AGENDA STAFF REPORT

Agenda Item AGENDA STAFF REPORT ASR Control 21-000399
MEETING DATE:	06/22/21
legal entity taking action:	Board of Supervisors and Orange County Housing Authority
board of supervisors district(s):	2
SUBMITTING Agency/Department:	OC Community Resources (Approved)
Department contact person(s):	Dylan Wright (714) 480-2788
	Julia Bidwell (714) 480-2991

Subject: Approve Project-Based Vouchers and Partnership Transfer for Homekey Projects

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: See Financial Impact Section

Staffing Impact:

# of Positions:

Sole Source: No

Current Fiscal Year Revenue: N/A

Funding Source: See Financial Impact Section	County Audit in last 3 years: No

Prior Board Action: 5/25/2021 #49,11/17/2020 #15, 11/17/2020 #S28E, 10/20/2020 #S16G

RECOMMENDED ACTION(S):

Acting as the Board of Commissioners to the Orange County Housing Authority:

Approve the selection of Tahiti Motel for utilization of 59 Veterans Affairs Supportive Housing, Mainstream and/or 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 in a form as approved by County Counsel.

Approve the selection of Stanton Inn and Suites for utilization of 71 Veterans Affairs Supportive Housing, Mainstream and/or 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 in a form as approved by County Counsel.

Acting as the Board of Supervisors and as the Board of Commissioners to the Orange County Housing Authority, acting in its capacity as Housing Successor Agency:

Approve of the transfer of the Tahiti Motel to a to be formed limited partnership with a subsidiary of Jamboree Housing Corporation as managing general partner, subject to contingencies outlined in this Agenda Staff Report and authorize the OC Community Resources Director or designee to execute any such additional agreements, contracts, instructions and instruments necessary in a form as approved by County Counsel.

Approve subordination of the previously approved $2,400,000 County loan for Tahiti Motel to construction loan of up to $20,000,000 and, at permanent financing, an amortized first trust deed conventional permanent loan of $2,174,072, 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 project financing.

Authorize the OC Community Resources Director or designee to execute Subordination Agreement, and such additional agreements, contracts, instructions and instruments necessary or consistent with refinancing in the terms set forth in this Agenda Staff Report in a form as approved by County Counsel.

Acting as the Board of Supervisors:

Approve subordination of the previously approved $1,085,000 County loan for Stanton Inn and Suites to a construction loan of up to $20,000,000 and, at permanent financing, an amortized first trust deed conventional permanent loan of $5,050,000, as set forth in this Agenda Staff Report and Suites 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 project financing.

Approve of the transfer of the Stanton Inn and Suites project to a to be formed limited partnership with a subsidiary of Jamboree Housing Corporation as managing general partner, subject to contingencies outlined in this Agenda Staff Report and authorize the OC Community Resources Director or designee to execute any such additional agreements, contracts, instructions and instruments necessary in a form as approved by County Counsel.

Authorize the OC Community Resources Director or designee to approve Relocation Plans for Stanton Inn and Suites and Tahiti Motel consistent with State and Federal Relocation laws.

SUMMARY:

Approval of the partnership transfer, commitment of 130 Veterans Affairs Supportive Housing, Mainstream and/or Housing Choice Project Based Vouchers to Tahiti Motel and Stanton Inn and Suites Homekey Projects and subordination of previously approved County loans will support the development of supportive housing in Orange County.

BACKGROUND INFORMATION:

On June 30, 2020, Governor Gavin Newsom announced the Homekey Program as the successor to Project Roomkey. Homekey Program sites will assist those persons experiencing homelessness or at-risk of homelessness and who are impacted by the COVID-19 pandemic to be developed immediately into interim housing and ultimately into permanent supportive housing (PSH) units. On July 28, 2020, and September 15, 2020, the Board of Supervisors (Board) approved resolutions to apply and submit applications for the Homekey Program with Jamboree Housing Corporation (Jamboree) listed as co-applicant.

On August 13, 2020, the County submitted three applications for funding with Jamboree as the co-sponsor. Two of the properties, Stanton Inn and Suites (Stanton Inn) and Tahiti Motel were awarded funding. On August 25, 2020, the Board approved the purchase and sale agreement for both Homekey Program properties. On October 20, 2020, the Board authorized OC Community Resources (OCCR) to accept Homekey Program grant funds totaling $23,088,000 and execute standard agreements related to the purchase and acquisition of the identified sites. Part of that agreement included the County providing immediate interim housing operations at the Homekey Program sites within 90 days.

On November 3, 2020, the Board approved a Master Agreement with Jamboree for Homekey Program operating services for interim housing sites to support those persons experiencing homelessness or at-risk of homelessness and who are impacted by COVID-19 until conversion to PSH.

On November 17, 2020, the Board approved a $2.4 million loan in Housing Successor Agency funds for the acquisition and development of the Tahiti Motel. On October 20, 2020, the Board approved the use of $1,085,000 in Mental Health Services Act (MHSA) funding as a loan for the acquisition of the Stanton Inn and subsequently approved on November 17, 2020, the use of the MHSA funds to also fund partial development costs including rehabilitation.

On May 25, 2021, the Board approved a revised resolution for Tahiti Motel changing the co-applicant from the County of Orange to the Board of Commissioners to the Orange County Housing Authority (OCHA), as required by the state. Additionally on May 25, 2021, the Board approved up to $6.5 million dollars in American Rescue Plan Act/HOME Supplemental Funds and federal HOME Partnership funds and added 157 Veterans Affairs Supportive Housing (VASH), Mainstream and/or Housing Choice Project-Based Vouchers (PBV) to support the creation of new supportive housing units within Orange County for veterans and/or households experiencing homelessness and support the Homekey Program projects with additional PBVs.

In order to facilitate the conversion of the Tahiti Motel and Stanton Inn to PSH, OCCR is now requesting the Board to approve the selection of these two projects under the 2020 Supportive Housing Notice of Funding Availability for utilization of 130 VASH, Mainstream and/or Housing Choice PBVs and to subordinate previously approved loans to financing as outlined in this Agenda Staff Report.

Additionally, OCCR is requesting transfer of the Tahiti Motel and Stanton Inn properties to a to be formed limited partnerships with a subsidiary of Jamboree Housing as managing general partner in order to obtain an award of state 9 percent low-income housing tax credits (Tax Credits).

Below are details and background on the property financing, subordination and partnership transfer for the Tahiti Motel and Stanton Inn.

Stanton Inn Property

Jamboree is requesting 71 PBVs from the County. These 71 PBVs will be guaranteed for 20 years, consistent with U.S. Department of Housing and Urban Development (HUD) regulations and OCHA's Administrative Plan. As of the date of this submission, Stanton Inn and Suites is at 100% occupancy.

In addition to the project-based rental assistance vouchers from the OCHA, the following financing sources will be utilized by Jamboree to substantially rehabilitate the previously purchased Stanton Inn located within the City of Stanton to convert it from interim housing for previously homeless individuals to PSH:

Construction Financing

Source of Funds	Funding Amount
Construction Financing	$14,783,112
County of Orange Loan	$1,085,000
California Department of Housing and Community Development (HCD) Subsidy/Project HomeKey Funds - Grant	$7,920,000
Tax Credit Proceeds	$1,295,285
Total Project Costs	$25,083,397

Permanent Financing

Source of Funds	Funding Amount
Conventional Loan/Bond Proceeds	$5,050,000
County of Orange Loan	$1,085,000
HCD Subsidy/Project HomeKey Funds - Grant	$7,920,000
Tax Credit Proceeds (9%)	$11,028,397
Total Project Costs	$25,083,397

OCCR is requesting authorization to subordinate the previously approved $1,085,000 County loan to a construction loan of up to $20 million and at permanent financing to an amortized loan in the amount of $5.05 million. The County will be subordinate to financing as outlined in the summary above. OCCR is requesting 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 loan, OCCR will calculate the senior debt plus the County loan 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 loan, the County may subordinate to additional senior debt, if necessary, for the viability of the project.

Tahiti Motel Property

Jamboree is requesting 59 PBVs from the County of Orange. These 59 PBVs will be guaranteed for 20 years, consistent with HUD regulations and OCHA's Administrative Plan. As of the date of this submission, Tahiti Motel is at 100 percent occupancy.

In addition to the project-based rental assistance vouchers from the OCHA, the following financing sources will be utilized by Jamboree to substantially rehabilitate the previously purchased Tahiti Motel located within the City of Stanton to convert it from interim housing for previously homeless individuals to permanent supportive housing:

Construction Financing

Source of Funds	Funding Amount
Construction Financing	$14,821,949
County of Orange Loan	$2,400,000
HCD Subsidy/Project Home Key Funds - Grant	$9,600,000
Tax Credit Proceeds (9%)	$1,694,209
Total Project Costs	$28,516,158

Permanent Financing

Source of Funds	Funding Amount
Conventional Loan/Bond Proceeds	$2,174,072
County of Orange Loan	$2,400,000
HCD Subsidy/Project Home Key Funds - Grant	$9,600,000
Tax Credit Proceeds (9%)	$14,342,086
Total Project Costs	$28,516,158

OCCR is requesting authorization to subordinate the previously approved $2.4 million County loan to a construction loan of up to $20 million and at permanent financing to an amortized loan in the amount of $2,174,072. The County will be subordinate to financing as outlined in the summary above. OCCR is requesting 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 loan, OCCR will calculate the senior debt plus the County loan 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 loan, the County may subordinate to additional senior debt, if necessary, for the viability of the project.

Transfer of Tahiti Motel and Stanton Inn Properties

Jamboree, as co-sponsor with the County, received grants of Homekey Program funds from the HCD. These funds were used to acquire fee title to the Tahiti Motel and to acquire a ground leasehold interest in the land and fee ownership to the improvements comprising the Stanton Inn (Projects). In addition to the Homekey Program funds, Jamboree also received loans from the OCHA and grants from the Stanton Housing Authority (SHA). Pursuant to the requirements of the Homekey Program and the associated Standard Agreement with HCD, the Projects are initially being operated as interim housing for persons experiencing homelessness.

The Projects were acquired by a non-profit subsidiary of Jamboree. Pursuant to the requirements of Homekey Program, Jamboree and the County/OCHA now intend to convert the Projects from interim housing to PSH utilizing Tax Credits and PBVs from OCHA. The PSH phase consists of substantial rehabilitation and property improvements to enhance the quality of life for the residents. The application deadline for Tax Credit financing is July 1, 2021.

In order to generate Tax Credits, the Projects need to be sold for fair market value by Jamboree to a new “to be formed” limited partnership in which a wholly owned subsidiary of Jamboree will be the managing general partner and a third-party tax credit investor or syndicator will be the limited partner (Partnership). The Partnership will develop these projects. This is a common structure for a tax credit syndication. The tax credit investor or syndicator will be confirmed prior to the closing and start of construction. Without a sale of the Projects to the tax credit Partnership, the Projects would not be able to generate acquisition basis, which would make the Projects infeasible.

As part of the PSH phase, the Homekey Regulatory Agreement will continue to encumber the Projects and the intent is to operate them in accordance with the terms of the Homekey Regulatory Agreement; as well as the County Regulatory Agreement and the SHA Regulatory Agreement. Pursuant to the requirements of the Standard Agreement and the County/OCHA Loans, the transfer of the Projects from Jamboree to the Partnership requires the approval of the HCD and the County/OCHA. The HCD has provided their approval.

Commitment of the PBVs, if approved by the Board, is contingent upon the following:

· Completion and approval of California Environmental Quality Act (CEQA) and National Environmental Policy Act (NEPA)

· Evidence of commitment of all construction and permanent financing sources.

· 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.

· Formation of a limited partnership.

The item is scheduled for the June 10, 2020, Project Advisory Committee of the County Housing and Community Development Commission.

Additionally, with the conversion of the properties from interim to permanent use, there may be relocation of residents at the Projects. Jamboree is working with an experienced relocation consultant that completed the previous relocation plans for the Projects at acquisition. OCCR is requesting authority from the Board to approve any relocation plans consistent with state and federal relocation law requirements.

Tahiti Motel and Stanton Inn are operating as interim housing and, per the State Standard Agreement, they must be converted to PSH within five years. These actions will approve the selection of utilization of 130 PBVs for the two Homekey Program projects, allow for subordination of the County’s previously approved loans and approve partnership transfers, which will allow Jamboree to apply for and be competitive in the July 2021 low-income housing tax credit round.

These Projects are part of the concerted effort to further develop the System of Care. The PBVs award will contribute to the efforts on building a responsive System of Care in Orange County that provides housing solutions that meet the needs of the homeless populations. The proposed Development has the opportunity to address homelessness by providing supportive housing to 130 extremely low- and very low-income individuals experiencing homelessness or who were formerly homeless. These supportive housing units are part of the 2,700 PSH units identified in the Housing Funding Strategy to address housing needs for individuals and households experiencing homelessness. As such, these 130 units of new supportive housing units will contribute to the progress of this effort.

Compliance with CEQA: The proposed actions are part of the project that was previously determined to be exempt from the CEQA pursuant to Public Resources Code Section 21080.50, to provide permanent supportive housing and affordable housing dwellings, and for related activities funded by Homekey Program funds pursuant to Health & Safety Code Section 50675.12, on October 20, 2020.

Compliance with NEPA: Per 24 Code of Federal Regulations Part 58, an Environmental Assessment of the project is currently being conducted and, upon completion, a Request for Release of Funds will be sent to HUD.

FINANCIAL IMPACT:

The Housing Choice Project Based Voucher amount varies and are unknown at this time. The 130 PBVs available to recipients are funded 100 percent federal HUD funding and can be absorbed with existing appropriations within OCHA Fund 15F.

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A - California Code of Regulations Title 14 Section 15378
Attachment B - Code of Federal Regulations Title 24 Subtitle A Part 58