AGENDA STAFF REPORT

Agenda Item AGENDA STAFF REPORT ASR Control 19-001233
MEETING DATE:	12/17/19
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	All Districts
SUBMITTING Agency/Department:	OC Community Resources (Approved)
Department contact person(s):	Dylan Wright (714) 480-2788
	Julia Bidwell (714) 480-2991

Subject: FY 2018-19 Housing Successor Agency Annual Report

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:

# of Positions:

Sole Source: N/A

Current Fiscal Year Revenue: N/A

Funding Source: N/A	County Audit in last 3 years: No

Prior Board Action: 12/18/2018 #6, 1/24/2012 #32

RECOMMENDED ACTION(S):

Receive and file the FY 2018-19 Housing Successor Agency Annual Report.

Authorize OC Community Resources Director or designee to make any adjustments, as may be necessary, based on the final Comprehensive Annual Financial Report.

SUMMARY:

Receiving and filing of the FY 2018-19 Housing Successor Agency Annual Report will support the County of Orange's compliance with state redevelopment dissolution law requirements.

BACKGROUND INFORMATION:

On January 1, 2014, Senate Bill 341 (SB 341) became effective and amended the California Health and Safety Code (HSC), Section 34176.1 requiring redevelopment housing successor agencies to prepare an annual report containing: 1) an independent financial audit report; 2) statements relating to income, types of expenditures and fund balances; 3) updates on any activities related to fund transfers, recognized obligation payments and housing successor owned property; and 4) any excess surplus funds, as described by law. On January 24, 2012, the Board of Supervisors (Board) approved the Orange County Housing Authority (OCHA) to act as Housing Successor Agency (Housing Successor) for the former Orange County Development Agency (OCDA). On December 18, 2018, the Board approved the FY 2017-18 Housing Successor Agency Annual Report.

The Housing Successor’s FY 2018-19 Annual Report (Annual Report) was prepared pursuant to HSC 34176.1 and includes a fiscal statement prepared by the Housing Successor and a summary of information related to the Housing Successor’s housing activities. These activities include ongoing monitoring of deed restricted affordable units, tenant-based rental assistance, rapid rehousing program and creation of new housing units that will be affordable to households earning less than 30 percent and no more than 80 percent of the Area Median Income (AMI). An independent financial audit of the Housing Successor prepared by Eide Bailly LLP, as part of the County of Orange's Comprehensive Annual Financial Report, was utilized to develop this Annual Report. This Annual Report relates only to those assets that were transferred from the former OCDA and does not represent the entirety of OCHA operations.

In FY 2018-19, the Housing Successor initiated the development of units for the benefit of extremely low-income households Countywide through the 2016 Permanent Supportive Housing Notice of Funding Availability (PSH NOFA), which leveraged Housing Successor funds with grants, low-income housing tax credits and other public and private sources of funds.

SB 341 reinstated a requirement to prevent housing successors from accumulating an excess surplus in the Low and Moderate Income Housing Asset Fund (Housing Asset Fund), which is generally defined as unencumbered cash that exceeds the greater of $1 million or the aggregate amount deposited into the Housing Asset Fund in the preceding four years. OCHA previously accrued an excess surplus in the Housing Asset Fund in FY 2017-18. The amount reported in the last report totaled $9,044,000. However, the amount encumbered and the amount actually expended varied, as such the FY 2017-18 excess surplus amount was updated to reflect the difference. The updated FY 2017-18 excess surplus amount is $9,243,800. OCHA has made progress toward the elimination of the FY 2017-18 excess surplus amount by encumbering funds for several projects including Placentia Veterans Village, Salerno at Cypress Village and Della Rosa. At the end of this reporting period, $3,543,540 of the FY 2017-18 excess surplus remains.

For FY 2018-19, the aggregate amounts deposited into the Housing Asset Fund from FY 2014-15 through FY 2017-18 is $2,229,000. HSC allows for encumbered funds to be subtracted from the fund balance as part of the calculation. Furthermore, each excess surplus amount must be accounted for separately; as such, the reduction for the previous excess surplus of $3,543,540 is reduced from the available funds as to not double count the excess surplus funds or available fund balance. OCHA has accumulated an excess surplus of $428,200 in FY 2018-19.

SB 341 states that if a housing successor has an excess surplus, the housing successor shall encumber the excess surplus within three fiscal years. If the housing successor fails to comply with this, the housing successor, within 90 days of the end of the third fiscal year, shall transfer any excess surplus to the Department of Housing and Community Development (HCD). The cumulative FY 2017-18 and FY 2018-19 excess surplus amount of $3,971,740 will need to be expended or encumbered by the end of FY 2020-21 and FY 2021-22 to avoid OCHA having to transfer funds over to HCD. OCHA is in the process of committing funds for projects that were submitted through the 2016 PSH NOFA. OCHA has two projects, Westminster Crossing and Fountain Valley Housing, that have received Board approval and two additional projects, Casa Paloma and Crossroads at Washington, that are in the underwriting process. Together with funding to support administration, these commitments and pending commitments are anticipated to eliminate the excess surplus within the required timeframes.

During the five-year compliance period, the OCHA through the 2016 PSH NOFA expended funds on two projects, Potter’s Lane and Oakcrest Heights, in the amounts of $1,458,000 and $140,200, respectively. Potter's Lane is a 16-unit supportive housing development constructed of modified steel shipping containers in Midway City serving veterans experiencing chronic homelessness. Oakcrest Heights is a 54-unit affordable housing development for low-, very low- and extremely low-income households with 14 units set aside for transitional aged youth and adults moving out of foster care. All funds expended by OCHA as the Housing Successor went towards the development of units restricted to households earning at or below 30 percent AMI and, as such, OCHA is in compliance with the five-year expenditure requirement. OCHA will continue to ensure it meets all expenditure requirements going forward, including the next five-year compliance period of July 1, 2019, through June 30, 2024.

No deficiencies were noted in the Annual Report with regards to the Housing Successor's internal controls over financial reporting in FY 2018-19. In compliance with HSC Section 34176.1, this Annual Report is being submitted to its legislative body for review prior to December 31, 2019, and shall be placed on the Housing Successor website (www.occommunityservices.org/hcd/successor).

FINANCIAL IMPACT:

N/A

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A – FY 2018-19 Housing Successor Agency Annual Report
Attachment B – California Health and Safety Code Section 34176.1
Attachment C – Senate Bill 341