City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2024-01246 6/25/2024 Consent Item 19.
Modification of Scope for the Gateway Mixed-Income Housing Project File ID: 2024-01246
Location: 3400-3401 Stockton Boulevard, District 5, Represented by Vice Mayor Maple and District 6, Represented by Councilmember Guerra
Recommendation: Adopt a Resolution: 1) approving a revised Exhibit B of Resolution No. 2022- 0327, modifying the scope for the Gateway Mixed-Income Housing Project at 3400-3401 Stockton Boulevard from 230 to 196 mixed income housing units; and 2) allowing the City Manager or the City Manager’s designee to negotiate and execute a $15 million loan agreement with CT Gateway LLC with the revised scope for the Gateway Mixed-Income Housing Project at 3400-3401 Stockton Boulevard, subject to City Attorney approval as to form.
Contact: Leslie Fritzsche, Economic Investment Manager, (916) 808-5450, [email protected]; Ya-yin Isle, Housing Policy Manager, (916) 808-1869, [email protected]; City Manager’s Office of Innovation and Economic Development Presenter: None
Attachments:
1-Description/Analysis
2-Resolution
3-Attachment A to the Resolution
Additional Description/Analysis
Issue Detail: On October 25, 2022, Council adopted Resolution No. 2022-0327, which allocated $15 million for the development of a 230-unit mixed-income housing project at 3400-3401 Stockton Boulevard at 9
th and 10th Street. Since that time, College Town International (CTI), the owner and developer of the project, has been hard at work finalizing the planning entitlements and building permit applications. Due to significant increases in construction costs and higher interest rates, CTI has revised their plans. The changes include a reduction in the number of total units in the project from 230 to 196. This reduction will take place on the eastern parcel which is now proposed to contain 65 units from the original 99 along with 50 parking spaces. The project is being redesigned by Vrilakas and Groen Architects, a local architectural firm specializing in catalytic infill projects.
File ID: 2024-01246 6/25/2024 Consent Item 19.
Though the number of total units is changing, the percentage of affordability has increased. The original project had 4% of the units at 60% AMI, 31% of the units at 80% AMI, 30 at 120% AMI and 35% at market rate. This has been modified with 4% of the units at 60% AMI, 36% of the units at 80% AMI, 37% at 120% AMI and 23% at market rate. The mix of studios, one-bedrooms and two- bedrooms remains largely similar to the original composition. The revised project includes the following:
3400 Stockton (West) 3401 Stockton (East)PROJE
CT
TOTAL
S
80% 120% MarketTotal 80% 60% Total
Studios 4 25 16 45 15 5 20 65
1 8 37 24 69 37 1 38 107
2 1 10 6 17 6 1 7 24
13 72 46 131 58 7 65 196
The project will have a 30-year affordability covenant on all the affordable units except for the 60% units which will be regulated for 55 years.
If the modification is approved by Council, construction of the 131-unit project at 3400 Stockton will begin in July 2024 with an anticipated completion date in early 2026. The 65-unit eastern project at 3401 Stockton is currently being redesigned and, upon securing permits, is anticipated to begin construction by early 2025.
Policy Considerations: The actions outlined in this report will support the City’s policy of focusing resources to key infill areas such as Oak Park and Tahoe Park and further the development of affordable housing along Stockton Boulevard. These policies are reflected in the City’s 2040 General Plan, Housing Element, Transportation Priorities Plan and Vision Zero Action Plan. The project also furthers the housing development goals and objectives in the Aggie Square Community Benefit Partnership Agreement.
Economic Impacts: None.
Environmental Considerations: The permits for construction required by the City are ministerial, and are not subject to the requirements of the California Environmental Quality Act (CEQA). The actions requested here, which include establishment of a funding mechanism for local projects, are a fiscal activity and not a project pursuant to CEQA Guidelines section 15378 (b)(4) because they do not constitute the commitment to or approval of any particular project that could have a significant effect on the environment. The project entitlements have been
File ID: 2024-01246 6/25/2024 Consent Item 19.
previously approved; no new discretionary permits would be required. CEQA Guidelines Sections 15378(b)(4); 15060(c)(3).
Sustainability: The allocations outlined in this report will provide funding to assist with the redevelopment of two vacant sites on Stockton Boulevard and further sustainability goals for promoting infill development.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: This project is a catalytic one for Stockton Boulevard and will be the housing development closest to Aggie Square. The mixed-income nature of the project will allow for prospective tenants with a diversity of incomes in the surrounding workforce and neighborhoods to live together in a community and have the ability to stay as their income changes. Increasing the number of units on Stockton Boulevard overall will allow more opportunities for all incomes to be better served as the Aggie Square reinvestment comes to the area. Initiation of construction will be a significant milestone towards fulfilling the City’s goal for infill along Stockton and furthering the objectives outlined in the Aggie Square Community Benefit Partnership Agreement of providing City resources towards the construction of new mixed-income housing near Aggie Square.
Affected by higher interest rates and the building costs, the modification of the unit count and redesign will reduce costs for the project thus allowing the project to begin construction in the near term. This will result in much-needed new housing being added to the Oak Park and Tahoe Park area.
Financial Considerations: On October 25, 2022, Council adopted Resolution 2022-0327, providing $15 million in funding for the Gateway project from the City’s Risk Fund as part of the City’s External Loan Policy for Public Benefit. There are no changes to the level of City funding recommended in this report. The proposed loan will be a 10-year loan carrying an interest rate of City’s Pool A rate plus 100 basis points with a 2.5% floor and a 3.71% interest rate ceiling, updated annually. Specific terms are outlined in the revised Exhibit to the Resolution.
Local Business Enterprise: Not applicable.
RESOLUTION NO. 2024-
Adopted by the Sacramento City Council
June 25, 2024
Approving a Revised Scope for the Gateway Mixed-Income Housing Project
BACKGROUND
A. On October 25, 2002, the Council approved Resolution 2022-0387 which authorized a $15 million loan for the Gateway Mixed-Income Housing Project (“Gateway Project”) at 3400-3401 Stockton Boulevard.
B. Originally, the 230 units spanning Stockton Boulevard, the eastern portion of the project (3401 Stockton), has been redesigned to make the project economically feasible. These changes are a direct result of increases in higher interest rates and higher construction costs. The project will have 65 units instead of the original 99, a reduction of 34 units.
C. The revised Gateway Project will continue to provide a mix of low, moderate, and market rate units for rent on the boulevard, including 78 low-income units (7 at 60% and 71 at 80% AMI), 72 moderate income (120% AMI) units and 46 market rate units.
The percentage of affordability has increased from the original percentage.
D. This 196-unit Gateway Project will act as a catalyst for further private investment on Stockton Boulevard and supports City efforts to provide a mix of housing types and options that support existing residents from housing displacement.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The City Manager or the City Manager’s designee is authorized to negotiate, enter into, execute and amend a $15,000,000 external loan agreement and related documents with CT Gateway LLC for the Project under the terms described in the attached revised Exhibit B, including an affordability agreement for the low- income and moderate-income units, as approved to form by the City Attorney’s Office, and to perform other necessary actions for project financing.
Section 2. The City Manager or the City Manager’s designee is authorized to perform all other actions related to the Project including executing the related affordability agreement and other documents with CT Gateway LLC.
Table of Contents:
Attachment A - Revised Exhibit B – Gateway Mixed Income Housing Development Project Loan Attachment A
Exhibit B (Revised)
Gateway Mixed Income Housing Development Project Loan
Risk Fund (Fund 6502) Loan to the Innovation & Growth Fund (Fund 2031) for the Stockton Boulevard Gateway Project (I02189011) within the Stockton Boulevard Housing Development Project (I02189010)
Purpose:
The Stockton Boulevard Gateway Project (Project) will provide a mix of low, moderate, and market rate units for rent on the boulevard, including 78 low-income units (7 at 60% AMI and 71 at 80% AMI), 72 moderate income (120% AMI) units, and 46 market rate units. This 196-unit development will act as a catalyst for further private investment on Stockton Boulevard and supports City efforts to provide a mix of housing types and options that support existing residents from housing displacement.
This development provides for a mix of incomes and provides opportunity for Housing Choice Voucher placements as well. All of the affordable units will be regulated for 30 years with the exception of the 60% AMI units which will be subject to a Density Bonus Agreement with SHRA and will be regulated for 55 years.
Funding Source:
Risk Fund (Fund 6502).
Repayment of Interfund Loan:
This loan will be repaid with interest (City’s Pool A rate plus 100 basis points (bps), with a 2.5% interest rate floor and a 3.71% interest rate ceiling, updated annually) within 120 months of loan execution. Repayment will occur from the following:
1. Annual project interest payments from the Borrower, CT Gateway LLC, that start upon the issuance of a Certificate of Occupancy. Repayments are to be made back to the Innovation & Growth Fund (Fund 2031) with 0.5% of interest staying with Fund 2031 for reuse in public benefit projects and the remaining interest goes back to the Risk Fund (Fund 6502).
2. Upon 120 months from the execution of the loan, the full principal of the loan is due and payable. Prepayments of the principal can be made as part of the annual payments to the City. All payments of the principal will be returned to the Risk Fund (Fund 6502).
Loan and Official Documents:
1. The City Manager or the City Manager’s designee has the authority to execute the necessary loan documents and all necessary financial transactions to effectuate the External Loan Policy and the Project, including a twenty-year Affordability Agreement for the low- and moderate-income units in this project.
2. The City will require a general contractor’s construction performance bond during the construction phase of the Project and a financial performance bond or other acceptable guarantee from the borrower during the period from Certificate of Occupancy until the project is 85% occupied and with adequate cashflow to pay annual interest on the City loan.
3. Any excess proceeds of the Project from a sale or refinance of the Project will go towards repayment of the City loan first.