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Agenda Item
ASR
Control 24-000289 |
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MEETING
DATE: |
06/25/24 |
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legal entity taking action: |
Board
of Supervisors and Orange County Housing Authority |
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board of supervisors district(s): |
1 |
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SUBMITTING Agency/Department: |
OC
Community Resources (Approved) |
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Department contact person(s): |
Dylan
Wright (714) 480-2788 |
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Julia
Bidwell (714) 480-2991 |
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Subject: Approve
Loan and Project-Based Vouchers for 15081 Jackson Apartments
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ceo CONCUR |
County Counsel Review |
Clerk of the
Board |
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Concur |
No Legal Objection |
Public Hearing |
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3 Votes Board Majority |
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Budgeted: N/A |
Current
Year Cost: N/A |
Annual
Cost: N/A |
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Staffing
Impact:
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No |
#
of Positions: |
Sole
Source: N/A |
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Current Fiscal Year Revenue: N/A
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Prior Board Action: 2/28/2023 #32 |
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RECOMMENDED
ACTION(S):
Acting as the Board of Supervisors:
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1. |
Conduct a public
hearing and consider public comments pursuant to Measure C, a 1980 voter
approved ballot measure for affordable housing in accordance with Article 34
of the California Constitution, regarding the approval of 15081 Jackson
Apartments, a 65-unit affordable and supportive housing development in Midway
City, located in unincorporated Orange County, which will restrict more than
49 percent of units to lower income households. |
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2. |
Authorize the OC
Community Resources Director or designee to utilize up to $11,494,210 for
loan financing in available funding as outlined in the Financial Impact
Section to 15081 Jackson L.P., formed by American Family Housing, for the
development of 15081 Jackson Apartments, in accordance with the 2023
Supportive Housing Notice of Funding Availability guidelines and policy. |
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3. |
Approve the loan
commitments to 15081 Jackson L.P., formed by American Family Housing, in the
amount not to exceed $11,494,210, comprised of $7,809,605 in capital loan
funds and $3,684,605 to be used for capitalized operating subsidy reserves in
Mental Health Services Act and HOME American Rescue Plan Program, or other
County of Orange funding source, subject to contingencies outlined in this
Agenda Staff Report. |
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4. |
Approve
subordination of the $7,809,605 County capital loan at construction financing
to a first construction loan of approximately $27.2 million, with the ability
to increase the subordination amount up to 10 percent due to an increase of
construction costs and up to $11,494,210 in combined County capital and
capitalized operating subsidy reserve loans at permanent financing to a first
trust deed loan of approximately $4,802,501, as set forth in this Agenda
Staff Report and authorize the OC Community Resources Director or designee to
subordinate to 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 the project financing. |
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5. |
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. |
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6. |
Authorize the OC
Community Resources Director or designee to approve the Relocation Plan for
15081 Jackson Apartments consistent with State and/or Federal relocation
laws. |
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Acting as the Board
of Commissioners to the Orange County Housing Authority: |
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7. |
Approve the
selection of 15081 Jackson Apartments for the utilization of 30 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. |
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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 Housing Choice Project-Based Vouchers in
connection with 15081 Jackson Apartments, 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. |
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SUMMARY:
Conducting a
public hearing and considering public comments for the development of 15081
Jackson Apartments and approval of the County construction and permanent loans,
commitment of 30 Housing Choice Project-Based Vouchers and subordination of the
County loans at construction and permanent financing to senior debt for 15081
Jackson Apartments will help support the production of supportive housing in
Orange County.
BACKGROUND
INFORMATION:
On February 28,
2023, the Board of Supervisors (Board) approved the recommended changes in
policy and process for the 2023 Supportive Housing Notice of Funding
Availability (2023 NOFA) and authorized the OC Community Resources (OCCR)
Director or designee to issue the 2023 NOFA making up to $67.1 million in
funding and up to 210 Project-Based Housing Choice Vouchers (PBVs) available
for the development of extremely low-income housing and return to the Board for
funding commitments to individual projects. Assisted units through the 2023
NOFA receive direct referrals through the Coordinated Entry System (CES).
The 2023 NOFA also
allows the County of Orange (County) to implement a Capitalized Operating
Subsidy Reserve (COSR) Program utilizing Mental Health Services Fund (MHSA)
funds to address operational deficits attributable to restricted MHSA
supportive housing units. The COSR Program will be sized for a term of a
minimum of 15 to a maximum of 20 years, based on current assumptions of
operating costs, or in other words, approximately seven percent of the total
MHSA COSR funds will be provided per year as operational deficit subsidy.
American Family
Housing (AFH) responded to the 2023 NOFA with a funding application for a
65-unit affordable and supportive rental housing development. The Development,
15081 Jackson Apartments, will be located at 15081 Jackson Street, 15072 and
15082 Adams Street in Midway City in unincorporated Orange County.
AFH is a nonprofit
affordable housing developer established in 1985 and owns over 50 affordable
rental housing properties in three Southern California counties: Orange, Los
Angeles and San Bernardino. AFH developed a number of affordable housing
developments in Orange County including Casa Paloma, a 71-unit community in
Midway City, unincorporated Orange County, that was completed in September
2022. AFH properties offer more than 280 units of housing that ensure the
provision of safe, affordable homes for adults and families. The Development
will ultimately be owned and managed by 15081 Jackson L.P., a formed limited
partnership owned by AFH.
The codeveloper
for the proposed development is Veloce Partners, a private/for-profit
organization that provides a range of development and financial advisory
services focused on affordable housing and community development projects.
Veloce Partners provides both consulting services for affordable housing
development and has developed and owns 17 multifamily apartment communities in
the Los Angeles market area.
The proposed
Development will provide 65 units of affordable and supportive housing, including
63 one-bedroom rental units to households earning at or below 30 and 60 percent
of the Area Median Income (AMI) and two (2) two-bedroom units for on-site
property management. Twenty (20) one-bedroom rental units will be restricted to
Mental Health Services Act (MHSA) eligible individuals experiencing
homelessness with rents set at 30 percent AMI and subsidized with MHSA COSR. An
additional 30 one-bedroom rental units will be restricted to 30 percent AMI for
permanent supportive housing and be subsidized with Orange County Housing
Authority (OCHA) PBVs. The remaining 13 units will be restricted at 60 percent
AMI by the California Tax Credit Allocation Committee (TCAC) and/or other
funding sources.
The proposed
rectangular project site consists of three separate parcels totaling 0.75-acre
containing three automotive businesses and a vacant residential dwelling. In
accordance with applicable relocation laws and regulations and proposed
Relocation Plan, the existing tenants will be provided relocation assistance
and benefits from AFH. The site is located in a mixed-use area, with a
combination of commercial and industrial uses, as well as single family and
multifamily residential uses, and is zoned C2(H) in the Housing Overlay Zone.
Due to existing site conditions, a Phase I Environmental Site Assessment (ESA)
and Phase II ESA was completed on April 11, 2023 and April 28, 2023,
respectively, followed by a Vapor Intrusion Risk Evaluation completed on May
11, 2023. AFH will be required to implement contamination and toxic substances
mitigation measures as part of the National Environmental Policy Act (NEPA)
Environment Assessment. The cost of the mitigation measures will be assessed
and included in the Development budget.
Onsite
amenities will include ground level parking, bike storage area, community room,
supportive service offices, outdoor seating areas, a large courtyard divided
into two smaller areas and an outdoor second story deck.
On-site property
management services and supportive services will be provided by AFH. Twenty
(20) units will also receive supportive services from the OC Health Care Agency
for the MHSA eligible households.
Construction and Permanent Financing,
COSRs and PBVs
AFH is requesting
$7,809,605 in MHSA and HOME American Rescue Plan Program (HOME-ARP), or other
County funding source, funds at construction closing to permanent financing and
$3,684,605 MHSA COSR at permanent financing, totaling $11,494,210, to be available
to the project. The County loans will be subordinate to financing as outlined
in the financial summary below. At construction financing, OCCR is requesting
authorization to increase the subordination amount up to 10 percent if there is
an increase in construction cost without requiring an as-built appraisal. OCCR
is also requesting authorization to subordinate to 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.
AFH is also
requesting 30 PBVs to be available to the Development after construction is
completed and a Certificate of Occupancy is issued. These 30 PBVs will be
guaranteed for 20 years, consistent with U.S. Department of Housing and Urban
Development (HUD) regulations, and will provide rental subsidies to 30 of the
one-bedroom units restricted to 30 percent AMI by County and/or state funding
sources.
Upon approval of
the County loans and PBVs request, AFH intends on applying for 9 percent tax
credits in July 2024.
Below are the
updated financial summary highlights of the Construction and Permanent
Financing phase of the Development:
|
Construction Source of Funds |
Funding Amount |
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Construction
Loan |
$27,200,000 |
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County of Orange
(MHSA) |
$3,684,605 |
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County of Orange
(HOME-ARP) |
$4,125,000 |
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CalOptima Health
|
$2,940,000 |
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Other Costs
Deferred Until Completion (including reserves) |
$4,060,370 |
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Tax Credit
Equity (GP/LP Equity) |
$3,703,737 |
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Deferred
Developer Fee |
$1,100,000 |
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Total Sources of Funds |
$46,813,712 |
|
Permanent Sources of Funds |
Funding Amount |
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Conventional
Permanent Loan |
$4,802,501 |
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County of Orange
(MHSA) |
$3,684,605 |
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County of Orange
(MHSA COSR) |
$3,684,605 |
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County of Orange
(HOME-ARP) |
$4,125,000 |
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CalOptima Health
|
$2,940,000 |
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Tax Credit
Equity (GP/LP Equity) |
$27,577,001 |
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Total Sources of Funds |
$46,813,712 |
Note: Financing
subject to change prior to construction and completion of Development.
Underwriting guidelines are in accordance with 2023 NOFA.
Loan Terms:
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Construction
and Permanent Loan: |
Up to $7,809,605
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Interest
Rate: |
3 percent
simple |
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Term: |
55 years from
Qualified Project Period |
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Security: |
Second
and Fourth Deeds of Trust |
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Payments: |
Residual
Receipts per the 2023 NOFA |
Loan Terms for COSR:
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COSR: |
Up to $3,684,605 |
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Interest
Rate: |
0 percent |
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Term: |
Maximum of 20
years |
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Security: |
Third
Deed of Trust |
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Payments: |
Deferred and
forgivable |
The County will
record rent and occupancy restrictions on 50 one-bedroom units for individuals
experiencing homelessness earning at or below 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.
Funding
of the County loans and commitment of the PBVs are contingent upon the
following:
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1. |
Completion and approval
of California Environmental Quality Act (CEQA) and National Environmental
Policy Act (NEPA) as applicable. |
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2. |
Evidence of
commitment of all construction and permanent financing sources, including tax
credit award. |
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3. |
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. |
The Project Review
Advisory Panel reviewed staff recommendation to pass project on underwriting at
their May 16, 2024, meeting.
The supportive
housing units in this development are part of the 2,396 permanent supporting
housing units identified in the Housing Funding Strategy 2022 Update to address
housing needs for individuals and households experiencing homelessness. As
such, these 50 units of supportive housing units will contribute to the
progress of this effort and provide much needed supportive housing in the near
future. Additionally, the 50 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 End Homelessness.
This Development
is located in unincorporated Orange County and AFH is requesting the County to
exercise its authority under Article 34 of the California Constitution (Article
34), a provision that requires new low-rent housing projects that are
developed, constructed or acquired by public bodies be authorized by public
vote. As such, OCCR is recommending approval of this Development as it meets
the criteria established pursuant to Measure C, a 1980 voter approved ballot
measure placed by the Board regarding affordable housing. Measure C allows the
County to develop, construct, finance or acquire affordable housing projects
within unincorporated Orange County without placing the individual project
before the voters as required under Article 34 so long as certain requirements
are met. Those requirements include not using general fund monies, publishing
notice of a public hearing to announce the consideration of the project,
holding the public hearing to allow consideration of public comments regarding
the project, and ensuring that the housing built or rehabilitated does not
exceed 5 percent of the total dwelling units within unincorporated Orange
County. According to the State of California’s Department of Finance, the
current total number of existing dwelling units in unincorporated County is
over 132,000 units. Pursuant to the voter-approved language, approximately
6,600 affordable housing units can be built or rehabilitated in unincorporated
County. The current total number of affordable housing units permitted in
unincorporated County is 1,445, representing approximately 1 percent of the
allowable 5 percent cap. The number of affordable housing units in
unincorporated County will increase to 1,508 with the approval of 15081 Jackson
Apartments and will remain under the 5 percent cap. Additionally, because the
Development is located in unincorporated Orange County, the proposed 65 units,
63 affordable units and 2 property management units, will count towards the
County’s Regional Housing Needs Allocation numbers.
Compliance with CEQA: This action is
not a project within the meaning of 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 30 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, an Environmental Assessment of the
project is being compiled and will be submitted to HUD for approval along with
the Request for Release of Funds upon completion.
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 $7,809,605 loans will be funded
at and/or after construction loan closing anticipated in April 2025 (Fiscal
Year 2024-25) and $3,684,605 COSR is anticipated to be funded at or after
permanent financing in March 2027 (totaling $11,494,210). The loan up to
$11,494,210 will be funded with 100 percent Federal HOME Funds and HOME-ARP
Funds in Fund 15G and/or MHSA in Fund 12A.
STAFFING IMPACT:
N/A
REVIEWING
AGENCIES:
OC Health Care Agency
OC Public Works
Office of Care Coordination
ATTACHMENT(S):
Attachment A – Article 34
Referendum
Attachment B – Article 34 Statement of Votes
Attachment C – California Code of Regulations Title 14 Section 15378
Attachment D – Code of Federal Regulations Title 24 Subtitle A Part 58