|
Agenda Item
ASR
Control 25-000989 |
||
|
MEETING
DATE: |
03/24/26 |
|
|
legal entity taking action: |
Board
of Supervisors and Orange County Housing Authority |
|
|
board of supervisors district(s): |
5 |
|
|
SUBMITTING Agency/Department: |
OC
Community Resources (Approved) |
|
|
Department contact person(s): |
Dylan
Wright (714) 480-2788 |
|
|
|
Dr.
Veronica Kelly (714) 834-7024 |
|
Subject: Approve Loan and Project-Based
Vouchers for Costa Mesa Senior
|
ceo CONCUR |
County Counsel Review |
Clerk of the Board |
||||||||
|
Concur |
No
Legal Objection |
Discussion |
||||||||
|
|
|
3
Votes Board Majority |
||||||||
|
|
|
|
||||||||
|
Budgeted: N/A |
Current Year
Cost: N/A |
Annual Cost: N/A |
||||||||
|
|
|
|
||||||||
|
Staffing Impact: |
No |
# of Positions: |
Sole Source: N/A |
|||||||
|
Current Fiscal Year Revenue: N/A
|
||||||||||
|
Prior Board Action: 2/25/2025 #22, 2/27/2024 #35 |
||||||||||
RECOMMENDED
ACTION(S):
|
Acting
as the Board of Supervisors: |
|
||||
|
1. |
Authorize the OC
Community Resources Director or designee to utilize up to $3,990,800 in
available funding consisting of up to $2,490,800 under the 2023 Supportive
Housing Notice of Funding Availability First Amendment and up to $1,500,000
under the 2025 Supportive Housing Notice of Funding Availability, for loan
financing in available funding as outlined in the Financial Impact Section to
a limited partnership to be formed by Jamboree Housing Corporation, for the
development of Costa Mesa Senior, an affordable and permanent supportive
housing development located at 695 West 19th Street in the City of Costa
Mesa, in accordance with their respective Notice of Funding Availability
guidelines and policies. |
||||
|
2. |
Approve loan
commitment to a limited partnership to be formed by Jamboree Housing
Corporation, in the amount not to exceed a total of up to $3,990,800, subject
to contingencies outlined in this Agenda Staff Report. |
|
|||
|
3. |
Approve loan
commitment to a limited partnership to be formed by Jamboree Housing
Corporation with a per unit loan limit of $150,000 for 10 County-restricted
units, exceeding the per unit loan limits under 2025 Supportive Housing
Notice of Funding Availability for a development in the City of Costa Mesa,
subject to contingencies outlined in this Agenda Staff Report. |
|
|||
|
4. |
Approve
subordination of up to $3,990,800 County loan(s) for Costa Mesa Senior to
senior construction and permanent financing, as outlined in this Agenda Staff
Report, including authority to subordinate to increases in the senior
construction loan amount of up to 20 percent to address changes in
construction costs, provided that any such subordination remains consistent
with County underwriting standards, affordability requirements, and the
County’s required security position, and authorize the OC Community Resources
Director or designee to subordinate to additional senior debt at permanent
financing up to 100 percent of the cumulative loan to value based on the
as-built appraised market value, if necessary, based on any future changes in
the project financing. |
||||
|
5. 6. |
Authorize the OC
Community Resources Director or designee to execute subordination agreements;
standard set of loan documents and restrictive covenants; and such additional
agreements, contracts, instructions, and instruments necessary or appropriate
for construction and permanent loan financing. Authorize the
Health Care Agency Director or designee to execute documents related to
services agreements that are necessary or appropriate for confirming the
commitment of ongoing services for the Mental Health Services Act funding. |
|
|||
|
Acting as the
Board of Commissioners to the Orange County Housing Authority: |
|
||||
|
7. |
Approve the
selection of Costa Mesa Senior for the utilization of up to 34 Housing Choice
Project-Based Vouchers in accordance with the policies and procedures
identified in the Orange County Housing Authority Administrative Plan and
authorize the execution of related documents, instruments and agreements. |
|
|||
|
8. |
Authorize the
Executive Director of the Orange County Housing Authority or designee to
execute agreements related to the commitment of the U.S. Department of
Housing and Urban Development Project-Based Vouchers in connection with Costa
Mesa Senior, provided the commitment incorporates the business and financial
terms and contingencies set forth in this Agenda Staff Report and is approved
as to form by County Counsel. |
|
|||
SUMMARY:
Approval of the County loan(s) and
commitment of up to 34 Project-Based Vouchers subject to the contingencies set
forth and subordination of the County loan(s) at construction and permanent
financing to senior debt for Costa Mesa Senior will help support the production
of permanent supportive housing for seniors in Orange County.
BACKGROUND
INFORMATION:
On February 27, 2024, the Board of
Supervisors (Board) approved the recommended changes in policy and process for
the 2023 Supportive Housing Notice of Funding Availability First Amendment
(2023 NOFA) and authorized the OC Community Resources (OCCR) Director or
designee to issue the 2023 NOFA First Amendment, making up to $32.7 million in
funding and up to 218 Project-Based Vouchers (PBVs) available for the
development of extremely low-income housing and to return to the Board for
funding commitments to individual projects. Assisted units funded through the
2023 NOFA receive direct referrals through the County of Orange’s County
Coordinated Entry System (CES).
The following year, on February 25,
2025, the Board approved the recommended changes in policy and process for the
2025 Supportive Housing Notice of Funding Availability (2025 NOFA) and
authorized the OCCR Director or designee to issue the 2025 NOFA making up to
$12.05 million in funding and up to 150 PBVs available for the development of
extremely low-income housing and return to the Board for funding commitments to
individual projects.
In August 2024, Jamboree Housing
Corporation (Developer) responded to the 2023 NOFA with a funding application
requesting up to $2,490,800 in capital funding and 34 PBVs for a proposed
70-unit affordable and permanent supportive housing development located at 695
West 19th Street in the City of Costa Mesa (City) known as Costa Mesa Senior
(Development). Following submission of the original application, the Developer
experienced financing constraints stemming from changes in anticipated federal
funding and availability and timing of other funding sources. As a result, in
February 2026, the Developer applied for an additional $1,500,000 in County
funding under the 2025 NOFA.
The Developer is a 501(c)(3)
nonprofit affordable and supportive housing developer that has operated in
Orange County for more than 35 years. The Developer has a $3.2 billion asset
portfolio accommodating approximately 27,000 residents in over 100 affordable
housing communities throughout Northern and Southern California. To date, the
Developer has housed more than 700 individuals in Orange County who were
previously experiencing homelessness and is currently providing housing for
more than 120 individuals with a mental health diagnosis and/or who were
experiencing homelessness in Orange County.
The Development would consist of 68
one-bedroom units and two two-bedroom units, one of which would be designated
as the on-site property manager’s unit. Of the 68 one-bedroom units, 34 would
be restricted by the County to serve seniors experiencing homelessness with
household incomes at or below 30 percent of Area Median Income (AMI), with the
remaining units restricted to households earning at or below 60 percent AMI.
The Development site is currently a 1.5-acre parcel owned by the City,
currently being used as a parking lot, which will be ground leased to the
Developer for a 99-year term. The proposed Development will provide 133 on-site
garage parking spaces and on-site amenities including a leasing office, common
areas, laundry facilities, individual counseling offices, a community room with
kitchen area, pet spa, multipurpose flex room, community courtyard, and dog
park.
On-site property management
services will be provided by Quality Management Group (QMG), which will be
responsible for maintenance, operations, property accounting and tenant
oversight. Mental Health Services Act (MHSA) supportive services will be provided
by the Health Care Agency to eligible households. Additional supportive and
social services will be provided by Housing with Heart (HWH) for non-MHSA
funded units. These supportive and social services include life skills
training, substance abuse counseling and treatment, and money management
education. HWH is an affiliate of the Developer.
Construction/Permanent
Financing and PBVs
The Developer is requesting two
separate construction to permanent loan(s) under two distinct NOFAs in a
combined amount up to $3,990,800. The first loan, $2,490,800, is requested
under the 2023 NOFA First Amendment. The second loan, in an amount up to $1,500,000,
is requested under the 2025 NOFA. Both loans will be made available to the project at construction
financing. The County loan(s) will be subordinate to financing as outlined in
the financial summary below. At construction loan closing, the County is
expected to close on its loan(s) and disburse funds concurrently with the
senior construction financing, to the extent necessary. To support completion
and long-term feasibility of the Development, OCCR is requesting Board
authorization for the County to subordinate its loan(s) to senior construction
and permanent financing, consistent with the requirements and limitations set
forth in their NOFAs.
At construction financing, the
County will close on its loan and is requesting authorization to increase the
subordination amount up to 20 percent if there is an increase in construction
cost. OCCR is also requesting authorization to subordinate additional senior
debt up to 100 percent of the cumulative loan-to-value, based on the as-built
appraised market value, if necessary, based on any future changes in project
financing. In determining the maximum additional senior debt to which the
County will subordinate its loans, OCCR will calculate the senior debt plus the
County loans and subtract that total from the current (within last six months)
as-built appraised market value. If the current as-built appraised market value
exceeds the cumulative senior debt plus the County loans, the County may
subordinate to additional senior debt, if necessary, for the viability of the
project.
The Developer is requesting a
commitment of PBVs for the Development following completion of construction and
issuance of a Certificate of Occupancy. The request will be up to 34 PBVs,
which will be guaranteed for a 20-year term consistent with U.S. Department of
Housing and Urban Development
regulations and will provide rental assistance for 33 one-bedroom units
and one two-bedroom unit restricted by the County or the Orange County Housing
Finance Trust (OCHFT) to serve households earning at or below 30 percent of
AMI.
The Developer has secured an MHSA
capital funding commitment from the OCHFT for 11 units. As proposed, the
Developer is requesting $2,490,800 in County MHSA capital funding for 13
additional units and $1,500,000 in 15G Reserve funds for the remaining 10 supportive
housing units subsidized by the 34 PBVs.
Under the 2025 NOFA, the Developer
can request $100,000 per one-bedroom unit and $105,000 per two-bedroom unit, or
approximately $100,000 per unit, in non-MHSA funding sources for a development
located in an entitlement city. However, due to the Development’s financing gap
and limited available resources to fill the gap and the quickly approaching
deadline to submit for tax credit financing, OCCR recommends exceeding the
allowable per unit loan limits by $50,000 per one-bedroom unit and $45,000 per
two-bedroom unit and underwriting the Development with a $150,000 per unit loan
limit for 10 County-restricted units, totaling $1,500,000.
The City of Costa Mesa owns the
land (valued at approximately $10,500,000) which is anticipated to be
contributed to the Development through a long-term ground lease. The City is
also considering a contribution of an additional $3,250,000 in capital funding
for the Development subject to City Council approval at the March 18, 2026
meeting. In addition, the City is anticipated to consider waivers or reductions
of applicable development impact fees in an estimated amount of $438,131.
The OCHFT has committed
approximately $1.8 million to the Development and is considering a contribution
of an additional $2,500,000 funding to support the overall financing plan. The
Developer has also requested $5,000,000 from CalOptima Health and anticipates
an award on March 6, 2026. No formal commitments have been made for the funding
sources anticipated for consideration at this time, and project assumptions may
be revised based on the outcome of each source mentioned.
Upon approval of the County loan(s)
and PBVs request, as well as award of the pending funding sources, the
Developer intends on applying for nine percent low-income housing tax credits
in April 2026.
Below are the updated financial
summary highlights of the Construction and Permanent Financing phase of the
Development.
Construction
Sources of Funds
|
Source |
Amount |
|
Construction Loan |
$24,200,000 |
|
County of Orange (MHSA) |
$2,490,800 |
|
County of Orange (15G Reserves) |
$1,500,000 |
|
City of Costa Mesa – Capital Loan |
$2,925,000 |
|
City of Costa Mesa – Land Donation |
$10,500,000 |
|
OC Housing Finance Trust (MHSA) |
$1,844,340 |
|
OC Housing Finance Trust |
$2,500,000 |
|
Cal Optima |
$5,000,000 |
|
Impact Fee Waiver |
$438,131 |
|
Deferred Fees and Costs |
$2,721,651 |
|
Tax Credit Equity (Construction) |
$4,675,532 |
|
Total |
$58,795,454 |
Permanent
Sources of Funds
|
Source |
Amount |
|
Permanent Loan |
$7,684,050 |
|
County of Orange (MHSA) |
$2,490,800 |
|
County of Orange (15G Reserves) |
$1,500,000 |
|
City of Costa Mesa – HOME |
$3,250,000 |
|
City of Costa Mesa – Land Donation |
$10,500,000 |
|
OC Housing Finance Trust (MHSA) |
$1,844,340 |
|
OC Housing Finance Trust |
$2,500,000 |
|
Cal Optima |
$5,000,000 |
|
Impact Fee Waiver |
$438,131 |
|
Deferred Developer Fee |
$210,471 |
|
Tax Credit Equity (Permanent) |
$23,377,662 |
|
Total |
$58,795,454 |
Uses
of Funds
|
Use |
Amount |
|
Acquisition |
$10,610,000 |
|
Construction |
$33,240,031 |
|
Architectural / Survey / Engineering |
$1,550,000 |
|
Loan Interest & Fees |
$3,817,190 |
|
Hard & Soft Cost Contingency |
$3,415,612 |
|
Legal Fees |
$300,000 |
|
Reserves |
$368,016 |
|
Other Costs |
$2,694,605 |
|
Developer Fee |
$2,800,000 |
|
Total |
$58,795,454 |
Note: Financing subject to change
prior to construction and completion of Development. Underwriting guidelines
are in accordance with 2023 NOFA First Amendment and 2025 NOFA.
Loan
Terms:
|
Construction and
Permanent Loan: |
Up to $3,990,800 |
|
Interest Rate: |
3 percent simple |
|
Term: |
55 years from
Qualified Project Period |
|
Security: |
Second and Third
Deeds of Trust |
|
Payments: |
Residual
Receipts per the NOFA(s) |
The County will record rent and
occupancy restrictions on up to 23 County restricted units for households
experiencing homelessness earning 30 percent AMI for a period of 55 years via a
regulatory agreement, which will not be subordinated to any conventional deed
of trust. The specific rent and occupancy restrictions may ultimately change
based on the final financing structure of the Development, but in no
circumstance shall restrictions be less than 30 percent AMI for the units
subsidized by the PBVs. Upon completion of construction, the Developer shall
submit a final cost audit. Any excess financing over development costs shall be
allocated proportionally among the County and other public agency soft lenders,
as applicable, and applied as a
principal reduction of each loan.
Regional
Housing Needs Assessment (RHNA) Credit
Per Section 2.08 of the 2025 NOFA,
for developments located in cities that receive County local funding (such as
General Fund, HSA, or 15G Reserves funds), the County will require acceptance
of the transfer of a RHNA share from the County’s allocation to the City’s
allocation based on the number of County restricted units. This transfer must
be approved by the governing body of the city in which the Development is
located. For this Development, the County is providing local revenue funding
for ten units and will require RHNA share for these ten County restricted
units, pursuant to the 2025 NOFA policies.
Commitment of the
County loan(s) and PBVs are contingent upon the following:
|
1. |
Completion and
approval of California Environmental Quality Act (CEQA), as applicable. |
|
2. |
Evidence of
commitment of all construction and permanent financing sources, including tax
credit award. |
|
3. 4. |
Receipt and
approval of final project development costs and revised final development
proforma and financing plan (including cash flow analysis) to reflect all
final funding approvals. Approval by the
City’s governing body of the transfer of RHNA share for the ten
County-restricted units in accordance with Section 2.08 of the 2025 NOFA. |
The Project Review Advisory Panel
approved OCCR staff recommendation to pass project on underwriting at their
March 12, 2026, meeting.
The supportive housing units in this
development are part of the 2,396 permanent supportive housing units identified
in the Housing Funding Strategy 2022 Update to address housing needs for
individuals and households experiencing homelessness. As such, these units of
supportive housing will contribute to the progress of this effort and provide
much needed supportive housing in the near future. Additionally, the up to 34
units of supportive housing units will follow the best practices, guiding
principles and commitments of the Homeless Service System Pillars Report which
was created by the Commission to Address Homelessness.
Compliance
with CEQA:
This action is not a project within the meaning of California Environmental
Quality Act (CEQA) Guidelines Section 15378 and is therefore not subject to
CEQA, since it does not have the potential for resulting in either a direct
physical change in the environment, or a reasonably foreseeable indirect
physical change in the environment. The approval of this agenda item does not
commit the County to a definite course of action in regard to a project since
it is for approval of County loans, commitment of up to 34 PBVs, subordination
of the County loans to senior debt for the Development and to allow the
County’s continued support of the production of supportive housing in Orange
County. This proposed activity is therefore not subject to CEQA. Any future
action connected to this approval that constitutes a project will be reviewed
for compliance with CEQA.
Compliance
with NEPA: Per
24 Code of Federal Regulations Part 58 (Attachment B), an Environmental
Assessment of the project was completed and an AUGF was issued by HUD on
October 27, 2025, for the PBVs.
FINANCIAL
IMPACT:
The loan commitments will only
affect the notes receivable balance sheet accounts of the fund. Per budgeting
practice, the loan commitments are not built into the fiscal year
appropriations budget process. The $3,990,800 loan will be funded at construction
financing anticipated in December 2026 (Fiscal Year 2026-27). The total loan
consists of two separate loans: $2,490,800 funded from the Mental Health
Services Act Fund 12A and $1,500,000 funded from 15G Reserves in Fund 15G.
STAFFING
IMPACT:
N/A
REVIEWING
AGENCIES:
Office
of Care Coordination
OC Health Care Agency
ATTACHMENT(S):
Attachment
A – California Code of Regulations Title 14 Section 15378
Attachment B – Code of Federal Regulations Title 24 Subtitle A Part 58