City Council
SPECIAL MEETING AGENDA
Monday, July 24, 2023, 4:15 p.m.
Council Chambers, 990 Palm Street, San Luis Obispo
SPECIAL MEETING OF THE CITY COUNCIL
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1. CALL TO ORDER
Mayor Erica A. Stewart will call the Special Meeting of the San Luis Obispo City Council to order.
2. PLEDGE OF ALLEGIANCE
Mayor Stewart will lead the Council in the Pledge of Allegiance.
3. PUBLIC COMMENT FOR ITEMS ON THE AGENDA ONLY
Public Comment will only be accepted for items listed on the agenda.
4. BUSINESS ITEM
4.a AUTHORIZE JOINT APPLICATION TO AND PARTICIPATION IN THE HOMEKEY PROGRAM ROUND 3 GRANT PROGRAM AND
AUTHORIZE ALLOCATION OF $400,000 IN AFFORDABLE HOUSING
FUNDS (Estimated Time: 30 minutes)
3 Recommendation:
Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, authorizing Joint Application to and participation in the Homekey Program” in conjunction with People’s Self Help Housing Corporation (PSHHC) for a 40-60 unit permanent supportive housing project located at 1433 Calle Joaquin in a total not to exceed
$22,000,000; and
1. Allocate $400,000 of Affordable Housing Funds to provide for a local match for the project; and
2. Direct staff to work with PSHHC to complete due diligence necessary for the application; and
3. Authorize the City Manager, or their designee, to execute the grant documents; and
4. Direct Staff to return to the City Council with a Memorandum of Agreement outlining partnership service, program, and funding commitments prior to accepting Homekey funds.
5. 5. ADJOURNMENT
The City Council will hold a Special Closed Session Meeting on Monday, August 14, 2023 at 5:30 p.m. in the Council Hearing Room at City Hall. The next Regular Meeting of the City Council will be held on Tuesday, August 15, 2023 at 5:30 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo. The Regular Meeting of August 1, 2023 will be cancelled, as approved during Council's annual review of the meeting calendar on December 13, 2022.
Item 4a
Department: Community Development
Cost Center: 4008
For Agenda of: 7/24/2023
Placement: Business
Estimated Time: NA
FROM: Timmi Tway, Community Development Director
Prepared By: Teresa McClish, Housing Policy and Programs Manager Daisy Wiberg, Acting Homelessness Response Manager
SUBJECT: AUTHORIZE STAFF TO SUBMIT A JOINT APPLICATION FOR HOMEKEY ROUND 3 GRANT PROGRAM IN CONJUNCTION WITH PEOPLE’S SELF HELP HOUSING CORPORATION AND AUTHORIZE ALLOCATION OF $400,000 IN
AFFORDABLE HOUSING FUNDS
RECOMMENDATION
1. Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, authorizing Joint Application to, and participation in, the Homekey Program” in conjunction with People’s Self Help Housing Corporation (PSHHC) for a 50-75 unit permanent supportive housing project located at 1433 Calle Joaquin in a total amount not to exceed $22,000,000; and
2. Allocate $400,000 of Affordable Housing Funds to provide for a local match for the project; and
3. Direct staff to work with PSHHC to complete the due diligence necessary for the application; and
4. Authorize the City Manager, or their designee, to execute the grant documents; and
5. Direct Staff to return to the City Council with a Memorandum of Agreement outlining partnership, service, program, and funding commitments prior to accepting Homekey Program funds.
REPORT IN BRIEF
The Homekey Grant program, administered through the California Department of Housing and Community Development (HCD), is a proven model for state, regional, and Local Public Entities to support the acquisition, development, and rehabilitation of a broad range of housing types to rapidly facilitate Permanent or Interim Housing for those most in need.
City staff has worked closely with PSHHC to develop at Homekey Round 3 grant application to increase permanent supportive housing units to implement the City’s Homelessness Response Strategic Plan and support the Countywide Plan to Address Homelessness. PSHHC has secured site control through a purchase and sale agreement for the Calle Joaquin Homekey project site to rehabilitate the building onsite for 50-75
Item 4a
permanent supportive housing units. The Homekey Round 3 grant deadline is July 28, 2023.
POLICY CONTEXT
The City’s General Plan 6th Cycle Housing Element1includes Safety as Goal 1, and Program 1.7 states “Continue to support local and regional solutions to homelessness by funding supportive programs services and housing solutions.” Additionally, providing financial assistance to affordable housing projects is a theme supported throughout the Housing Element. Housing Element Goal 2 is Affordability, which specifically states “Accommodate affordable housing production that helps meet the City’s quantified objectives.” HE Program 2.9 states “Assist with the issuance of taxexempt bonds, tax credit financing, loan underwriting or other financial tools to help develop or preserve at least 20 affordable units annually through various programs.” Goal 3 in the HE is Housing Conservation, to Conserve existing housing and prevent the loss of safe housing and the displacement of current occupants, and Policies 3.3,
3.5 and Program 3.9 respectively state:
“Encourage the construction, preservation, rehabilitation or expansion of residential hotels, group homes, integrated community apartments, and singleroom occupancy dwellings;” “Encourage and support creative strategies for the rehabilitation and adaptation and reuse of residential, commercial, and industrial structures for housing;” and “Work annually with non-profit organizations, faith-based organizations, or the Housing Authority of the City of San Luis Obispo to encourage rehabilitation of residential, commercial, or industrial buildings to expand extremely low, very-low, low or moderate income rental housing opportunities.”
HE Goal 6 is Housing Production, which specifically states “Plan for new housing to meet the full range of community housing needs.” HE Program 6.20 states, “Continue to financially assist in the development of housing affordable to extremely low, very-low, low or moderate income households during the planning period using State, Federal and local funding sources, with funding priority given to projects that result in the maximum housing benefits for the lowest household income levels.”
Additionally, the City’s Homelessness Response Strategic Plan includes Objective 2: to support efforts to establish emergency/transitional housing for key beneficiary groups including chronically homeless individuals, medically vulnerable individuals, and families, with a key task to establish partnerships with housing developers and homeless services providers to submit funding applications in coordination with the County (e.g., Homekey
1 City of San Luis Obispo 6th Cycle Housing Element
Item 4a
Grant Funding) that will provide new transitional and permanent supportive housing resources for families.2
Finally, the Financial Management Manual, Section 740, Grant Management Policy, discusses the importance of grant programs in accomplishing City goals and objectives.
It also outlines that Council is to approve all grant applications in excess of $5,000 and delegate receipt and contract execution to the City Manager if delegation is allowed by the grantor agency.
DISCUSSION
Background
On March 29, 2023, the California Department of Housing and Community Development (HCD) announced a notice of funding availability (NOFA) of approximately $736 million in Round 3 Homekey funds to sustain and rapidly expand the inventory of housing for people experiencing homelessness or at risk of homelessness and who are, thereby, inherently impacted by or at increased risk for medical diseases or conditions due to the COVID-19 pandemic or other communicable diseases.3 The estimated Homekey funds for the Central Coast geographic allocation is $22,657,376.
The Homekey Program is a proven model for state, regional, and Local Public Entities to support the acquisition, development, and rehabilitation of a broad range of housing types, including but not limited to hotels, motels, hostels, single family homes and multifamily apartments, adult residential facilities, manufactured housing, and to facilitate the conversion of commercial properties and other existing buildings to Permanent or Interim Housing for those most in need. The NOFA provides guidelines for the expenditure of Homekey funds and the administration of the Homekey Program.
Homekey funds will be available to eligible applicants for which the City qualifies, on a continuous basis from the release of the Homekey NOFA through July 28, 2023, or until the available funds are exhausted, whichever occurs first. An eligible entity may apply jointly with a non-profit or for-profit corporation, a limited liability company (LLC), and/or a limited partnership (LP) as a Co-Applicant.
One of the requirements for the Homekey Application is to provide a signed resolution (Attachment A) authorizing application for, and receipt of funds.
On April 18, 2023, the City Council authorized submittal of a Homekey Round 3 Grant Program application in conjunction with Peoples’ Self Help Housing (PSHH) Corporation for an amount not to exceed (NTE) $18 million. The project site location anticipated at the time was the Homestead Motel located at 920 Olive Street that committed to PSHH through a signed letter of intent (LOI), but subsequently withdrew. City staff have since worked with PSHH to secure a different location and after several offers, PSHH has secured site control through a purchase and sale agreement with Motel 6 North at 1433
2 City of San Luis Obispo Homelessness Response Strategic Plan 3https://www.hcd.ca.gov/sites/default/files/docs/grants-and-funding/homekey/Homekey-Round-3-Noticeof-Funding-Availability.pdf
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Calle Joaquin in San Luis Obispo. This purchase and sale agreement is contingent on receiving Homekey grant funds.
On May 16, 2023, the San Luis Obispo County Board of Supervisors authorized a total of $2.6 million for the previously contemplated Homekey project to cover the estimated $650,000/year in operating costs for four years per grant guidelines. The County is currently preparing a revised letter of support for the Calle Joaquin project, which will be submitted with the grant application when finalized.
Potential Homekey Project Overview
The Homekey project would be located at the Motel 6 North site at 1433 Calle Joaquin in San Luis Obispo. The motel was built in 1973, went through a remodel in 2014, and would be rehabilitated and re-purposed to house 50-75 permanent supportive housing units managed by People’s Self Help Housing Corporation (PSHHC) with supportive services onsite. In conjunction with housing, a portion of the project will include offices for service providers. The site would be staffed with an onsite manager, licensed social worker and case management support, and is well located with safe and convenient access to services.
The Homekey project will include property improvements as required by the physical needs assessment and City requirements to convert the motel to residential use such as adding fire sprinklers and kitchen access.
Item 4a
PSHHC, or its special purpose entity Calle Joaquin Homeky LLC, would be the coapplicant for the Homekey Program grant. In addition, PSHHC will be the developer, owner/operator and service provider. PSSHC will use Homekey funds for the acquisition and rehabilitation of the site and building for permanent supportive housing. The housing is intended to accommodate a variety of the homeless population, including the chronically homeless, and youth and families who are homeless or at risk of becoming homeless. The ability to accommodate families will also improve capacity at the 40 Prado Homeless Services Center if CAPSLO is able to repurpose the existing family wing to provide additional beds and serve a broader range of clients at that congregate shelter.
The City will waive all applicable service and permit fees and award a fee deferral loan for impact fees as applicable and allowed by State law.4 The City, as Grantee, will encumber all permanent housing units with a 30-year and 55-year affordability covenant, respectively, per Homekey Program Requirements.5
Homekey Round 3 Grant applications will include a detailed project-specific supportive services plan, and Standard Agreement to encumber funds from the Homekey program.
The Homekey Program is intended to meet urgent housing needs, and as such, requires aggressive implementation timelines. Homekey capital funds must be expended within eight months of the date of award. Acquisition, rehabilitation and/or construction must be completed twelve months form the date of award and full occupancy must be achieved by fifteen months from the date of award.
As the lead applicant on the Homekey proposal, the City will formalize an agreement with PSHHC as the co-applicant and project developer. PSHHC will administer subrecipient agreements with the County of San Luis Obispo and service providers for the provision of ongoing funding and services. The Balay Ko Foundation, a nonprofit corporation, has also committed up to $800,000 in gap funding for the project. On May 16, 2023, the County Board of Supervisors committed $650,000 for four years of operational funding to be applied for the proposed Homekey project in San Luis Obispo to cover costs after the first two-years of Homekey funds are expended, totaling $2.6 million. County participation will be incorporated into the Homekey application and regulatory agreement. Those partnerships will be outlined in detail in the Homekey proposal, and memorandums of agreement will be executed if the City is awarded Homekey grant funding.
It should be noted that the Homekey Grant Round 3 Guidelines include funding formulas that change depending on the number of “doors” and the clientele to be housed and provided services. The Calle Joaquin Homekey project includes approximately 50-75
4 Pursuant to HSC section 50675.1.3, subdivision (i), Homekey Projects “shall be deemed consistent and in conformity with any applicable local plan, standard, or requirement, and any applicable coastal plan, local or otherwise, and allowed as a permitted use, within the zone in which the structure is located, and shall not be subject to a conditional use permit, discretionary permit, or any other discretionary reviews or approvals.”
5 At year 15 from the recordation of the Affordability Covenant, in circumstances where the Grantee has exhausted available operating funding and demonstrated to the Department that the Project is no longer feasible, the Department may approve an increase in income levels, to the minimum extent required for fiscal integrity, in five percent increments of Assisted Units up to 50 percent AMI.
Item 4a
units depending upon rooms that will be converted for office space, common space, a manager unit and/or family units. Because of the increased size of the project in comparison to the original Homestead Motel locations, additional local match was sought and Bally Ko was generous in their contribution commitment for $800,000 (Attachment B). Additionally, it is recommended that $400,000 be allocated from the City’s Affordable Housing Funds to provide additional local match for the project. The criteria for eligibility of Affordable Housing Fund award is outlined in Resolution 9263 (2001 Series) and includes Eligibility, Need, Suitability, Timing, Financial Effectiveness, and Readiness.
The attached resolution includes findings that the Calle Joaquin Homekey Project meets all eligibility criteria for the proposed award.
Finally, the Calle Joaquin Homekey Project is 100% permanent supportive housing and does not include the transitional/interim housing units that were part of the previously contemplated Homestead Motel project. Although the unit number has increased from approximately 30 for the original Homestead Motel proposal (15 permanent supportive housing and 15 transitional/interim housing units) to 50-75 permanent supportive housing units, it is anticipated that the operating expenses per the Homekey formula from the original project site will cover the revised project housing type and site location. 6 Public Engagement
As this is authorization to apply for grant funding, no public engagement is required and the grant deadlines do not afford an opportunity for public outreach prior to application. If awarded, the City and PSHHC will develop a public outreach program to facilitate a smooth project implementation.
CONCURRENCE
The Homelessness Response Steering Committee is in support of the application.
ENVIRONMENTAL REVIEW
As provided by Health and Safety Code section 50675.1.4, the guidelines allow for exemption of certain Round 3 Homekey Projects from the California Environmental Quality Act (CEQA).7 Evaluation of potential environmental impacts in accordance with CEQA will occur if during the application submittal or funding award it is determined that the project is not exempt per HSC section 50675.1.4.
FISCAL IMPACT
Budgeted: Yes/No Budget Year: 2023-24
Funding Identified: Yes/No
6 The Welcome Home Village approved through the Encampments Resolution Grant for the Department of Social Services site will include interim/transitional housing units for a portion of that project. 7HSC section 50675.1.4, subdivision (e) states, “The Department of Housing and Community Development may adopt guidelines for the expenditure of the funds appropriated to the Department, and for the administration of this program. The guidelines shall not be subject to the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.”
Item 4a
Fiscal Analysis:
Funding Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund
Affordable Housing
Fund
$1,392,660 $400,000 $992,660
State $22,657,376. $15,000,000
Federal
Fees
Other: Private
Donation
$800,000 $800,000
Total $24,850,036 $16,200,000
Up to
$22,000,000
Homekey will fund a maximum grant amount per door (units at the time of acquisition), which includes both the acquisition cost and any needed rehabilitation or new construction based on the maximum grant amount; or the sum of the acquisition amount and any additional construction or rehabilitation expenses, as supported by an appraisal and such other reasonable documentation required by HCD. The baseline amount per door8 does not require a local match. Alternatively, funds are allocated based on subpopulations served for those experiencing chronic homelessness. Pursuant to the NOFA, acquisition and rehabilitation of the property and three years of operating subsidy is estimated to result in a project cost of $15,000,000. Per the Homekey grant provisions, it is recommended to identify an authorized dollar amount that is at least double the anticipated award. Given the available allocation for the Central Coast geographical region, the total authorized amount shall not exceed $22,000,000. An additional $800,000 in private donation funds have been committed as gap funding for the project. The Affordable Housing Fund Award will fill the remaining acquisition gap funding and improve the feasibility and competitiveness of the project. The originally contemplated project at the Homestead Motel included an estimated cost of $9,000,000 for a 15-30 unit combined interim and permanent supportive housing project. The Calle Joaquin Homekey project is estimated to cost $15,000,000 for a 50-75 unit permanent supportive housing project.
Regarding application costs, there is no grant application fee, however, in order to prepare the materials for application, costs related to due diligence may be needed (e.g. geotechnical survey) reimbursable by the Homekey grant.
8 Unit size -baseline capital amounts: studio or 1-bedroom $150k/door; 2-bedroom $175k/door; 3-bedroom $200k/door.
Item 4a
ALTERNATIVES
1. Continue the recommendation to a later meeting. This alternative is not recommended as the application deadline is July 28, 2023.
2. Deny the recommendation. The Council may deny staff’s recommendation to apply for grant funding, based on findings of inconsistency with City policies and other applicable City regulations. This is not recommended as the project is eligible for the Homekey Round 3 Grant and would significantly implement the City’s Homelessness Response Strategic Plan and advance the City’s Major City Goal for Housing and Homelessness.
ATTACHMENTS
A - Draft Resolution authorizing application to Homekey Round 3 Grant Funds B - Balay Ko Foundation letter of support
R ______
RESOLUTION NO. _____ (2023 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, AUTHORIZING JOINT APPLICATION TO, AND
PARTICIPATION IN, THE HOMEKEY PROGRAM FOR THE CALLE
JOAQUIN HOMEKEY PROJECT
WHEREAS, the California Department of Housing and Community Development (“Department”) has issued a Notice of Funding Availability, dated March 29, 2023 (“NOFA”), for the Homekey Program (“Homekey” or “Program”). The Department has issued the NOFA for Homekey grant funds pursuant to Health and Safety Code section 50675.1.3 (Assembly. Bill No. 140 (2021-2022 Reg. Sess.), § 20.); and WHEREAS, The City of San Luis Obispo (“The City”) desires to jointly apply for Homekey grant funds with People’s Self Help Housing (“Corporation”). Therefore, The City is joining Corporation in the submittal of an application for Homekey funds (“Application”) to the Department for review and consideration of the Calle Joaquin Homekey Project located at 1433 Calle Joaquin; and
WHEREAS, The Department is authorized to administer Homekey pursuant to the Multifamily Housing Program (Chapter 6.7 (commencing with Section 50675) of Part 2 of Division 31 of the Health and Safety Code. Homekey funding allocations are subject to the terms and conditions of the NOFA, the Application, the Department-approved STD 213, Standard Agreement (“Standard Agreement”), and all other legal requirements of the Homekey Program.
WHEREAS, Housing Element policies and programs encourage and support the construction of new affordable housing in the City; and NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo to authorize the joint application to, and participation in, the Homekey program as follows:
SECTION 1. Recitals. The recitals set forth above are hereby adopted as additional findings of the City in adopting the policies herein.
SECTION 2. Environmental Review. As provided by Health and Safety Code section 50675.1. the guidelines allow for the exemption of certain Round 3 Homekey Projects from the California Environmental Quality Act (CEQA). Evaluation of potential environmental impacts in accordance with CEQA will occur if during the application submittal or funding award it is determined that the project is not exempt per HSC section 50675.1.4.
SECTION 3. Findings. The City Council, after consideration of the Homekey Program and staff recommendations, makes the following findings:
Resolution No. _____ (2023 Series) Page 2
R ______
1. The City Manager or their designee is hereby authorized and directed to submit a joint Application to the Department in response to the NOFA, and to jointly apply for Homekey grant funds for an anticipated project cost of $15,000,000. Per the Homekey grant provisions, it is recommended to identify an authorized dollar amount that is at least double the anticipated award. In line with available funding allocation for the Central Coast Geographical Area, the total authorized amount shall not exceed $22,000,000.
2. If the Application is approved, the City Manager or their designee is hereby authorized and directed to enter into, execute, and deliver a Standard Agreement in a total amount not to exceed $22,000,000, any and all other documents required or deemed necessary or appropriate to secure the Homekey funds from the Department and to participate in the Homekey Program, and all amendments thereto (collectively, the “Homekey Documents”).
3. The City acknowledges and agrees that it shall be subject to the terms and conditions specified in the Standard Agreement, and that the NOFA and Application will be incorporated in the Standard Agreement by reference and made a part thereof. Any and all activities, expenditures, information, and timelines represented in the Application are enforceable through the Standard Agreement. Funds are to be used for the allowable expenditures and activities identified in the Standard Agreement.
4. The City Manager of the City of San Luis Obispo, or their designee, is authorized to execute the Application and the Homekey Documents on behalf of the City for participation in the Homekey Program and to execute such other documents and take such other actions consistent with the purposes of the grant as necessary to accept and comply with grant requirements and implement the project.
NOW, THEREFORE, BE IT FURTHER RESOLVED by the Council of the City of San Luis Obispo as follows:
SECTION 1. Findings. The City Council does hereby make the following findings in support of the proposed AHF awards:
1. Eligibility: Use of the AHF for the requested purpose will increase or improve the City’s affordable housing inventory and promote General Plan policies regarding housing, as follows:
The Calle Joaquin Homekey Project will enable an increase to the City’s affordable housing inventory specifically for permanent supportive housing and implements several General Plan policies regarding housing. The project will increase the supply of affordable housing for extremely low, very low, and low
Resolution No. _____ (2023 Series) Page 3
R ______
income households with the conversion of 87 motel units to 50-75 permanent supportive housing units and associated supportive services.
2. Need: There exists a substantial or overarching need for the type of unit to be assisted, as follows:
Housing needs in general are growing along the coastal areas, particularly for lower income households, which is exacerbating the Homelessness crisis. San Luis Obispo will benefit greatly from the Calle Joaquin Homekey Project development because it specifically provides critical permanent supportive housing units called for in both the City’s Homelessness Response Strategic Plan and the County of San Luis Obispo Countywide Plan to Reduce Homelessness.
3. Suitability: The project to be assisted is appropriate for its location both in terms of land use and design, as follows:
The Calle Joaquin Homekey Project is appropriately suited for this location, both in terms of land use, adjacent bus routes, and proximity to services along Los Osos Valley Road, Madonna Road, South Higuera and Prado Road and will accommodate full-time on-site supportive services, management and oversight.
4. Timing: The project would better serve the City’s needs if it were built immediately as opposed to later, as follows:
The Calle Joaquin Homekey Project will be permitted and motel rooms converted and occupied within 15 months as allowed for and intended by the state Homekey Grant program to rapidly expand the inventory of housing for people experiencing homelessness or at risk of homelessness at the specified location.
5. Financial Effectiveness: But for the requested funding, the project would not be economically feasible; or AHF funding “leverages” significant additional funding from other sources, as follows:
This is a highly effective use of the City's Affordable Housing Funds, as it will leverage additional funding sources as they demonstrate local support and commitment to the development. These funding sources include the Homekey Grant Round 3 $15 million, County of San Luis Obispo $2.6 million; and Private Foundation funding $800,000. Project financial feasibility is dependent upon Affordable Housing Funds.
6. Readiness: The project is ready to proceed, as follows:
Resolution No. _____ (2023 Series) Page 4
R ______
Per Homekey Guidelines and City Zoning regulations, the proposed Calle Joaquin Homekey Project will not require discretionary approvals. Upon the award of a City Affordable Housing Fund award, PSHHC will be eligible to apply for additional public funding programs and other private activity bond financing.
Should the project receive the Homekey Round 3 Grant award, construction will start immediately with occupancy 15 months from award.
Upon motion of Council Member ___________, seconded by Council Member ___________, and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this _____ day of _______________ 2023. ___________________________
Mayor Erica A. Stewart
ATTEST:
______________________
Teresa Purrington,
City Clerk
APPROVED AS TO FORM:
______________________
J. Christine Dietrick,
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. ___________________________
Teresa Purrington,
City Clerk