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Agenda Item
ASR
Control 21-000672 |
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MEETING DATE: |
08/24/21 |
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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: |
County Executive Office (Approved) |
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Department contact
person(s): |
Thomas Miller (714) 834-6019 |
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Dylan Wright (714) 480-2788 |
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Subject: Approve the Department of
Toxic Substances Control Standard Voluntary Agreement
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ceo CONCUR |
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Clerk of the Board |
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Concur |
Approved Agreement to Form |
Consent Calendar |
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3 Votes Board Majority |
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Budgeted: Yes |
Current Year Cost:
See Financial Impact Section |
Annual Cost:
N/A |
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Staffing Impact: |
No |
# of Positions:
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Sole Source:
N/A |
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Current Fiscal Year Revenue: N/A
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Prior Board Action: 12/15/2020
#S37C, 02/25/2020 #7, 07/16/2019 #28 |
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RECOMMENDED ACTION(S):
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1. |
Approve and authorize the Chief Real Estate Officer or
designee to execute the Standard Voluntary Agreement, in substantially the
form attached, with the County of Orange, the Housing Authority of the City
of Santa Ana and California Department of Toxic Substances Control for agency
environmental oversight of the Crossroads at Washington affordable housing
project and to perform all actions necessary for implementation of this
Agreement in a sum not to exceed $25,000. |
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2. |
Direct Auditor-Controller, upon notification and approval
from Chief Real Estate Officer, or designee, to issue an advanced payment, no
later than 10 days after the effective date of the Standard Voluntary
Agreement, to Department of Toxic Substances Control, in an amount not to
exceed $6,979 and additional payments as set forth herein as directed by the
Chief Real Estate Officer, or designee in an aggregate amount not to exceed
$25,000. |
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3. |
Approve and authorize the Chief Real Estate Officer or
designee to execute the Second Amendment to Option Agreement with Washington
Santa Ana Housing Partners, L.P. and Housing Authority of the City of Santa
Ana, in substantially the form attached, with minor modifications that do not
materially alter the terms or financial obligations to the County, and
amendments thereto that do not materially alter the terms of the financial
obligations to the County, with approval of County Counsel, and perform all
activities specified under the terms of the Second Amendment to Option
Agreement. |
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4. |
Direct the Auditor-Controller, upon notification from the
Chief Real Estate Officer or designee, to issue checks for payment of a total
not to exceed $1 million for reimbursement to Washington Santa Ana Housing
Partners, L.P. consistent with the
Second Amendment to Option Agreement. |
SUMMARY:
Approval and execution of a Standard Voluntary Agreement
between the County of Orange, the Housing Authority of the City of Santa Ana
and the California Department of Toxic Substances Control and the Second
Amendment to Option Agreement will provide for activities that support the
completion of due diligence and environmental cleanup necessary to make the
property at Crossroads at Washington suitable for development of affordable
housing.
BACKGROUND INFORMATION:
The Crossroads at Washington
(Project) is a proposed multifamily affordable housing development at 1126 and
1146 E. Washington Avenue, Santa Ana, CA 92701. The approximately 2.286-acre
site (Property) includes two parcels (identified in Table 1 below) owned by the
County of Orange (County) and the Housing Authority of the City of Santa Ana
(Authority).
Table 1 – Property Ownership
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Property Owner |
Assessor’s Parcel Number |
Acres |
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Housing Authority of the City of Santa Ana |
398-092-14 |
1.456 |
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County of Orange |
398-092-13 |
0.83 |
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Total |
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2.286 |
On July 16, 2019, the Board of
Supervisors (Board) selected Washington Santa Ana Housing Partners, L.P., a
partnership formed by The Related Companies of California, LLC and A Community
of Friends (Developer) for the lease and development of the Project for an
86-unit affordable housing project and authorized the Chief Real Estate Officer
to negotiate an option agreement and ground lease agreement with the Developer,
as well as a joint powers agreement (JPA) with the Authority. On February 25,
2020, the Board approved a 36-month term Option Agreement with Washington Santa
Ana Housing Partners, L.P. (Optionee) to conduct due diligence and obtain
entitlements for the Project, approved the 65-year term Ground Lease Agreement
and approved the JPA. During the option term, the Developer is required to
satisfy several conditions within the Option Agreement in order to exercise its
rights to ground lease the Property. These conditions include compliance with
environmental requirements for the development of the Project.
The County has made 43 Project-Based Housing Choice Vouchers (HCV) available to the Project after construction is completed and a Certificate of Occupancy is issued and a loan commitment of $2,280,701. The value of the 43 HCVs for the 15-year period is estimated to be $12,685,320 based on the current Orange County Housing Authority Voucher Payment Standard and anticipated Utility Allowance. The final contract rents for the Project-Based HCVs shall be determined by the Authority. The following financial summary highlights the currently projected Permanent Financing phase of the Project, which is subject to change and does not include potential environmental remediation costs:
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Sources of Funds |
Total |
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Permanent Loan |
$5,549,000 |
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County Permanent Supportive Housing (PSH) Notice of Funding Availability (NOFA) Loan |
$2,280,701 |
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County Land Loan |
$2,341,864 |
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City Residual Receipts Loan (Land Value) |
$4,108,136 |
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City Residual Receipts Loan (Other Public Subsidies) |
$3,971,440 |
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Tax Credit Proceeds |
$24,696,393 |
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Orange County Housing Finance Trust PSH NOFA Loan |
$2,500,000 |
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Total Development Costs |
$45,447,534 |
Environmental History and
Assessments
The Property is currently vacant and
free of building structures or occupants. However, the Property was previously
used for agriculture, industrial storage and vehicular services. Various
contractors and businesses, including transit agencies, auto repair services
and trucking companies, occupied the Authority parcel from 1966 to 1991. The
County’s parcel was developed with a materials/equipment storage area between
1972 and 1989. The northwestern portion of the Property was primarily occupied
by vehicle service facilities that used onsite gasoline, diesel fuel
underground storage tanks and fuel dispensers. Between 2007 and 2019, various
contractors and services leased both parcels (e.g., ARB Underground,
Christiansen Amusement).
The Developer retained Altec Testing
& Engineering, Inc. (Altec) during the due diligence period to conduct
environmental investigations for the sites. An initial Phase I environmental
investigation was conducted on October 19, 2019, indicating the likely presence
of hydrocarbon contamination on the site in view of past uses that would
require some offsite disposal of soil, a manageable mitigation. A Phase II
Environmental Site Assessment (Phase II) Report was warranted based on the
Phase I findings and was prepared by Altec on February 19, 2020. The Phase II
identified unexpected contaminants (e.g., tetrachloroethylene, also known as
PCE) and recommended additional environmental investigations to determine the
extent of the soil contamination on the County and Authority properties. Subsequently,
the County retained Geosyntec Consultants, Inc. to provide environmental peer
review services and to act as the County’s consultant with respect to
environmental issues on the Property.
Agency Oversight
Additional environmental assessments
in May and September 2020 concluded that the levels of contaminants might
warrant environmental oversight by a public agency. As a preemptive measure,
the County, Authority and Developer agreed to reach out to the Orange County
Health Care Agency (OCHCA) to serve as the oversight agency under its voluntary
environmental oversight program. The involvement of an oversight agency
provides regulatory direction on further assessments and mitigation/remediation
options for the site. However, OCHCA
determined that oversight by the Department of Toxic Substances Control (DTSC)
would be more appropriate. As a result, on December 18, 2020, OCHCA advised the
County and Authority to transfer environmental oversight responsibilities to
DTSC.
The Developer subsequently reached
out to DTSC to provide agency oversight and assist with additional
environmental investigations and secured DTSC’s further assistance on the
project site to ensure that it is cleaned up effectively. On February 11, 2021,
DTSC approved the project site to be included in their Targeted Site
Investigation Plus (TSI+) program. The TSI+ program is funded by a
Comprehensive Environmental Response, Compensation, and Liability Act 128(a)
State Response Program Grant from the United States Environmental Protection
Agency (EPA). EPA concurred with funding the project on February 3, 2021. This
EPA/DTSC pilot program award provides funding for services to conduct a
Supplemental Site Investigation with a Human Health Risk Assessment, and
prepare a Cleanup Plan/remedy selection document. Funding and associated
activities will be assessed and adjusted throughout the duration of the TSI+
program activities. DTSC proceeded with engaging a separate environmental
engineering services contractor, GSI Environmental (GSI), for the additional
assessment work and activities included in the TSI+ program. GSI’s supplemental
site investigation, which was approved by DTSC, is in process. This
environmental assessment grant work was done at no cost to the Project. The
Developer is responsible for undertaking this environmental remediation if it
chooses to move forward under its option agreement with the County and
Authority. The Developer is working on identifying additional sources to
address funding the environmental cleanup phase of this work, including loan
and grant funding opportunities.
On April 27, 2021, at the request of
the Developer and DTSC the County and Authority staff submitted a Request for
Agency Oversight Application to the DTSC. The application was subsequently reviewed
and accepted by DTSC. In response, DTSC prepared a draft Voluntary Oversight
Agreement (Agreement) that authorizes DTSC to serve as the oversight agency for
the Project during and after the TSI+ program period and additional scope
required under the Agreement. As the property owners, the County and Authority
would execute this Agreement. The
Agreement allows DTSC the ability to facilitate and help coordinate further
inspections and investigations, review and approve appropriate remediation
measures and documents, and engage the public, as necessary.
The scope of work to be completed under the Agreement may include, but is not limited to, the following: a Removal Action Work (RAW) Plan or Remedial Action Plan (RAP); preparation of California Environmental Quality Act, if any; public engagement activities as required for projects undergoing a Preliminary Endangerment Assessment, RAW or RAP; tribal outreach and consultation to ensure compliance with DTSC’s Tribal Consultation Policy; preparation of a Site Health and Safety Plan; and sampling and analysis conducted under this agreement shall be performed in accordance with quality assurance and quality control plans. This scope of work may be revised in the future to accommodate additional tasks, including additional oversight during the clean-up program.
DTSC
also provided a Cost Estimate for DTSC’s oversight in Exhibit D to the
Agreement. DTSC is budgeting $27,917 for this cost, of which $13,958 is
required to be paid upfront under Section 16.3 within 10 days after the
Agreement is fully executed. The County and Authority have agreed to split this
fee, with each party contributing 50 percent. DTSC will bill against this
amount and can amend this amount after providing an estimate for additional
activities under Section 7. In discussions with the Authority, they have
proposed increasing the amount of potential DTSC budget from the current amount
of $27,917 to $50,000 to provide greater flexibility in dealing with this
environmental oversight situation. The County’s share of this amount would be
$25,000. Staff believes this would be a prudent direction to take because of
the unpredictable and fluid nature of this environmental assessment phase.
The Agreement can be terminated by
either party under a 30-day termination clause in Section 18. However, if DTSC
finds a condition on-site that poses an “immediate threat to public health or
safety or the environment,” the Proponent (County and Authority) can be ordered
by DTSC to conduct additional activities to abate the endangerment. In
discussions with DTSC, it seems unlikely that DTSC would make such a
determination given the extent of the contamination found on-site. However, the
site is undergoing further testing and assessment, so this risk exists.
County Executive Office (CEO) Real
Estate and OC Community Resources recommend the approval of the Agreement. This
will facilitate the construction of affordable housing on the Property. In the alternative, if for some reason the
Project does not move forward, this process will assist with the future
remediation of any on-site contamination.
FCAA Tax Credit Reservation
Due to the highly competitive nature
of receiving tax credit allocations in California (competitions are typically
oversubscribed by 300 percent), the Developer was unsuccessful in securing a
tax credit reservation in its initial California Tax Credit Allocation
Committee (TCAC) application submittal during the 2020 First Competitive
Application Funding Round in March 2020. The Developer resubmitted a tax credit
application in TCAC’s Second Competitive Application Funding Round in July 2020
and was successful in securing a reservation of special, one-time Further
Consolidated Appropriations Act, 2020 (FCAA) federal credits in the amount of
$2,684,659.
As prescribed by the TCAC
regulations, if the Developer chooses to accept the reservation of the FCAA
credits, the Developer would be subject to $214,772 of non-refundable payments
comprised of the required TCAC Allocation Fee ($107,386) and TCAC Performance
Deposit ($107,386). If the Developer returns the credits, TCAC will not return
the fees. Additionally, the TCAC regulations allow the Developer to return the
FCAA credits no later than September 1, 2021, to avoid being assessed negative
points for future TCAC applications. Assessment of these negative points could
adversely impact the Developer’s ability to compete for affordable project tax
credits for a period of up to two years. Unlike typical 9 percent TCAC projects
that require competitive 9 percent projects to start construction within
180/194 days of the tax credit award, TCAC’s September 1, 2021, deadline to
return FCAA credits for the Project allows flexibility for the Developer to
start construction whenever feasible as long as the Project is completed by
December 31, 2023.
Additionally, the Developer is
working with DTSC on its Equitable Community Revitalization Grant (ECRG)
program. DTSC was awarded $76 million by the state for this program. DTSC has
expressed a desire to include the Project in this grant funding to assist in
paying for the environmental remediation. Unfortunately, it may take until at
least January 2022 to decide on the Project’s acceptance into the ECRG program.
The Developer is also looking for alternative financing solutions in case the
ECRG program does not award the Developer this grant funding.
Therefore, the Developer has requested
that the County and City of Santa Ana provide assurance that the County and
City of Santa Ana will “backstop” its remediation efforts if it accepts the
FCAA credits and is unable thereafter to secure outside funding for the
environmental remediation. The TSI+ program mentioned above will only fund the
environmental assessment phase of the environmental work and not the cleanup
phase, which can be much more costly. As outlined above, the Developer does not
presently have funding secured for the cleanup phase, but is working with DTSC
on an award of funding under its ECRG program. DTSC is optimistic that the
Project will be awarded funding under this program. Preliminary environmental
cleanup costs are estimated to be approximately $2 million.
First and Proposed Second Amendments
On December 15, 2020, the Board
approved potential financial commitments by the County in the amount of
$157,386 to backstop the Optionee on potential additional environmental costs
in the amount of $50,000 (County’s share) and for a non-refundable deposit in
the amount of $107,386 (County’s share) paid by Optionee as part of a special,
one-time federal credit award to Optionee. Payment of this backstop will not be
required if Optionee successfully develops the Project.
The proposed Second Amendment to the
Option Agreement (Second Amendment) as requested by the Developer will provide
for an environmental remediation backstop to support Project feasibility if the
Developer is unable to secure additional funding for the cost of remediation
and cleanup through a separate DTSC remediation program. A copy of the proposed Second Amendment is
attached hereto as Attachment B. The Second Amendment will commit the County
and City of Santa Ana to pay up to $2 million for environmental remediation,
payable equally in a 50-50 split. This commitment will only be required in the
event: 1) the Developer elects to accept the FCAA credits on or before
September 1, 2021; and, 2) the Developer is unable to secure the ERCG program
funding or alternative financing for the environmental cleanup prior to the end
of May 2022.
Recommendation to Approve the
Standard Voluntary Agreement and Second Amendment
Staff believes it would be
appropriate to enter into the Standard Voluntary Agreement, along with the
proposed Second Amendment, to move this Project forward to address the on-site
environmental contamination cleanup under DTSC oversight. CEO Real Estate
believes this is the next step in the development of this collaborative
Project. Additionally, from a long-term perspective, regardless of whether the
current Project is successful, the County will need to address the remediation
of the Property in some form. The current course of action gives us the best
method for a clean-up that may very well occur at no cost to the County.
Compliance with CEQA
The proposed project was previously
determined not to be 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 as determined on February
25, 2020, when the original option and lease agreement was approved by the
Board.
FINANCIAL IMPACT:
The Agreement requires an advance payment of $13,958 from the County and Authority to DTSC no later than 10 days after the full execution of the Agreement. Approval of the Standard Voluntary Agreement will result in costs during FY 2021-22, in the amount of a sum not to exceed $25,000. Any additional costs in FY 2021-22, if applicable and necessary, would be funded 100 percent from Real Estate Fund 135 which may include additional $1 million County’s share of 50% reimbursement to Washington Santa Ana Housing Partners, L.P. consistent with the Second Amendment to Option Agreement.
STAFFING IMPACT:
N/A
REVIEWING AGENCIES:
Auditor-Controller
OC Community Resources
ATTACHMENT(S):
Attachment A – Standard Voluntary Agreement
Attachment B – Second Amendment to Option Agreement