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Council Agenda: 01/31/2023
Item No.: 8.3a
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
RESOLUTION NO. ______________
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN
JOSE (1) APPROVING A CONSTRUCTION-PERMANENT
LOAN COMMITMENT OF UP TO $9,450,000 AND AN
ACQUISITION FUNDING COMMITMENT OF UP TO
$5,200,000 FROM MEASURE E REAL PROPERTY
TRANSFER TAX ALLOCATIONS FOR PACIFIC
SOUTHWEST COMMUNITY DEVELOPMENT
CORPORATION OR AN AFFILIATED DEVELOPMENT
ENTITY IN CONJUNCTION WITH CRP AFFORDABLE
HOUSING AND COMMUNITY DEVELOPMENT LLC OR
AFFILIATED ENTITIES FOR DRY CREEK CROSSING,
LOCATED AT 2388 S. BASCOM AVENUE, WHICH WILL
PROVIDE 63 AFFORDABLE RENT-RESTRICTED
APARTMENTS AND ONE UNRESTRICTED MANAGER’S
APARTMENT; (2) AUTHORIZING A LOAN-TO-VALUE
RATIO OF GREATER THAN 100% FOR THIS
DEVELOPMENT; (3) AUTHORIZING THE DIRECTOR OF
HOUSING TO ACQUIRE THE 2388 S. BASCOM AVENUE
SITE FOR A PRICE NOT TO EXCEED $5,200,000 AND TO
GROUND LEASE THE SITE TO THE DEVELOPER FOR
THIS DEVELOPMENT; (4) AUTHORIZING THE DIRECTOR
OF HOUSING OR DIRECTOR’S DESIGNEE TO
NEGOTIATE AND EXECUTE DOCUMENTS AND
DOCUMENT AMENDMENTS RELATED TO THE
ACQUISITION AND DEVELOPMENT OF THE SITE, AND
GROUND LEASING OF THE SITE, INCLUDING A DEED
ACCEPTANCE AND ANY RIDERS TO THE GROUND
LEASES REQUIRED BY GOVERNMENTAL ENTITIES AND
TO EXECUTE LENDER’S CONSENT TO THESE RIDERS;
(5) AUTHORIZING THE DIRECTOR OF HOUSING OR
DIRECTOR’S DESIGNEE TO NEGOTIATE AND EXECUTE
LOAN DOCUMENTS AND ALL OTHER DOCUMENTS,
INCLUDING ANY AMENDMENT THERETO, RELATED TO
CITY FINANCING FOR THIS DEVELOPMENT; AND (6)
MAKING A DETERMINATION THAT, CONSISTENT WITH
GOVERNMENT CODE SECTION 37364, AFTER
ACQUISITION, THE 2388 S. BASCOM AVENUE SITE IS TO
BE LEASED TO THE DEVELOPER WITHOUT FIRST
OFFERING THE SITE TO THE PUBLIC FOR ANY OTHER
USES, SINCE THE SITE WILL BE RESTRICTED TO
PROVIDE AFFORDABLE HOUSING TO PERSONS AND
FAMILIES OF LOW OR MODERATE INCOME, AS
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Council Agenda: 01/31/2023
Item No.: 8.3a
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
DEFINED BY SECTION 50093 OF THE HEALTH AND
SAFETY CODE OR AS DEFINED BY THE UNITED STATES
DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT OR ITS SUCCESSORS, AND THAT THIS
USE IS IN THE CITY’S BEST INTERESTS
WHEREAS, on December 20, 2021, under the City of San José (“City”) Council’s direction, the Housing Department issued a $150 million Notice of Funding Availability (“NOFA”) for the development of affordable housing for extremely low, very low, and low income individuals and families, prioritizing 45% of the funding for extremely low-income housing; and
WHEREAS, in response to the NOFA released by the City, Pacific Southwest Community Development Corporation (“PSCDC”) in conjunction with CRP Affordable Housing and Community Development LLC ( “CRP”) submitted a development proposal with a request for commitment of funding in the amount of up to $14,650,000, composed entirely of Measure E Funds; and
WHEREAS, the City loan of up to $9,450,000 will provide construction and permanent financing for the 63 affordable apartments and one manager’s apartment (the “Development”) and the up to $5,200,000 in City funding will provide an acquisition loan or finance the City purchase of the land, which was appraised at $5.2 million as of January 22, 2022; and
WHEREAS, of the 63 affordable apartments, 18 apartments will be available to individuals and families earning up to 30% AMI, 21 will be available for individuals and families earning up to 50% AMI, 13 apartments will be available for individuals and families earning up to 60% AMI, and 11 apartments will be available for individuals and families earning up to 70% AMI; and
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Council Agenda: 01/31/2023
Item No.: 8.3a
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
WHEREAS, City’s Loan to Value (“LTV”) policy requires that the LTV ratio not exceed 100% in order to mitigate the City’s risk of potential loss associated with a loan, however, the City now builds more deeply affordable developments then it did in the 1990’s and early 2000's, so the LTV is not the ideal measure of stability for modern developments and City staff, recommend waiver of the LTV if a development’s projected operating income is expected to be at least 1.15 times the required permanent mortgage payment; and
WHEREAS, it is expected that the LTV ratio for the Development will significantly exceed 100%; and
WHEREAS, in order to receive the City loan or financing for the development purchase, Pacific Southwest Community Development Corporation or an affiliated development entity in conjunction with CRP Affordable Housing and Community Development LLC or affiliated entities (collectively, Developer ) will be subject to the City Ground Lease Policy to allow CRP to execute the current Purchase Agreement with the seller; and
WHEREAS, staff recommends City Council authorize the Director of Housing to negotiate and execute documents for a long-term ground lease of the Dry Creek Crossing site; and
WHEREAS, the long-term ground lease will enable the Developer to apply for Low Income Housing Tax Credits, a tax-exempt bond allocation, and other needed development financing tools; and
WHEREAS, the City will enter into a long-term, low-rent ground lease of the Site to the Developer for the Development for a term of 65 years, with an option to extend for another 15 years; and
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Council Agenda: 01/31/2023
Item No.: 8.3a
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
WHEREAS, once the Dry Creek Crossing Site is acquired by the City, it will become City property and pursuant to the Surplus Lands Act and its guidelines, the City must follow certain procedures in selling or ground leasing of City-owned property which require the offering of that property to the public, unless the sale or lease falls under an exemption; and
WHEREAS, one exception to the Surplus Lands Act and its guidelines is where the property is used to provide housing affordable to persons and families of low or moderate income as defined by Section 50093 of the Health and Safety Code or as defined by the United States Department of Housing and Urban Development or its successors; and
WHEREAS, staff has recommended that based on the affordability requirements described above, the council make a determination that the property will be used to provide housing affordable to persons and families of low or moderate income and that this use will be in the City’s best interest; and
WHEREAS, City Council approved the Affordable Housing Siting Policy which seeks to reverse the impacts of segregation in San José by implementing a “both/and” approach to building affordable housing encouraging sites in Affordable Housing Expansion Areas as well as other areas ; and
WHEREAS, the Development is located in an Affordable Housing Expansion Area; and
WHEREAS, City staff is recommending this NOFA selected development for funding commitment approval, which will allow Developer to move forward with its Low-Income Housing Tax-Exempt Bond Allocation application to California Debt Limit Allocation Committee in February 2023;
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Council Agenda: 01/31/2023
Item No.: 8.3a
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF SAN JOSE THAT:
a. A total funding commitment of up to $14,650,000 to Pacific Southwest Community Development Corporation or an affiliated development entity in conjunction with CRP Affordable Housing and Community Development LLC or affiliated entities for Dry Creek Crossing, located at 2388 S. Bascom Avenue, which is being developed to provide 63 affordable rent-restricted units, and 1 unrestricted manager’s apartment from the City’s Measure E Real Property Transfer Tax fund, which commitment includes an amount not to exceed $9,450,000 in a Construction-Permanent Loan commitment and an amount not to exceed $5,200,000 for a land acquisition loan or to finance the City purchase of the land, as set forth in the Memorandum from the Housing and Budget Departments, dated as of January 9, 2023 is hereby authorized. b. A loan-to-value ratio of greater than 100% to Pacific Southwest Community Development Corporation or an affiliated development entity in conjunction with CRP Affordable Housing and Community Development LLC or affiliated entities, is hereby authorized.
c. The Director of Housing is hereby authorized to acquire the 2388 S. Bascom Avenue site for a price not to exceed $5,200,000 and to ground lease the site to the Developer for the Development.
d. The Director of Housing or Director’s designee, is hereby authorized to negotiate and execute documents and document amendments related to the acquisition and development of the site and the ground leasing of the site, including a deed acceptance and any riders to the ground leases.
e. The Director of Housing or the Director’s designee is hereby authorized, to negotiate and execute loan documents and all other documents, including any amendments thereto, related to City financing for the Development.
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Council Agenda: 01/31/2023
Item No.: 8.3a
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
f. A determination that consistent with Government Code Section 37364, after acquisition, the Site can be leased to the Developer without first offering the Site to the public for any other use, since the Site will be restricted so as to provide housing affordable to persons and families of low or moderate income as defined by Section 50093 of the Health and Safety Code or as defined by the United States Department of Housing and Urban Development or its successors is hereby made.
ADOPTED this _____ day of ___________, 2023, by the following vote:
AYES:
NOES:
ABSENT:
DISQUALIFIED:
MATT MAHAN
Mayor
ATTEST:
TONI J. TABER, CMC
City Clerk