City of South San Francisco
Legislation Text
P.O. Box 711 (City Hall, 400
Grand Avenue)
South San Francisco, CA
File #: 23-746 Agenda Date: 12/13/2023
Version: 1 Item #: 18.
Report regarding a request from Rotary Plaza, Inc. for funding to support a newly proposed affordable housing development, Rotary Gardens, located at 500 and 522 Linden and adoption of 1) a resolution committing $1,633,172 to the project and 2) a resolution amending the City’s Permanent Local Housing Allocation 5-year plan. (Danielle Thoe, Housing Manager)
RECOMMENDATION
Staff recommends that City Council receive a report regarding a request from Rotary Plaza, Inc. for funding to support a newly proposed affordable housing development at 500 and 522 Linden and:
1) Consider adoption of a resolution committing $1,633,172 in funds set to expire within the next fiscal year to the project fulfilling a portion of Rotary Plaza, Inc.’s request, directing staff to negotiate loan agreements effectuating this commitment, and return to Council for final budgetary appropriations and loan approval; and
2) Consider adoption of a resolution amending the City’s Permanent Local Housing Allocation (PLHA) 5-year plan. and authorizing the City Manager to execute all necessary documents in order to commit PLHA funds to the Rotary Plaza, Inc. project.
BACKGROUND
In Summer 2023 the local Rotary Club approached the City to let staff know of a potential affordable housing project that its team was working on at the Liberty Bank site on Linden Avenue, specifically 500 and 522 Linden. The Rotary Club and its development partner, Beacon Development, have continued work on that project, tentatively named Rotary Gardens, and earlier this fall submitted an entitlement application for the first phase of their planned two-phase development project. The first phase includes an 83-unit senior affordable housing building, and the second phase is anticipated to include a 65-unit family building. Rotary and Beacon have not advanced phase two design yet due to a lack of pre-development funding and project timing constraints. Staff recommended to Rotary and Beacon that the Rotary Gardens projects would benefit from the efficiencies of securing entitlements together and that doing so would better communicate to the surrounding neighborhood and broader South San Francisco community that this is one development project with a cohesive vision and management approach.
To move the two phases forward together, Rotary and Beacon require additional pre-development funding. The development team discussed with staff potential available funds and then submitted a formal written request for approximately $7.5 million in funding to support the development of these two buildings. Providing funding to affordable housing projects early in their predevelopment journey shows that the City is committed to the success of the project and provides early low-cost capital that the development team can leverage to secure additional funding for the project.
Affordable Housing Pipeline
The proposed Rotary Plaza, Inc. project at 500 and 522 Linden is just one of several projects in the City’s affordable housing pipeline. As Council is aware, the City has one recently delivered affordable housing projects, ROEM’s 84-unit, scattered-site, Grand & Linden Family Apartments; one affordable housing project under construction, For the Future Housing’s 36-unit Baden Station project; one fully entitled project seeking to complete its financing, Bridge’s 158-unit 1051 Mission Road; and one project about to embark on the City of South San Francisco Page 1 of 4 Printed on 12/8/2023 powered by Legistar™
File #: 23-746 Agenda Date: 12/13/2023
Version: 1 Item #: 18.
complete its financing, Bridge’s 158-unit 1051 Mission Road; and one project about to embark on the entitlement process, Eden’s 201 Baden senior housing project. What these projects have in common is that they all have committed City, County, and State funding. The only remaining affordable housing project on the horizon is Rotary and Beacon’s planned, two-phase project on Linden Avenue, which has yet to secure funding beyond the development team’s own equity.
Available Affordable Housing Funding
The City has three main affordable housing funds, the Low/Mod-Income Housing Asset Fund also known as the Housing Successor Fund (Fund 241), the Commercial Linkage Fee (Fund 823), and the Housing Trust Fund (Fund 205). The City also receives a formula entitlement grant from the State known as the Permanent Local Housing Allocation or PLHA. The unencumbered balances of these funds, as of November 15, 2023, are as follows:
Fund Balance
Housing Trust Fund (Fund 205) $570,000
Commercial Linkage Fee Fund (Fund 823) $18,000,000
Low/Mod-Income Housing Asset Fund (Fund 241) $2,380,000 State Permanent Local Housing Allocation (PLHA) Years 1 & 2 $556,789 TOTAL HOUSING FUNDS $21,506,789
Housing Trust Fund (Fund 205)
The Housing Trust Fund is the City’s most flexible source of affordable housing funding, originating from developer deposits and in lieu payments for inclusionary affordable housing. While flexible, it does not have a large revenue stream and so will likely be spent down in the coming years, unless a major market rate housing project opts to pay the inclusionary housing in lieu fee, which now stands at $424,840.11 per required affordable unit.
Commercial Linkage Fee Fund (Fund 823)
The Commercial Linkage Fee Fund can be spent quite flexibly on projects serving households making 120% or less of the area median income and encumbering funds within five years of receipt, in accordance with South San Francisco Municipal Code Chapter 8.69 and State Government Code Section 66006 requires agencies to outline the status of development impact fees. This Fund is anticipated to grow quickly once the life science industry resumes the pace of development experienced prior to the pandemic.
Low/Mod-Income Housing Asset Fund (Fund 241)
The Housing Asset Fund, which includes funds from the City’s former Redevelopment Agency and is regulated by State Senate Bill 341, has strict spending requirements including an excess surplus provision. Specifically, the Housing Asset Fund may not accumulate an unencumbered cash balance that exceeds the greater of either $1 million or the sum of deposits in the prior four fiscal years. This requirement ensures that housing successors are actively spending available Housing Asset Funds on affordable housing. Currently, the Housing Asset Fund has an excess surplus of $1,076,383 that must be encumbered by Fiscal Year 2024-2025.
Per HSC Section 34176(b), a maximum of 50% of deed-restricted rental housing units assisted by the Housing Asset Fund in the previous 10 years may be restricted to seniors. Through the City’s financial support of previous Rotary affordable housing projects at 433 Alida Way (Rotary Plaza) and 310 Miller (Rotary Terrace) the City is unable to spend further Housing Asset Funds on senior affordable housing. Because of this, any City of South San Francisco Page 2 of 4 Printed on 12/8/2023 powered by Legistar™
File #: 23-746 Agenda Date: 12/13/2023
Version: 1 Item #: 18.
the City is unable to spend further Housing Asset Funds on senior affordable housing. Because of this, any Successor Agency funds will only be used to fund the family housing building in the Rotary development. Staff will work with the Rotary team to develop final loan documents that will codify this separation of funds.
State Permanent Local Housing Allocation (PLHA)
Like Fund 241, the State PLHA entitlement grant also has strict spending limitations. The City began receiving the funds in 2020 (for Fiscal Year 2018-2019) - the first of five years of the allocation. These funds must be expended within five years of the fiscal year for which they are received (so FY 19 must be spent by FY 24).
During the July 22, 2020, City Council meeting, Council approved the City’s 5-year plan for PLHA spending.
This plan, which is approved by the State Housing & Community Development Department (HCD), commits the City to spending its first two years of PLHA funds on rental assistance (Activity 6) and the next three years on predevelopment, development, acquisition, rehabilitation, and preservation of affordable rental and ownership housing (Activity 2). During the November 16, 2022 City Council meeting, Council approved an amendment to the PLHA plan to appropriate all five years of the planning period on rental assistance (Activity 6).
After further conversations with HCD staff it became clear that the PLHA definition of and requirements for providing rental assistance significantly differ from the City’s existing rental assistance program. The City’s program serves as a response to emergency rental assistance needs which serves to meet immediate financial needs, and is well-funded through set-aside homelessness prevention dollars within the Housing Asset Fund (Fund 241). The PLHA program would require substantially restructuring the City’s rental assistance program to provide at least six months of rental assistance, serving as more of a mini voucher program than a response to urgent needs. To operate a rental assistance program under the PLHA requirements would require much more significant administrative investment and would not allow the City to serve as many households as it is able to via the current rental assistance program.
Given the factors of program eligibility referenced above and the requirement that the City spend PLHA funds by April 2024 staff recommend that the most impactful and expedient way to spend these funds is through using them as affordable housing predevelopment funding.
DISCUSSION
Anticipating the spend-down requirements of the Housing Asset Fund and PLHA, staff has been looking for opportunities to use this $1.6 million (approximately $1 million from the Housing Asset Fund and $600,000 from PLHA) to catalyze new affordable housing development without significantly limiting the flexibility of the project, given the regulations governing spending these funds. As discussed earlier in this report, Rotary and Beacon have come forward with a proposed project that comes as a welcome addition to the City’s affordable housing development pipeline, but requires local, City funds in order to better compete for leverage County and State dollars.
Committing funding now to Rotary and Beacon will also help accelerate the design of the family project and potentially allow for a single entitlement process for both the family project and the senior project. While Rotary and Beacon may not build both the senior and the family projects at the same time (there are advantages to this with construction staging and mitigating impacts to the neighborhood and surrounding streets), staff believes it is still advantageous to entitle the buildings as one project so that the community understands that this is one development project, with a cohesive vision and management approach. The family units are also sorely needed in the community and so accelerating their production is in the City’s interest.
Rotary and Beacon are amendable to this approach and eager to access this $1.6 million in predevelopment City of South San Francisco Page 3 of 4 Printed on 12/8/2023 powered by Legistar™
File #: 23-746 Agenda Date: 12/13/2023
Version: 1 Item #: 18.
Rotary and Beacon are amendable to this approach and eager to access this $1.6 million in predevelopment funding to accelerate the entitlement of both projects so that they are more competitive for scarce County, State, and federal sources of funding. The actions associated with this staff report would commit funds and amend the City’s PLHA 5-Year Plan, but staff would still need to negotiate loan agreements with Rotary and Beacon and return to Council for final approval and formal appropriation of the funds. Today’s actions are the first in a twostep process to effectuate this City commitment.
FISCAL IMPACT
There is no fiscal impact to the City’s General Fund associated with approving the proposed resolutions.
Approval of the resolutions will serve to approve amending City’s 5-Year Plan for PLHA and commit its first two years, $556,789, to the Rotary Gardens senior building, as well as $1,076,383 of the City’s Housing Asset Fund to the Rotary Gardens family building. Both of these funds have restricted uses and time-sensitive commitment/spending deadlines within the next eight months.
Even after spending these funds the City retains nearly $20 million in unencumbered affordable housing funds, including over $18 million in Commercial Linkage Fees.
RELATIONSHIP TO STRATEGIC PLAN
These loans assist in the creation of housing affordable to households with lower incomes, supporting the City’s efforts to promote and preserve a balanced mix of housing options in the City.
CONCLUSION
Staff recommends that City Council receive a report regarding a request from Rotary Plaza, Inc. for funding to support a newly proposed affordable housing development, Rotary Gardens, at 500 and 522 Linden and:
1) Consider adoption of a resolution committing $1,633,172 in funds set to expire within the next fiscal year to the project fulfilling a portion of Rotary Plaza, Inc.’s request, directing staff to negotiate loan agreements effectuating this commitment, and return to Council for final budgetary appropriations and loan approval; and
2) Consider adoption of a resolution amending the City’s PLHA 5-year plan. and authorizing the City Manager to execute all necessary documents in order to commit PLHA funds to the Rotary Plaza, Inc. project.
City of South San Francisco Page 4 of 4 Printed on 12/8/2023 powered by Legistar™
City of South San Francisco
City Council
Resolution: RES 187- 2023
File Number: 23- 1065
P.O. Box 711 ( City Hall, 400
Grand Avenue)
South San Francisco, CA
Enactment Number: RES 187- 2023
RESOLUTION COMMITTING $ 1, 076, 383 IN
LOW/MOD-INCOME HOUSING ASSET FUNDS ( FUND
241) AND $ 556, 789 IN STATE PERMANENT LOCAL
HOUSING ALLOCATION FUNDS TO THE ROTARY
GARDENS AFFORDABLE HOUSING DEVELOPMENT
PROJECT AT 500 AND 522 LINDEN AND
AUTHORIZING STAFF TO NEGOTIATE LOANS
EFFECTUATING THE COMMITMENT. ( DANIELLE
THOE, HOUSING MANAGER)
WHEREAS, the local Rotary Club and its development partner, Beacon Development, have submitted a formal written request to the City for approximately $ 7. 5 million in funding to support a two- phase affordable housing project at 500 and 522 Linden; and WHEREAS, the first phase includes an 83- unit senior affordable housing building, and the second phase is anticipated to include a 65- unit family building; and WHEREAS, Rotary and Beacon have not advanced phase two design yet due to a lack of pre -development funding and project timing constraints; and WHEREAS, Rotary and Beacon' s proposed project, known as Rotary Gardens, is the only affordable housing project in the City' s development pipeline that has not received a local commitment of funds; and
WHEREAS, the City' s Low/ Mod- Income Housing Asset Fund ( Fund 241), which includes funds from the City' s former Redevelopment Agency and is regulated by State Senate Bill 341, has an excess surplus of $1, 076, 383 that must be encumbered by Fiscal Year 2024- 2025; and WHEREAS, this excess surplus may not be spent on senior housing; and WHEREAS, the City is the recipient of a five-year State entitlement grant known as the Permanent Local Housing Allocation (PLHA) for which the first two years of funds, collectively $ 556, 789, must be spent by April 1, 2023, and April 1, 2024; and
WHEREAS, providing funding to affordable housing projects early in their predevelopment journey shows that the City is committed to the success of the project and provides early low- cost capital that the development team can leverage to secure additional funding for the project; and WHEREAS, the City wishes to commit these expiring funds to the Rotary Gardens project, with 1, 076, 383 from the Housing Asset Fund supporting the 65- unit family building and $ 556, 789 in PLHA funds supporting the 83- unit senior affordable housing building.
City of South San Francisco
File Number: 23- 1065 Enactment Number: RES 187- 2023
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that the City Council does hereby commit these expiring funds to the Rotary Gardens project, with 1, 076, 383 from the Housing Asset Fund ( Fund 241) supporting the 65- unit family building and$ 556, 789 in PLHA funds ( Years 1 and 2 allocation) supporting the 83- unit senior affordable.
BE IT FURTHER RESOLVED that:
1. The foregoing recitals are true and correct and incorporated herein as part of this Resolution; and That staff are directed to negotiate loan agreements effectuating this commitment and return to Council for final budgetary appropriations and loan approval.
At a meeting of the City Council on 12/ 13/ 2023, a motion was made by Councilmember Nicolas, seconded by Councilmember Nagales, that this Resolution be approved. The motion passed.
Yes: 5 Mayor Coleman, Vice Mayor Flores, Councilmember Addiego, Councimember Nagales, and Councilmember Nicolas
Attest by
sa Govea Acosta, City Clerk
City of South San Francisco
File Number: 23- 1062
City of South San Francisco
City Council
Resolution: RES 188- 2023
P.O. Box 711 ( City Hall, 400
Grand Avenue)
South San Francisco, CA
Enactment Number: RES 188- 2023
RESOLUTION AMENDING RESOLUTION 205- 2022
AUTHORIZING THE CITY OF SOUTH SAN FRANCISCO TO
APPLY TO THE STATE OF CALIFORNIA TO RECEIVE AND
ADMINISTER THE CITY' S ENTITLEMENT OF PERMANENT
LOCAL HOUSING ALLOCATION ( PLHA) FUNDS AND TO
ENTER INTO ALL REQUIRED AGREEMENTS TO RECEIVE
THE PLHA FUNDS.
A necessary quorum and majority of the City of South San Francisco City Council hereby consents to, adopts, and ratifies the following resolution:
WHEREAS, the State of California ( the " State") Department of Housing and Community Development Department") is authorized to provide up to $ 304 million under the SB 2 Permanent Local Housing Allocation PLHA) Program Formula Component from the Building Homes and Job Trust Fund for assistance to Cities and Counties ( as described in Health and Safety Code section 50470 et seq. ( Chapter 364, Statutes of 2017 ( SB2)); and WHEREAS, the State of California ( the " State") Department of Housing and Community Development Department") issued a Notice of Funding Availability (" NOFA") dated May 3, 2021 under the PLHA Program; and WHEREAS, the City of South San Francisco (" Applicant") is an eligible Local government who has applied for program funds to administer one or more eligible activities, or a Local or Regional Housing Trust Fund to whom an eligible Local government delegated its PLHA formula allocation; and WHEREAS, the South San Francisco City Council approved Resolution 94-2020 at its Regular City Council meeting on July 22, 2020 authorizing the City to apply to the State to receive and administer the City' s PLHA entitlement program funds and to enter into all required agreements to receive the PLHA funds; and WHEREAS, Council approved Resolution 205- 2022 at its Special City Council meeting on November 16, 2022 amending its 5- Year Plan for its PLHA entitlement; and WHEREAS, the City has seen a high need for affordable housing as evidenced by data gathered and conclusions drawn in the City' s Housing Element; and
WHEREAS, the City Council, at its December 13, 2023 Regular Meeting, wishes to amend its 5- Year Plan to use the first two years of PLHA funds for predevelopment, development, acquisition, rehabilitation, and preservation of affordable rental and ownership housing; and WHEREAS, the Department may approve funding allocations for PLHA Program, subject to the terms and conditions of the Guidelines, NOFA, Program requirements, the Standard Agreement, and other contracts between the Department and PLHA grant recipients.
City of South San Francisco
File Number: 23- 1062
Enactment Number: RES 188- 2023
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that it hereby consents to, adopts, and ratifies the following resolution:
1. If Applicant received a grant of PLHA funds from the Department pursuant to the above referenced PLHA NOFA, it represents and certifies that it will use all such funds in a manner consistent and in compliance with all applicable state and federal statutes, rules, regulations, and laws, including without limitation all rules and laws regarding the PLHA Program, as well as any and all contracts Applicant may have with the Department.
2. Applicant is hereby authorized and directed to receive a PLHA grant, in an amount not to exceed the five- year estimate of the PLHA formula allocations, as stated in Appendix C of the current NOFA $ 1, 307, 880 in accordance with all applicable rules and laws.
3. Applicant hereby agrees to use the PLHA funds for eligible activities as approved by the Department and in accordance with all Program requirements, Guidelines, other rules and laws, as well as in a manner consistent and in compliance with the Standard Agreement and other contracts between the Applicant and the Department.
4. Pursuant to Section 302( c)( 4) of the Guidelines, Applicant' s PLHA Plan for the 2019- 2023 Allocations is attached to this resolution, and Applicant hereby adopts this PLHA Plan and certifies compliance with all public notice, public comment, and public hearing requirements in accordance with the Guidelines.
5. Applicant certifies that it has or will subgrant some or all of its PLHA funds to another entity or entities.
Pursuant to Guidelines Section 302( c)( 3), " entity" means a housing developer or program operator but does not mean an administering Local government to whom a Local government may delegate its PLHA allocation.
6. Applicant certifies that its selection process of these subgrantees was or will be accessible to the public and avoided or shall avoid any conflicts ofinterest.
7. Pursuant to Applicant' s certification in this resolution, the PLHA funds will be expended only for eligible Activities and consistent with all program requirements.
8. Applicant certifies that, if funds are used for the acquisition, construction or rehabilitation of for -sale housing projects or units within for -sale housing projects, the grantee shall record a deed restriction against the property that will ensure compliance with one of the requirements stated in Guidelines Section 302( c)( 6)( A),(B), and (C).
9. Applicant certifies that, if funds are used for the development of Affordable Rental Housing Development, the Local government shall make PLHA assistance in the form of a low -interest, deferred loan to the Sponsor of the Project, and such loan shall be evidenced through a Promissory Note secured by a Deed of Trust and a Regulatory Agreement shall restrict occupancy and rents in accordance with a Local government -approved underwriting of the Project for a term of at least 55 years.
10. Applicant shall be subject to the terms and conditions as specified in the Standard Agreement, the PLHA Program Guidelines and any other applicable SB 2 Guidelines published by the Department.
City of South San Francisco
File Number: 23- 1062
Enactment Number: RES 188- 2023
11. Sharon Ranals, City Manager, is authorized to execute the PLHA Program Application, the PLHA Standard Agreement and any subsequent amendments or modifications thereto, as well as any other documents which are related to the Program or the PLHA grant awarded to Applicant, as the Department may deem appropriate:
At a meeting of the City Council on 12/ 13/ 2023, a motion was made by Councilmember Nicolas, seconded by Councilmember Nagales, that this Resolution be approved. The motion passed.
Yes: 5 Mayor Coleman, Vice Mayor Flores, Councilmember Addiego, Council
Lember
Nagmales,
and
Councilmember Nicolas Attest
by N Govea
Acosta, City Clerk City
of South San Francisco