSA will allow the Housing Authorities and SHARP to negotiate the developer fee and the method of covering predevelopment expenses for each project.
LBE - M/WBE and Section 3 requirements: The items discussed in this report have no M/WBE or Section 3 impact; therefore, M/WBE and Section 3 considerations do not apply.
RESOLUTION 2024-
Adopted by the Housing Authority of the City Sacramento
May 7, 2024
Approval of the Amended and Restated Development Services Agreement with the Sacramento Housing Authority Asset Repositioning Program, Inc. (SHARP)
BACKGROUND
A. On October 18, 2018, the Housing Authority (Board) of the City of Sacramento (City) adopted Resolution No. 2018-0019, which approved the updates to Housing Authority Asset Repositioning Plan allowing for the conversion of the public housing portfolio under th e Rental Assistance Demonstration (RAD) Program.
B. The Housing Authority intends to convert all its properties under the RAD program. The properties will be transferred to a low-income housing tax credit-eligible partnership, of which SHARP is the managing general partner.
C. SHARP is a California nonprofit public benefits corporation, and a component unit of the Sacramento Housing and Redevelopment Agency (SHRA).
D. RAD is a program created by the Department of Housing and Urban Development (HUD) to allow Public Housing Agencies to leverage public and private debt and equity in order to address deferred capital needs and improvements and allows for the conversion from the Public Housing program to a Section 8 platform.
E. On October 22, 2019, the Board adopted HACS Resolution 2019-0018, which provided the authority for the Housing Authority to enter into a Development Services Agreement (DSA) with SHARP.
F. The Amended and Restated DSA, an update to the DSA signed in 2019, will allow the Housing Authority to continue to perform all predevelopment and development activities on behalf of SHARP and negotiate with SHARP on project developer fees.
G. The execution of the Amended and Restated Development Services Agreement is administrative and does not constitute a project subject to environmental review under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15378 (b) and is exempt under the National Environmental Policy Act pursuant to 24 CFR
58.34(a)(3). Environmental Review for specific activities, such as disposition and/or rehabilitation, under RAD will be completed prior to any discretionary action(s) being carried out with regard to such projects.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE HOUSING AUTHORITY OF THE CITY 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 review, negotiate , and execute the Amended and Restated Development Services Agreement (Exhibit A), and further amend the Development Services Agreement as may be needed.
TABLE OF CONTENTS:
Exhibit A – Amended and Restated Development Services Agreement
AMENDED AND RESTATED DEVELOPMENT SERVICES AGREEMENT
THIS AMENDED AND RESTATED DEVELOPMENT SERVICES AGREEMENT (this “ Agreement”) is dated as of ____________, 2024 (“the Effective Date”), by and between the HOUSING AUTHORITY OF THE COUNTY OF SACRAMENTO, a public body, corporate and politic (“HACOS”), the HOUSING AUTHORITY OF THE CITY OF SACRAMENTO, a public body, corporate and politic (“HACS” and collectively with HACOS, the “Authorities”), and the SACRAMENTO HOUSING AUTHORITY REPOSITIONING PROGRAM, INC., a California nonprofit public benefit corporation (“SHARP”). .
BA
CKGROUND
A. The Authorities and SHARP entered into that certain Development Services Agreement dated as of October 22, 2019 (the “Original Agreement”) whereby the Authorities intended to convert its Public Housing portfolio to the Rental Assistance Demonstration (“RAD”) Program under the United States Department of Housing and Urban Development (“HUD”) by selecting a collection of properties for conversion
.
B
. Pursuant to the Original Agreement, each collection of properties will be referred to collectively as a “Project .” Each Project will be listed annually in the Authorities’ Annual Plans, which are subject to a Public Hearing and submission to, and approval by HUD.
C
. The Authorities intend to transfer these properties to a low income housing tax credit -eligible limited partnership of which SHARP is the managing general partner ( each a “Partnership”) for rehabilitation and ownership, through a ground lease of the land (when applicable) and the sale of the improvements to the Partnership.
D. SHARP intends to serve as the Developer of Projects pursuant to an agreement entered into with a Partnership. .
E. D
uring the predevelopment period and the development period of a Project, SHARP desires to retain the Authorities to perform the predevelopment and development services described below.
F. T
he Authorities and SHARP now wish to amend and restate the Original Agreement as follows:
A
GREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Appointment and Term. SHARP hereby engages the Authorities to render services for the predevelopment and development of the Properties (as defined herein) in a Project for SHARP as herein contemplated.
Exhibit A
2 2. Properties. The properties to be converted, either through or to, RAD are the Authorities’ Public Housing properties, and to a more limited extent, the Authorities’ market-rate or non- Federal properties (collectively, the “Properties”).
3. Authority and Obligations. Subject to any provision in the RAD approvals issued by HUD for each particular Project, the Authorities shall have the authority and the obligation to perform all predevelopment and development services necessary to complete the Project, including, but not limited to the following:
a. To oversee all architectural design;
b. To retain the general contractor for preconstruction services (if applicable) and construction management;
c. To oversee, monitor and direct the general contractor and all consultants with the respect to the pre-development and development of the Properties;
d. To interact with state and federal government authorities with respect to the completion of the application for, and the conversion of the Properties to RAD and the re-construction of the Properties;
e. To take all necessary acts for the Properties to comply with zoning, building codes, occupancy permits and all other local government requirements concerning the construction of the Properties;
f. To prepare, or cause to be prepared such environmental and neighborhood impact studies and reports, engineering surveys, hazardous substance reports, preliminary plans and specifications, as may be required in connection with the re-construction of the capital improvements for the Properties;
g. To develop a scope of work and schedule of values for the rehabilitation involved in the Project.
h. To create and implement a HUD-approved Financing Plan for the Project. The Authorities are working to secure financing through bond applications and will be responsible for a successful application. The Authorities may utilize a consultant, thoroughly vetted and awarded through Authorities’ established procurement and contract guidelines.
i. To procure all contractors necessary for the conversion of the Properties, including any vendor that is needed for third party reports required to successfully submit financial applications. For any predevelopment contracts to be paid for with public housing funds and such other contracts as the parties may agree, the Authorities will create, any 3 necessary RFQs or RFPs needed to secure these services. These vendors may include, but are not limited to:
i. Environmental Consultants
ii. Pest Control Companies (Wood Destroying Pests and General) iii. Hazardous Materials Inspectors
iv. General Contractor
v. Architects/Engineers
vi. Financial Consultants
vii. Zoning Reports
viii. Real Estate Appraisal Firm
ix. Surveyor
j. To oversee the completion of all punch-list items and to cause completion of the development of a Project, subject to no liens, claims, or encumbrances which are not permitted under the construction loans, as required under any loan documents or the investor partnership agreement.
4. Fees. The Authorities will be compensated for providing development services to SHARP for each Project in an amount mutually agreed upon by the parties.
5. Predevelopment Costs and Contracts. Costs paid by the Authorities for predevelopment work will be repaid through the following options, to be negotiated between SHARP and the Authorities:
a. a pre-development loan to be repaid to the Authorities through the Project’s residual receipts. This loan would be subordinated to the primary loans on the Project. b. Paid from the first draw upon entry of the investor Limited Partner into the tax credit limited partnership with the approval of the lender and limited partner.
Predevelopment contracts for the Project entered into by the Authorities or SHARP shall be assigned to the Partnership at the time of the construction closing, subject to the approval of the investor limited partner of the Partnership.
6. Term. This Agreement shall continue until either party provides written notice of termination to the other party designated the specific date of termination.
7. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereto waive any provision of law now or hereinafter in effect which renders any provision hereof prohibited or unenforceable in any respect.
4 8. Applicable Law. This Agreement, and the application or interpretation hereof, shall be governed by the laws of the State of California applicable to agreements made and to be performed entirely therein.
9. Indemnification. SHARP and the Authorities hereby indemnify and hold harmless each other from any loss or damage incurred by the indemnified party by reason of the gross negligence, fraud, breach of fiduciary duty or willful misconduct by the indemnifying party related to the provision of development services under this Agreement.
10. Binding Agreement. This Agreement shall be binding on the parties hereto, and their heirs, executors, personal representatives, successors and assigns. Notwithstanding the foregoing, SHARP shall not assign or encumber its respective rights and obligations under this Agreement and any such assignment or encumbrance shall be void ab initio.
11. Headings. All section headings in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section.
12. Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine, or neuter gender, shall include all other genders, the singular shall include the plural, and vice versa as the context may require.
13. Reliance. No person other than the parties to this Agreement may directly or indirectly rely upon or enforce the provisions of this Agreement, whether or not as a third party beneficiary or otherwise.
14. Relationship of Parties. Nothing contained in this Agreement shall be deemed or construed by the parties or any third party to create the relationship of partners or joint ventures between SHARP and the Authorities.
[Signatures follow on the next page.]
5 SHARP: HACOS:
SACRAMENTO HOUSING AUTHORITY
REPOSITIONING PROGRAM, INC.,
HOUSING AUTHORITY of the
COUNTY OF SACRAMENTO,
a California nonprofit public benefit
corporation
A public body corporate and politic
By:____________________________ By:___________________________ James Shields, La Shelle Dozier,
President Executive Director
HACS:
HOUSING AUTHORITY of the CITY OF
SACRAMENTO,
a pubic body corporate and politic
By:____________________________
La Shelle Dozier,
Executive Director